The taxman has won a KShs. 1.6 billion case against betting firm SportPesa, following a ruling by the High Court.
Kenya Revenue Authority (KRA) will go ahead and enforce the collection of winnings or betting tax using agency notices, as the Court ruled that they are income and subject to taxation.
High Court judge Alfred Mabeya in delivering the ruling, stated that, ‘winnings or betting tax is an income and is subject to taxation and the tax rates prescribed in the Income Tax Act.’
The case had been filed by Pevans East Africa, previous owners of SportPesa in an attempt to seek an injunction against KRA’s collection of the taxes due in betting winnings.
The petition was filed after KRA demanded KShs.1.6 billion from the betting firm, against their stand that the taxman had no powers to collect winnings. The Tax Appeals Tribunal upheld the position that KRA lacked powers to enforce collection of taxes from betting, saying that the taxman can file a fresh case to demand the amount.
In the latest ruling, Justice Mabeya supported the taxman by saying that KRA has powers to enforce the law including betting Act to enable collection of taxes accruing, even though the Betting Act doesn’t provide for taxation of winnings.
He ruled that betting tax is classified as a withholding tax and KRA’s issuance of agency notices for collection is captured by the law.
“The court finds that the sum of Kshs1.9 billion was not paid as withholding tax but as security for any taxes that would have been found to be due,” the judge is quoted saying.
The judgement opens a way for the taxman to seamlessly collect taxes in the betting industry without friction from the betting firms, adding to the taxbase expansion drive that also targets the Jua Kali industry.