Betting companies explain how tax on winnings is calculated

Betting companies address concerns raised by customers

Association of Gaming Operators explains how 20% withholding tax is calculated on winnings

Since the government introduced 20% withholding tax on proceeds of gaming, customers have been complaining to the betting companies over a major slash on what they get after placing a bet.

The Association of Gaming Operators - Kenya (Agok) on Tuesday placed a full-page spread in a local daily outlining the formula used comply with the government order.

Agok blamed the government for ambiguous wording used to explain what amount is subject to tax, warning that due to the misunderstanding the government may suffer during revenue collection.

"We concur with the government on tax collection to meet its agenda but the methodology and interpretation of the term winnings gives the operators a bad image especially with their customers who do not understand that the contentious interpretation is from the government. We feel this will have a negative impact on tax collection," the statement by Agok CEO Aloyce Omondi read in part.

The formula used to calculate 20% tax on bets

The statement outlined that the companies use betting odds, which are normally in decimal format, to calculate winnings. The odds figure is multiplied by the amount the gamer placed as a bet (stake) and the result is considered as winnings. This is referred to as fixed odds betting.

"A Sh10 bet at odds of 3.0 would return Sh 30 (Sh20 of winnings + Sh10 stake) if successful. If unsuccessful you lose your Sh10 stake. The calculation is now winnings = (odds x stake) - stake," the statement outlined.

The tax is then imposed on the winnings as above calculated.

A random test by Pulselive.co.ke on one of the betting platforms found that for a stake of Sh100 at 1.36 odds would attract Sh27 withholding tax and a payout of Sh109, which most gamers would find impracticable.

"KRA has instructed BCLB not to renew licenses of some betting companies based on their interpretation of winnings which distorts the expected revenue, even while the matter is yet to be settled by the Tax Appeals Tribunal," the statement outlined.

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