- SportPesa will remain in Kenya despite earlier hints of a pullout by the firm’s management
- SportPesa cited the recently imposed 35% turnover tax as a harsh move by the government that could stifle the betting industry in Kenya
Sports betting firm SportPesa plans to remain in the Kenyan market despite hints of a departure that made rounds over the past few days.
The firm has been protesting the newly imposed 35 percent turnover tax which has been termed in several quarters as punitive.
SportPesa’s global chief executive officer Gerasim Nikolov was quoted as saying that the company will no longer be able to operate profitably if the new tax regime is maintained.
“There is nowhere in the world where such a huge tax is levied on turnovers and even here in Kenya, no firm can survive today if a 35 percent tax was put on its turnover,” stated Nikolov during an interview with the Daily Nation.
He added that a number of businesses that partner with SportPesa will be greatly affected in the event of a pullout. But In a rejoinder from the SportPesa Kenya CEO Ronald Karauri, the company was not said to be staying put.
“SportPesa was the first and remains the best gaming brand in Kenya and SportPesa will be the last gaming brand to ever close in Kenya for whatever reason,” Karauri told tuko.co.ke. He added that Nikolov’s sentiments had been taken out of context, leading to the misunderstanding.
The firm is said to have been contemplating a move to neighboring Tanzania or UK which would have dealt a great blow to the sports betting industry in Kenya.
The contentious finance bill
The president of Kenya, Uhuru Kenyatta, signed into law the Finance Bill 2017 which imposes a standard 35 percent tax on all revenue accrued from gambling including lotteries, betting, prized competitions and casino gaming.
Prior to the Finance Bill 2017, licensed practitioners in the sports betting industry were subject to a 7.5 percent tax on revenues. The rapidly growing sports betting sector was soon targeted by government which wanted reap more taxes from the licensed firms while simultaneously creating a deterrent factor for underage bettors.
According to Karauri, the tax increase does nothing to deter betting in the country because it does not directly affect the bettors. In contrast, other forms of sin tax imposed on consumables such as alcohol and tobacco have a deterrent effect because the final consumer feels the pinch of price increments caused by increased taxes.
The initial proposed Finance Bill 2017 recommended a punitive 50 percent tax on lottery companies and sports betting firms but upon revision, the amount was reduced to 35 percent and this has already been signed into law.
Withdrawal of sponsorship
The new tax burden has resulted in the withdrawal of crucial sponsorship deals that SportPesa had signed with Kenyan soccer clubs including two of the most popular teams Gor Mahia and AFC Leopards. The country’s soccer governing bodies are also likely to be directly affected since SportPesa sponsors the Kenya Football Federation and the Kenya Premier League.
Stifling the industry?
According to Nikolov, the government does not have any concrete reason for imposing such steep tax measures and the end result may spell doom for betting and lottery companies.
“This tax is not founded on any basis other than killing the industry. We can only hope that a new consideration can be given before it is left to stifle the industry completely,” Nikolov stated.
The Kenya Revenue Authority (KRA) has collected 4.7 billion shillings ($45 million) in taxes from gaming outfits and earlier recommended a tax increase from 7.5 percent to 15 percent which would put Kenya at par with other African countries like Ghana and Rwanda. According to sources at KRA, the tax increment is expected to yield more tax revenues for the government but may hurt the economy in the long run by warding off potential investors.
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