GAMING FOR AFRICA Gaming for Africa
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Provincial Gambling Tax Increases Unconstitutional, says ConCourt
Provincial authorities will be forced to examine their respective gambling taxation regimes in light of a recent ruling from South Africa’s highest court that has ruled increases in provincial gambling levies as unconstitutional. At the heart of the matter was a substantial increase in levies for casino operators in the NorthWest province as authorised by the provincial MEC; a ruling that may impact other provinces. The Constitutional Court of South Africa (the
Apex Court) delivered an erudite and unanimous judgment in which the Court confirmed the unconstitutionality and invalidity of certain provisions in the North West Gambling Act, 2001 (as amended) that purported to authorise the Member of the Executive Council (MEC) responsible for Economic Development, Environment, Conservation & Tourism in the North West Province, to impose gambling levies/taxes on gambling licence holders in the North West as a tax contemplated in Section 228 of the Constitution of the Republic of South Africa, 1996 (“the Constitution”). Section 228 of the Constitution gives the
provincial legislature the legislative power to impose a provincial tax/levy subject to compliance with certain requirements including the Provincial Tax Regulation Process Act, 2001. In the main, the Apex Court held that in
the context of the South African constitutional and statutory framework; firstly, the MEC may not introduce a provincial tax by way of a Regulation (i.e., the impugned amended Regulation 73(1) in this case); and secondly, a provincial Act (i.e., the NW Gambling Act in this case) may not purport to
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empower the MEC to do so. Notwithstanding the above judgment; firstly,
casino licence holders in the North West are not absolved from their obligation to pay gambling levies/taxes in terms of Regulation 73(1) that applied prior to the January 2020 amendments. This is because this case concerned itself with the constitutionality and validity of the amended Regulation 73(1) which took effect in January 2020. Put differently, the Court was not requested to pronounce on the constitutionality and validity of the pre-January 2020 Regulation 73(1). Secondly, save for the invalidated amended Regulation 73(1), the remaining provisions of the January 2020 Regulations continue to apply and have legal effect. Again, this is because the Court was not requested to pronounce on their constitutionality and validity. The MEC for Economic Development,
Environment, Conservation and Tourism and the MEC for Provincial Treasury were ordered to pay the two operators the difference between the gambling levies they paid in terms of a regulation of the North West Gambling Regulations 2002 from 23 January
2020 to the date of the judgment, and the gambling levies that would have been payable during this period had this regulation not been amended. They were also ordered to pay interest at the
prescribed rate on the gambling levy amounts already paid by the two companies. The two MECs and the North West Gambling
Board were further ordered to pay the court costs of the Casino Association of South Africa, Peermont Global and Sun International, which brought the application contesting the lawfulness of the increased levies. “Finally, whilst the above matter concerned
the NW Gambling Act and the North West, other provinces are advised to consider their respective provincial gambling taxation regimes against this judgment,” says Adv. Themba Ngobese, South African legal gambling expert and Advocate of the High Court of South Africa. “The biggest challenge for those provinces whose gambling taxation regimes do not comply with South African constitutional and statutory framework is that they will not be able to successfully review and/or increase the rates of gambling levies/ taxes payable by licensed operators.”
Adv. Themba Ngobese, South African legal
gambling expert and Advocate of the High Court of South Africa
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