Treasury Cabinet Secretary Henry Rotich on Thursday read Kenya’s 2017/18 budget in Parliament, revealing a huge blow to the betting industry.
The Betting, Lottery, Gaming and Competition Industry tax of 7.5% (betting), 12% (lottery), 15% (gaming and competition) has been raised to a standard 50%.
CS Rotich noted that betting and gaming have become widespread in Kenya which lacks inadequate regulation.
”The expansion of the industry has had negative social effects on society, especially on the youths and vulnerable members of the society,” Rotich said.
He revealed that the tax proceeds will be put in a newly created national sports, culture and Arts fund to support the youth in the country.
The increased betting industry tax comes as Gem MP Jakoyo Midiwo proposed a bill to introduce new and higher taxes on the industry. Gross revenues from the industry are estimated to be in the region of Sh3 billion. Forecasts by PriceWaterhouseCoopers (PWC) Maurice Lugongo also indicates that the industry will experience steady growth over the next five years.
Despite the perceived low tax rate of 7.5%, tax from betting companies has tripled in two years according to the Kenya Revenue Authority.
KRA Commissioner General John Njiraini in a presentation to a Parliament Committee last month said that the agency collected about KSh 4.7 billion in corporate tax from betting firms in the last three financial years.
Njiraini told MPs the fast-growing industry has helped expand the tax base.
”The philosophy for taxing betting, lotteries and gaming revenues is partly to discourage gambling while also creating avenues for raising revenue. The application of this principle nevertheless requires moderation in relation to the imperative to ensure business continues to operate and thrive.”
Kenya’s 2017/18 Budget – Other Notable Facts
Kenya’s 2017/18 budget has a waiver of duty on maize imported in the next four months. Pesticide manufacturers and local assemblers of tourist vehicles have also been exempted from taxation.
CS Rotich issued incentives to the manufacturing sector to create more employment to the youth. KSh 450 million was said to have been set aside for modernization of Rivatex and another KSh 250 million for the New KCC.
Special Economic Zones in Kisumu, Mombasa, and Nairobi will be exempted from VAT besides infrastructure plans.
With the need to cut the government’s wage bill, CS Rotich announced a job freeze in the public service except for the education sector.
”We have set aside KSh 2 billion for hiring of teachers and another KSh 4 billion for exam waiver to 2017 KCSE and KCPE candidates.”
On devolution, the counties will get 329 billion, which is 35% of the total national revenue.
Rotich said the fiscal deficit for 2017/18 will be KSh 524.6 billion shillings, equivalent to 6 percent of GDP that will be financed through both external and domestic borrowing.
Domestic borrowing will be KSh 268.6 billion shillings or 3.1 percent of GDP while the net external financing will amount to KSh 256 billion shillings, or 2.9 percent of GDP, on mainly non-concessional terms.