Kenya gov’t to challenge Tribunal ruling on betting winnings tax

kenya-legal-challenge-bettors-winnings-tax-ruling

kenya-legal-challenge-bettors-winnings-tax-rulingKenya’s tax authority is challenging a tribunal’s ruling that the 20% tax on sports betting winnings doesn’t apply to the original betting stake.

Last week, the Tax Appeals Tribunal in Nairobi declared that the 20% tax on sports betting winnings that took effect in July 2018 applied only to bettors’ net winnings, not to the total sum returned to winning bettors by Kenyan-licensed sportsbooks, which includes punters’ original betting stakes.

In addition to ruling on the definition of betting winnings, the Tribunal also imposed restrictions on the KRA’s ability to compel betting operators from deducting the tax at source, instead shifting responsibility for remitting the tax to individual bettors.

On Monday, the Kenya Revenue Authority (KRA) issued a statement saying the taxman had filed paperwork indicating its intention to challenge the Tribunal’s ruling. The notice was filed on November 8, one day after the ruling was made public.

Local media quoted Paul Matuku, the KRA’s top legal eagle, saying the KRA was “aggrieved by the Tribunal’s finding that it had no legal backing in demanding Withholding Tax from the betting firms and the manner in which it had enforced collection of the tax.”

Waweru claimed that the Tribunal’s ruling “departed from the decision by Justice Hatari Waweru’s in a Meru High Court case in which the learned judge had found that there was no ambiguity in the interpretation of the term ‘winnings’ as defined by the Income Tax Act.”

The dispute over the definition of winnings led the KRA to demand hundreds of millions of dollars in alleged tax arrears from operators licensed by the Betting Control and Licensing Board (BCLB). When these demands weren’t met, the BCLB suspended the licenses of 27 betting operators while the KRA cut off their payment processing channels.

As a result, several operators, including market-leaders SportPesa and Betin, were forced to shut their Kenyan operations and lay off hundreds of staff. The BCLB suggested that suspended licensees would need to “apply afresh” for new licenses, assuming they were found to be in tax compliance.

Last week, SportPesa CEO Ronald Karauri issued a statement saying the company would “now reconsider the future of its operations in Kenya” and called on the KRA to abide by the Tribunal’s ruling and “apply a reasonable approach to gambling regulation and taxation, in line with international best practice.” The KRA’s notice of appeal suggests that ‘reasonable’ will remain an elusive goal for the foreseeable future.