Tanzania joins Kenya, Uganda tax squeeze on gamblers’ winnings

A graphic depicting an online betting site.

Tanzania has this month introduced a gaming tax on the amount or value of winnings through casinos and sports betting, tightening the noose on gamblers already squeezed by levies in neighbouring Kenya and Uganda.

In changes to its Gaming Act, Tanzania said levies of 12 per cent and 10 per cent are now applicable on the amount or value of all winnings in casinos and sports betting, respectively—joining its East Africa Community partners Kenya and Uganda, which have both already gone hard on gamblers with punitive taxes to discourage the addictive habit.

“The licensee of gaming activity is required to withhold gaming tax on winnings made and paid for. In this case, the licensee is the withholding agent who is required to remit the tax withheld on or before the seventh day of the month following the month of payment of the winnings; and submit a return or certificate of payment of tax withheld within 15 days after the end of each calendar month,” Tanzania’s Finance Act 2022 reads.

Until this month, Tanzania only focused on the taxation of revenue of betting firms through levies that ranged between 12 and 25 per cent. Its latest tax move means it is going after individual gamblers, hoping to discourage them through painful levies and also draw some revenue from the willing die-hard gamers.

In Kenya, gamblers already pay a 20 per cent tax on winnings that betting firms are required to withhold and remit to the Kenya Revenue Authority (KRA). This means that if for example one wins Sh1,000, he or she will receive Sh800 as the KRA takes Sh200. The levy on winnings by individuals is in addition to corporate income taxes levied on the gambling and gaming business.

In Uganda, the tax on the value of gaming winnings has been set at 15 per cent and withheld by gaming firms for subsequent remission to the revenue authorities.

The move by Tanzania solidifies a trend in which EAC countries are cracking down on gambling addiction through punitive taxation and other regulatory measures.

In Kenya, the government has sought to tighten the noose on gamblers with the State earlier this year even attempting to further raise the tax on betting stakes to 20 per cent.

In a proposal shot down by MPs, Treasury Cabinet Secretary Ukur Yatani had targeted heavier taxes on punters by raising the excise duty on cash wagered on betting, gaming, a prize competition, and buying a lottery ticket from the current 7.5 per cent.

In his unsuccessful submission, Mr Yatani said gambling and gaming had become “extremely addictive and can result in a variety of harmful repercussions, especially to the youth”.

A survey late last year showed that elderly Kenyans aged 55 and above topped the list of weekly gamblers in Kenya.

The elderly citizens bet 49 times a week on average – way higher than 41.4 per cent for all other age groups, the joint FinAccess Household survey by the Central Bank of Kenya (CBK), Kenya National Bureau of Statistics (KNBS), and Financial Sector Deepening Trust (FSD) Kenya revealed.

The average bet placed by the elderly persons is, however, the least among all age sets at Sh735-- an indication that they gamble for leisure rather than income generation as is the case among the more youthful players.

In the survey, 13.9 per cent of respondents reported being actively engaged in betting, with 18.4 per cent of those who bet being in urban areas and 11.4 per cent in rural areas.

“The gamers who perceive gaming as a source of income declined from 22.7 per cent in 2019 to 11.2 per cent in 2021 and the average amount used for betting declined to Sh939 in 2021 compared to Sh2,559 in 2019. This could be partly attributed (to the) government's deliberate measures to combat irresponsible and illegal betting,” the report notes.

Industry data shows that the gaming industry in Kenya records an average of Sh200 billion in annual sales.

This craze is reflected in the financial data of telecommunication firms such as Safaricom. For example, gambling enthusiasts in Kenya sunk Sh169.1 billion into bets through the M-Pesa mobile money platform in the year to March this year.

Data by Safaricom revealed that 732.29 million betting transactions were paid for through M-Pesa in the financial year ended March as more Kenyans tried their luck in betting at a time the economy is struggling to recover quickly enough from the lingering effects of the Covid-19 pandemic which has slowed job creation.

The value of bets placed via M-Pesa during the period marked a 23.8 per cent increase from the Sh136.58 billion in the previous year despite heavy taxation by the government to regulate the sector, which has been accused as a front for money laundering activities.

The Treasury in July last year reintroduced excise duty on betting and gaming at a rate of 7.5 per cent of the amount staked through the Finance Act 2021 in a move that was tipped to discourage punters from betting.

A 20 per cent excise tax was initially introduced in the year 2019 and saw several betting firms pull out of the local market but was removed in July 2020 through the Finance Act, 2020.

But barely a year later, Mr Yatani unsuccessfully proposed to raise the tax further from 7.5 per cent to 20 per cent in proposed changes to the Excise Duty Act through the Finance Bill 2022.