This is the second time I am writing about sports betting. Last week, on March 30, the Cabinet Secretary for Treasury read his fourth and final budget speech under this government.
In delivering the Sh2.6 trillion budget, he lauded the achievements of the government over the last four years, with allocations of billions to finish many projects.
With about Sh 1.5 trillion of expected tax revenue , there were a few increases announced to bridge the gap The shocker was a proposal to raise taxes for betting, lottery, gaming and competition from the current rates of seven and half per cent, five per cent, 12 per cent and 15 per cent, respectively, to a uniform tax rate of 50 per cent, to develop sports and arts.
This appears to have come out of the blue, and one sport betting company executive, commenting after the news, said the government is increasing taxes to do things the companies are already doing.
He appeared to regret why he had taken a charity cheque to the First Lady earlier that morning
Meanwhile, there’s an ongoing Bill in Parliament sponsored by House Deputy Minority Leader Jakoyo Midiwo surprisingly supported by House Majority Leader Aden Duale but opposed by his boss, Minority Leader Francis Nyenze.
It also proposes that from revenue raised from online betting, 30 per cent to go to prizes, 65 per cent to charities (health, education, sports) and 5 per cent to running costs of the operator.
It proposes banning mobile phones and phone money transfer from being used for online gambling. It calls for all licensees to publish reports in the newspapers about gross amounts, net payments, taxes remitted, and numbers of participants.
He wants foreigners to be banned from online gambling and that money from gambling not be remitted outside of Kenya.
What’s the impact of betting so far? One survey by GeoPoll found that Kenya has one of the highest numbers of betting youth in Africa. While youth in Africa bet about once a month, young Kenyans bet once a week. This could be due to the attraction of sports and the presence of sport betting companies.
Young Kenyans place 79 per cent of their bets on soccer matches. Also, across Africa, 75 per cent of bets are done by mobile phone. However, Kenyans do 96 per cent of their betting on mobile phones and spend about $50 (Sh5150) every month.
Some users start betting with the basic features on their phones, such as USSD, but then they later turn to more features like internet searches to research and improve their odds of winning. This also leads some to buy smartphones.
While 55 per cent believe they have won more money by betting, the survey found 50 per cent had actually lost more than they won. Some people take out loans from mobile phone companies to bet and don’t intend to repay if they lose.
They will get new SIM cards if they are blacklisted at credit reference bureaus.
Yet another survey by FSD Kenya looks at lessons that mobile money and bank service providers can learn from gaming companies to build habits that increase uptake of financial services.
It is based on the premise that betting companies use superior engagement and communication techniques to those of financial service providers.
So what will happen? The 50 per cent tax is radical. The government and gaming industry appear to have opposed Mr Midiwo’s Bill at the Committee Stage, but the new budget proposal appears to be more punitive.
The Finance Bill will be brought to Parliament in the next few weeks and MPs will vote on some clauses that are intended to finance government expenditure. Watch this space.