This archive report was first published on 2 September 2019.
On September 2, 2019, the Kenya Revenue Authority (KRA) issued tax agency notices to mobile network operators, citing unpaid tax bills. This move effectively grounded the operations of several betting firms, which were in the midst of ongoing tax disputes in court.
The KRA's actions were met with criticism, with many arguing that withholding a license is not a legally recognized measure of resolving tax disputes. The authority's request to the Betting Control and Licensing Board to withhold the betting firms' licenses was seen as an overreach of power.
Furthermore, the KRA's request to mobile network operators to shut down the betting firms' Paybill numbers was deemed unrecognizable under the Tax Procedures Act. The Central Bank of Kenya also put the firms on a list, cautioning its licensees against dealing with them, and some banks have since frozen their bank accounts.
The Communications Authority has also issued a notice to telecommunications service providers, asking them to disconnect the betting firms' telecommunications codes. The ongoing tax disputes in court, which are subject to the court calendar, remain the central issue.
The Income Tax Act, as amended by the Finance Act 2018, introduced a winnings tax of 20 percent of winnings. However, the definition of winnings is vague, leading to differing interpretations between the betting firms and the KRA.
The betting firms argue that winnings should be defined as the positive difference between the payout made and stakes placed in a given month, for each player. In contrast, the KRA interprets winnings as the gross amount of the payout to the punters, including the staked amount.
This interpretation increases the risk threshold of punters by removing the incentive of winning, ultimately destroying the business model of the betting firms. The shop closures that may result would mean the loss of billions worth of taxes paid to KRA in the last four years, as well as direct and indirect employment and sports sponsorship deals.
