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Kenyan economy is reeling from negative effects of cracking the whip on the fast developing gaming industry

Kenya Revenue Authority (KRA) offices at Times Tower
  • The reasons behind the government’s assault on the betting industry remain unclear to date.
  • What cannot be disputed is the financial consequences of their blunt action which have been felt far and wide.
  • The cash-hungry country now finds itself in a situation where much needed tax income for public services has dried up and, most ironically, gambling has continued but gone underground. 

At its peak, the gaming industry in Kenya was generating over $100m a year for the treasury. 

Figures from the Kenyan gambling regulator, Betting Control and Licensing Board (BCLB), show that gross gambling revenue for the 2016/2017 financial year was nearly Ksh 20 billion ($198m).

Then the government decided to crack the whip on the fast developing industry and things have never been the same again.

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According to the latest data published, revenue collected by the government from the gaming industry has free-fallen by 260%, from a monthly income in June 2019 of Sh 354,212,882 ($4million) to Sh74,205,002 ($700,000) recorded in September 2019. 

The reasons behind the government’s assault on the betting industry remain unclear to date.

What is even more puzzling in the whole assault is that different government ministries are reading from different scripts. The Kenya Revenue Authority says the crackdown is targeted at betting firms who are not remitting their taxes.

However the same KRA cannot explain how for three years in a row, Kenya’s leading sports betting platform SportPesa received the top taxpayer's honour for tax compliance.

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The third time was in March last year raising questions on why the government is accusing it of not paying taxes.

On the other hand, the ministry of interior claims the crackdown is informed by the need to stop young men from becoming addicted to gambling; others suggest it was simply an effort by self-interested government officials to get a slice of the profit the industry was generating. 

Whatever the reasons, what cannot be disputed is the financial consequences of their blunt action which have been felt far and wide.

Kenya’s telecommunication giant, Safaricom, wasn’t spared from the ramifications of the crackdown. The firm was forced to suspend its paybill number it had issued to the betting firms, something which held back the growth of M-Pesa.

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Arguably the stringent tax liabilities placed on the betting sector – including a 20% withholding tax on users’ wallets, including stakes and the winnings - dealt a dead blow the industry which had managed to employee thousands of Kenyans and provided widespread sponsorship of sporting events around the country, in addition to the tax revenue it brought.

The Kenyan government has not escaped the effects of its own crackdown. Rather than improving Kenya’s income, attacking the betting industry has led to a significant and serious decrease in funds available for public spending. 

The cash-hungry country now finds itself in a situation where much needed tax income for public services has dried up and, most ironically, gambling has continued, only it is now taking place in an unregulated and uncontrolled way, leaving many thousands of Kenyans vulnerable to the dark forces that operate in the shadows. 

President Kenyatta recently announced that the government will be formulating a law to compel the payment of contested tax bills before courts rule on them in a bid to boost government revenue and help plug a widening budget deficit, shining a spotlight on how bad the situation is becoming.

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Yet, tax collection isn’t the only repercussion of enacting an ill-informed legalisation. Thousands of jobs have been lost in the process which has lead to widespread protests both online and on the streets. 

And it doesn’t end with the betting industry. In allowing certain individuals to brazenly go after the betting industry without following the rule of law, the President has inadvertently declared open season on all tax paying sectors in Kenya. 

Just last week, one of Kenya’s largest flower producers, Finlays, announced it would close two farms, much to the despair of some 2,000 employees and industry players, who say the effects will be devastating to the local economy. 

The reason? High cost of doing business in Kenya. Along with several other firms in the country, the Kenya Revenue Authority owes the company millions in Value Added Tax (VAT) refunds and all the while it has imposed a 2.5 percent Free On Board levy on growers, effectively making the flower business untenable. 

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Once an employer of more than 500,000 and a generator of Sh113 billion, the flower industry, much like the betting industry, is heading for trouble. 

Which begs the question, who’s next? 

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Eyewitness? Submit your stories now via social or:

Email: news@pulselive.co.ke

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