Betting fans turn to Uganda to escape 20% tax on winnings

Gamblers living along the border with Uganda have simply exported their betting to ensure they get value for their money.

“In Uganda, the issue of 20 per cent withholding tax is not there, so you get your money. You stake and you get the expected earnings,” Hillary Etyang’, who owned a gaming account with Kenya’s former betting giant SportPesa, told the Star in an interview.

Thereafter, they walk to the nearest Uganda mobile money agents, deposit the cash into their foreign lines and start betting.

On weekends, when most local and international leagues are played, it’s common to see youth crossing the border in large numbers. They flood betting shops as they follow league matches from morning to night.

“We place our live bets, win our money, do shopping for our families and come back to Kenya,” Etyang’ said.

“We will continue doing this because betting was like an alternative source of income for us on the Kenyan side.”

“I once staked Sh10,000 for one match, expecting a possible win of Sh13,000. That would have given me a profit of Sh3,000 but to my shock, I received Sh10,900, which translated to a profit of only Sh900 from that huge amount,” Etyang’ said.

This, to him, was not reasonable since before the introduction of the new levy, he would place two bets with a similar amount and earn Sh6,000. But this is now impossible because he would be risking his money for the government’s gain.

Etyang’s woes paint a picture of how Kenyan youth have become addicted to gaming, an industry the government is trying all means to regulate.

On July 2, the Betting Control and Licensing Board (BLCB) declined to renew operating permits for 19 gaming companies after the firms were accused of failing to comply with tax payment guidelines.

According to the BCLB, anyone who bets and wins money pays 20 per cent of his or her total earning as tax to the government.

The new rule came into operation after July 1, when Interior CS Fred Matiang’i announced the suspension of betting permits for 19 firms.

Matiang’i had accused owners of gambling companies of tax evasion, alleging they owe the Kenya Revenue Authority Sh26 billions in unpaid dues.

Interestingly, SportPesa, which has since departed the Kenyan market, was in March 2016, 2017 and 2018 honoured by KRA as one of the country’s top taxpayers.

At the time of their suspension, the gambling industry alone controlled over Sh200 billion.

Matiang’i said the licences would only be renewed if the firms complied with the law, including paying all accumulated taxes.

As reality sinks in, in Malaba town, retail shop owner Samuel Mkoko occasionally sneaks out of his business to bet in Uganda. He said the decision to halt the renewal of betting firms’ permits was ill-timed.

“I have friends who are unemployed but are good at betting. They entirely rely on gambling to pay rent, buy food and clothes and even save money. I know of one who has bought a plot of land,” Mkoko said.

“Suspension should have come after the government has provided alternative sources of income. We are only lucky because we are near Uganda. Uganda will support us. There is nothing like withholding tax there. I will bet in Kenya if the 20 per cent withholding tax is done away with.”

Before the latest developments, the gambling industry in Kenya had grown tremendously the last five years, to the tune of Sh202.67 billion, employing approximately 5,000 people, official data shows.

To Etyang’, the new tax’s introduction is only a ploy by the government to cash in from where it never invested since it takes the lion’s share of what gamers earn.

“Gaming is not as profitable as it was before the new tax was introduced. That is why we have gone to Uganda. Government should get an alternative way of taxing but not from our hard-earned money. Let it tax the gambling firms but not us,” he said.

He said he does not see himself abandoning gambling since the boda boda motorcycle he owns was bought with betting money.

Just like Etyang’ and Mkoko, Elizabeth Anyaa, who completed college in 2015 and is still unemployed, has also not been spared by the new gaming rules.

“I am not familiar with the betting firms currently in the Kenyan market. I know SportPesa. Since they have closed shop, I have no option but to follow my friends to Uganda,” she said.

In her free time when she is in Malaba town, she hops onto a motorbike and rides to the Ugandan side of the border, where she deposits money to her Ugandan MTN mobile line, places her bets before returning to Kenya.

If she wins, she returns to Uganda for mobile money withdrawals before deciding on whether to spend the money in Uganda or Kenya.

She says she meets at least 50 Kenyans in the gambling shop she frequents in Uganda every weekend. There are five such shops in Malaba, Uganda.

SportPesa and Betin on September 28 officially announced their departure from Kenya after accusing the government of cultivating what they termed a hostile investment environment for them.

The two firms said they would only resume operations when the President Uhuru Kenyatta-led administration puts in place satisfactory taxation policies.

Betin on the same day announced that its staff had been rendered redundant. SportPesa followed suit on October 2, when chief executive Ronald Karauri sent home 400 employees.

The companies described the 20 per cent tax on them as “damaging to customers and the National Treasury”.

Before closing shop, SportPesa had expressed disappointment with Parliament’s imposition of the 20 per cent excise tax on all betting stakes, adding that the new levy was a fundamental misinterpretation of how revenue generation works.

The firm, which controlled the largest market share, argued that with the new tax rule on winnings, profitability levels for their individual clients would be low and this in return would deprive customers of their expected winnings.

The betting companies argued that the new tax would have severe effects for them as they have been paying taxes, lead to a drop in government tax revenue and halt all investments in Kenya’s sports industry.

It is also a mega uplift for Ugandan telecommunication investors since they cash in whenever Kenyan gamblers withdraw money using their Ugandan mobile lines.

On weekends, the Ugandan side of Malaba border is usually a beehive of activity as Kenyans cross to game and later on have fun.

Juliet Amoding, who operates a beer joint adjacent to Malaba police station, said in an interview 90 per cent of her clients, particularly on weekends, are Kenyans.

However, it’s not all doom and gloom for local betting firms. Among the suspended companies that have bounced back to operation are BetPawa, which has rebranded to Bet254, Mozzart Bet, Bet Lion, Odi Bets, Betway and Betika.

The government argues in its bid to regulate the gaming industry that the sector relays negative effects on society and must, therefore, be checked.

One of the new guidelines it issued in a new Gaming Bill is a requirement by the firms involved to run messages on the negative effects of gambling, similar to the ones relayed on the consumption of alcohol and cigarettes. The messages must also warn that gaming is addictive.

Among politicians who have spoken loudly on the recent suspension of gaming companies are outspoken Gatundu South MP Moses Kuria. He said the Kenya Revenue Authority indiscriminately accused betting investors of tax evasion, and should have closed all firms before seeking fresh individual clearance.

“The success of any economy is based on a predictable business environment and fidelity to the rule of law. It is presumptuous and preposterous for government to close down betting pay bills allegedly on tax-related matters when KRA has not issued agency notices,” the MP said on July 12 on his official Facebook page.

“To make matters worse, the directives are being issued in a skewed manner, sparing some well-connected platforms. Until we pass a law banning betting, we should stick to the law of fair play.”

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