A week after lawmakers in Kenya passed legislation that will soon see all of the nation’s licensed online gambling operators subjected to a uniform 35% net revenue tax, the boss for SportPesa has reportedly announced that the move is due to see his firm withdraw its financial support for local sporting clubs.
According to a report from the Quartz digital news outlet, online sportsbetting operator SportPesa is the title sponsor of the Kenyan Premier League and holds similar deals with Nairobi-based teams Gor Mahia and AFC Leopards as well as English Premier League giant Everton.
Ronald Karauri, Chief Executive Officer for SportPesa, reportedly used his Twitter account to declare that the imposition of the high tax rate from the start of January is set to “greatly affect” his firm’s operations and that current partners should be prepared to “plan accordingly.”
SportPesa additionally sponsors local boxing and rugby clubs, and Karauri, who moreover serves as Chairman for the Association of Gaming Operators Kenya, reportedly told The Star newspaper that the coming uniform tax rate is punitive, could kill all legitimate betting, gambling and lottery firms and result in the industry being forced underground.
“The expected financial projection will force the closure of firms and that there’s no company in the country that has the capacity of complying with the tax,” Karauri told the local newspaper. “The tax bracket tax is not fair as some operators can barely sustain their businesses.”
Kenya is currently home to the third largest online gambling market in Africa after South Africa and Nigeria with The Star reporting that critics of the coming tax increase have also argued that its imposition is likely to negatively impact industry jobs, discourage investment, and lead to the defunding of corporate social programs.
“Gaming operators in Kenya are likely to stop funding and carrying out corporate social responsibility projects and this will put a lot of youth out of jobs,” Karauri told the newspaper.
Although officials had originally proposed a uniform 50% net revenue tax, Kenyan President Uhuru Kenyatta signed a compromise measure last week that will set this rate at 35% from the first day of 2018. Local lotteries are currently subject to a 5% tax rate while this tariff stands at 7.5% for sportsbetting firms, 12% for online casinos and 15% for competitions such as raffles.
Far from achieving the stated goal of bringing in more cash for the state, Karauri reportedly told The Star that the coming tax rise will lead to Kenya receiving less money as lottery sales could drop by as much as 14.6% with online casino firms recording a 35% decline in operations. The newspaper reported that the Kenya Revenue Authority collected approximately $45.35 million from betting firms in the two years from the start of 2014 while SportPesa has predicted a coming 2.1% drop in annual earnings.