Betting firms and a group of gamblers have suffered a blow after the court refused to overturn 7.5% excise duty imposed on cash they set aside in their wallets for gaming.
High Court judge George Odunga dismissed a petition filed by the gamblers stating that levying excise duty on stakes is lawful.
“I have found that in betting transactions, it is proper to levy excise duty on the stake,” Justice Odunga said.
Judge Odunga also dismissed claims that the excise duty amounts to double taxation since gamblers pay 20% withholding tax on winnings and another 15% tax on the gross gaming revenue.
The tax means that betting firms will withhold and forward Sh75 out of every Sh1,000 wagered regardless of whether the punter wins or loses.
The Treasury has lobbied Parliament for approval to increase the tax to 20% from July 1 in efforts to curb gambling which breeds money laundering.
The petitioners claimed the introduction of the extra tax of 7.5% on top of the 20% tax imposed on all winnings amounted to double taxation.
But Justice Odunga ruled that excise duty is a different levy from withholding tax.
“Whereas the two taxes may well impose burdens on the taxpayer, that does not make them unconstitutional,” he said.
The judge explained that the issue of double taxation does not arise because the excise duty (paid at the point the punter places the stake) and the withholding income tax (paid upon winning) are two distinct taxes paid by different people.
Betika, Betway, Odibets, Sportpesa, MozzartBet and Association of Gaming Operators, were enjoined in the case against the Kenya Revenue Authority (KRA) and Parliament.
The petitioners claimed that investors and gamblers were discriminated against because other similar deposits like M-Pesa and bank accounts were not subjected to tax on funds saved on their platforms.
But KRA argues that the stake is the charge for participating in a bet, a lottery or a game and that it allows the punter to participate in a bet which places them in a position to gain or lose.
Treasury is seeking to return the 20% duty on the amount staked after MPs defeated a similar bid in the Finance Bill 2021, and reduced the duty to 7.5%.
If passed, the proposed 20% tax will apply from July 1and this is besides corporate income taxes imposed on the gambling and gaming business.
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