GAMING FOR AFRICA Kenyan court says government cannot take tax on winning bets U

ncertainty has reared its head again in the Kenyan gambling tax setup as a local judge has decided that it is illegal for

gambling operators to collect taxes from any winnings. Senior Resident Magistrate Dennis Kivuti of the Millimani Commercial Courts issued a ruling earlier this month prohibiting SportsPesa Ltd, a local operator handling sports betting, from withholding the Kenyan government present tax on gambling winnings currently set at 20 percent. The tax amount was imposed on the winnings of Benson Irugu. Mr. Irugu had protested the imposition of said tax and had filed a 2014 civil suit against SportsPesa Ltd with the trading name of Pevans East Africa. The Kenya Revenue Authority (KRA) filed an appeal to counter to Mr. Irugu’s lawsuit and a ruling on the matter was made earlier this week. On April 23, the Judge denied the appeal filed by

the KRA which prevented them from collecting any taxes on winnings. The judgment causes a lot of confusion and also significantly impacts the revenues of the KRA. The country’s Income Tax Act sections 2, 10, 34, and 35 covered these taxes and authorized the KRA to proceed with the collection. However, the judge’s ruling prevents the KRA from collecting these winnings and will limit their revenues by $26.7 million which is used for the development of multiple national projects including the country’s universal healthcare program. This latest event underscored the difficulties in

the implementation of said gambling tax which was imposed years ago. One great example of this was the tax bill that the KRA presented to SportsPesa Ltd covering the period of 2015-16 for close to $100 million. SportsPesa Ltd did not pay that amount as the

company said due to the court order it did not collect any taxes on winnings and hence could not remit the amount to the KRA. This argument was not accepted by the KRA who insisted that the court order only covered the taxes

for Mr. Irungu’s gambling winnings. Another source of frustration for the country’s

gambling operators was the Kenyan government’s constant changes in the tax rate imposed. A dramatic increase rolled out in 2017 where a uniform tax rate of 35 percent was fixed and then it was later cut back to 15 percent in September 2018 with the added reintroduction of the 20 percent gambling winnings tax. The government also stated earlier this month that it would not hesitate to suspend the license of any gambling operator delinquent with the remittance of its tax obligations.(source: Legal Gambling and the Law)

Western Cape casinos seek tax exemption on patron free-play T

wo of the biggest casinos in the Western Cape want to be exempt from paying tax on more than R127-million of free play they give their most loyal patrons, arguing it should not be calculated as revenue. Sun International’s GrandWest Casino and Entertainment World and Golden Valley Casino in Worcester have filed papers in the high court to force the Western Cape Gambling Board and the provincial minister of finance to deduct the R127-million from the more than R2.2-billion they make on the slot machines. Sun International contends that

freeplay should be seen as an investment in the business and therefore deducted before determining tax. In court papers, free play is called

free play does not represent cash because it comes into being without any financial contribution by the customer.

the non-cashable credit which is loaded on to the customer’s card account, held by the casino. “Free play is not offered to all the

players frequenting their gambling establishments. It is offered only to their qualifying loyalty programme customers. It constitutes a reward for a player’s loyalty. Free play is denominated in rand value but cannot be redeemed for cash.” The provincial government, in its argument, said after the money is loaded on to the card with the additional cash, and once played, it

constitutes the amount deducted from the player’s slot account. As a result, slot machine play,

according to the applicable tax act, is regarded as “drop”, and therefore revenue.

It said the imposition of the gambling tax was not dependent or connected to whether or not the financial position of the applicants (casinos) improves the free play. “This is entirely irrelevant for the purposes of the computation of the gambling tax payable by the applicants.” However, the casinos contend that

The casinos maintain that free play is used as a marketing tool to attract customers, which in turn increases the taxable revenue that can be collected by the government. It says the amount invested in free

play constitutes a R17 return on investment for every rand of free play used.

“The applicants are able to calculate the return ratio on Freeplay because the amount of free play used and the amount of the player’s own funds used are recorded on the applicant’s own personal MVG player cards into the gaming machines in order to play.”

28 MAY 2019

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