•There is the 20% withholding tax on all winnings, as well as the highly controversial excise tax on stake, which has generated plenty of debate in the industry for the better part of the last decade.
•The excise tax currently stands at 12.5%, but the recent troublesome Financial Bill of 2024 had proposed to increase the charges to 20%.
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Kenya has some of the highest betting taxes anywhere in the world, and as a consequence, some bettors and operators have been seeking ways to circumvent these tax regulations.
According to data from My Betting Sites Kenya, the country’s leading gambling affiliate company, there have been more than 5,000 searches for “betting sites with no tax” and related queries within the last three months.
“Our Google Search Console data show that there has been a sharp increase in Kenyan punters searching for tax-free betting sites within the last quarter”, said David Mwangi, editor-in-chief at My Betting Sites Kenya. “In fact, our page educating punters on the need to avoid such sites is currently amongst the most visited pages on our entire site”, he added.
It is easy to see why Kenyan bettors would want to avoid the tax demands on licensed betting sites. With a 12.5% excise tax on stakes and a 20% withholding tax on all winnings, sports betting doesn’t quite carry as much value as it would if these taxes were not in place.
General overview of Kenya’s betting tax laws
Before a betting company is permitted to operate in Kenya, it must part with a variety of fees, including an application fee and a licence grant fee, but after the pre-launch expenditure comes very robust tax charges.
Betting companies in Kenya are required to remit 15% of their gross gaming revenue to the Kenya Revenue Authority along with a 30% corporate tax on all customer winnings. The gross gaming revenue comprises the overall turnover minus the winnings paid out to customers.
It doesn't end there. There is the 20% withholding tax on all winnings, as well as the highly controversial excise tax on stake, which has generated plenty of debate in the industry for the better part of the last decade.
The excise tax currently stands at 12.5%, but the recent troublesome Financial Bill of 2024 had proposed to increase the charges to 20%.
This is not the first time that the Kenyan government has tried to push the excise tax up to 20%. Back in 2019, Kenya attempted to put the tax at 20%, up from the previous mark of 10%, but that move was reversed by the Parliamentary Finance Committee in 2020, which resolved that the increase had resulted in a drop in tax revenue collected from the industry.
The committee then moved that the excise should be put away completely, a proposal approved and signed into law by President Uhuru Kenyatta.
The pendulum swung again in 2021 when the government proposed a 20% tax on betting stakes, but the authorities eventually settled for a 7.5% tax. This was the case up until July 2023, when the tax was again increased to its current rate of 12.5%.
The excise tax has been particularly frowned at by the betting operators, but Kenyan bettors have also had major issues with the charges. If a bettor wager 1000 shillings on a bet, the actual wager would be 875 shillings following the deduction of the excise tax.
This obviously has an effect on the potential winnings of the wager, particularly if you factor in the 20% that would be deducted from the winnings should the bet be successful.
So why does Kenya have hostile tax charges against sports betting?
Well, the government has been in a long-running agenda to curtail the astronomical growth of sports betting in the country. There's a particular focus on curbing gambling amongst young people, with Kenya said to have the highest percentage of young gamblers in sub-Saharan Africa.
According to a Statista, 83.9% of all Kenyan gamblers fall within the youth category as at December 2021 - by far the largest in sub-Saharan Africa recorded in the survey - with Nigeria and South Africa coming second and third with 78.31% and 74.03% respectively.
Kenya is also quite notorious for under-age gambling, with school children regularly seen in betting houses along the streets of big cities like Nairobi and Mombasa.
The thinking from the Kenyan government is that raising the excise tax on stake and withholding tax on winnings would diminish the value of sports betting and make it less attractive to youngsters.
Kenya is also mulling over raising the minimum betting stake to 20 KES as the country fights to make betting as inaccessible as possible to school children and underage bettors.
While eradicating underage gambling remains a major priority of the government, they are also looking to control the growth amongst the adult population.
Between 2019 and 2021, the percentage of adult gamblers in Kenya skyrocketed from 1.9% to 13.1%, based on a 2021 survey by the Kenyan FinAccess Household, while TGM Sports reported that 63.82% of the entire Kenyan population had taken part in sports betting activities at some point within the 12-month period leading up to October 2022.
Another survey, sanctioned by the Media Council of Kenya and executed by Infotrak Research and Consulting Ltd reported that 56% of respondents confirmed that they bet at least once a day or once a week.
All of these points to an exponential surge in sports betting which has shown very little signs of abating. Indeed, Kenyans expended 88.5 billion Kenyan shillings on sports betting in the year leading up to June 2023.
Interestingly, the Kenya Revenue Authority also raked in increased tax revenue, with the taxman collecting 6.64 Billion shillings in excise Tax compared to the 5.1 billion that can in during the previous 12-month period.
Kenya has said it intends to use some of the tax coming in to establish rehabilitation centres and create more awareness about the negative consequences of sports betting.
But are there really tax-free betting sites in Kenya?
Kenya has done a very good job so far of sanitising its gambling space, but there is still some work to be done. There are some unlicensed offshore sites which are still able to sign up players from this country.
As Kenyan authorities continue to think up ways of keeping the betting industry on a leash via its tax laws, it must also keep a closer eye on such companies looking to come in through the back door to attend the thousands of unsuspecting Kenyans who want to bet without paying tax. The authorities also need to do a better job of educating these bettors on the dangers of betting on unlicensed sites.
For the Betting Control and Licensing Board, the Kenya Revenue Authority and all other agencies responsible for making these laws, it goes well beyond putting the regulations on paper. There should be emphasis on education, execution, implementation and punishment for violators.