Excise duty, or “sin tax”, has a storied history.
Alexander Hamilton proposed the “whiskey tax”, which became law in 1971 and was intended to generate revenue to repay debt incurred during the revolutionary war. It was also meant to curb the consumption of American whisky—then a highly growing habit. In the early 1500s, Pope Leo X introduced taxation of licensed red street operatives.
In Kenya, in a slight departure from the ‘sin tax’ history, the tax introduces goods not just detrimental to health—such as sugared and sweetened beverages, tobacco and alcohol—to include those that negatively affect our environment, such as plastic bottles. It is listed in the Excise Duty Act, 2015.
Excise duty on betting was first introduced in 2012 through the Finance Bill. Defeated during the Second Reading, it was reintroduced through the Finance Bill of 2010 with an introduction of a 20 per cent withholding tax as a final tax. Subsequent Finance Bills have introduced further changes. That led to the closure of several betting firms, citing the reason for the business no longer being viable.
The reintroduction of a 7.5 per cent tax on a stake has seen KRA collect Sh7.7 for every Sh100 staked. Betting firms pay 15 per cent on gross gaming revenue and corporation tax at 30 per cent on profits. A win attracts 20 per cent. Then-Gem MP Jakoyo Midiwo sponsored the Betting Lotteries and Gaming (Amendment) Bill 2016, to curb the widespread gambling behaviour among, especially, the youth.
Mario Schmidt, a professor at the University of Cologne, Germany, in his paper “Gambling against the Kenyan state 2020”, says many see gambling as a legitimate attempt at making a living. So, is gambling, like speculation, replacing labour and entrepreneurialism as the avenue of making money?
A friend of mine recently told me he relies on betting to eat. But many Kenyans bet as a way of adding life to their leisure activities, especially sports, breathing life into local sports. Several local sports firms also finance, support and nurture talents.
Estimates of the prevalence of gambling vary. But a December 2021 survey by US research firm GeoPoll found 84 per cent of Kenyan youth bet, a third of them daily. Most showed signs of gambling addiction—including betting to recover funds, trying to get lost money by gambling more, constantly planning gambling activities and how to get more money for gambling and lying about the habit.
Betting is big business, employing thousands of Kenyans. M-Pesa transactions on betting were Sh737 million over six months in 2021. KRA collected Sh5.67 billion, though a 19 per cent drop from Sh7.09 billion over the same period last year. But with the call on President William Ruto to regulate ‘opaque’ online betting firms, the target of collecting Sh15 billion could be achieved.
Parliament is set to debate the Finance Bill for the financial year 2023/2024 next month. Perhaps the biggest question is, how do we control the betting craze and stem the growing addiction among our youth, yet gambling is becoming the main hustle?
Mr Kimani, an accountant (CPA), is Molo MP and chairman of the National Assembly’s Committee on Finance and National Planning. [email protected]
