Kenyan operators lose fight against government's 35 percent tax

In Kenya, the Association of Gambling Operators, which represents online and retail sports betting companies, has lost its challenge to the government’s 35 percent tax levy (see previous reports) in the High Court.

On Thursday Justice John Mativo dismissed the challenge after the Association claimed that the high rate of taxation would kill mainstream firms and pave the way for underground players who will be difficult to control and regulate.

The government countered the challenge with the argument that the tax is reasonable and is intended to curb the rapid growth of online gambling and the harm it causes to vulnerable persons, families and communities. The government also explained that the taxation would raise funds for sports, culture and the arts in Kenya.

Justice Mativo criticised the Association for not disclosing that a previous case had been filed in October against the betting tax increase by one of its members, SportsPesa, although this had later been consolidated into the case brought before the High Court.

In that matter the operator had claimed that the radical increase in taxation (from 7.5 percent to first 50 percent and then a reduction to 35 percent) had been processed through parliament as part of the budget and was therefore unconstitutional in that it was not properly debated and considered as a stand-alone bill.

The plaintiff had also claimed that state president Uhuru Kenyatta had overreached his authority in approving the tax increase, which SportPesa claimed was burdensome and unreasonable.

Justice Mativo rejected all of these arguments, opining that taxation is “a way of apportioning the cost of government among those who in some measure are privileged to enjoy its benefits hence must bear its burdens.”

The tax rise takes effect from January 1 2018.