The Tax Compliance War: Why KRA Is Not Being Genuine, Case of SportPesa

In the recent few days, the airwaves have been ruled by the government’s decision to refuse to renew operational permits and the suspension of 27 betting firms in Kenya.

In a move that got investors in the sector with a surprise, the government went ahead to order telecommunications companies to suspend the Paybill numbers assigned to these betting firms.

The suspension of the Paybill numbers totally delinked the firms from their customers. Customers could neither deposit nor make withdrawals from their accounts.

As the theatrics by the government continue, no one has stopped to ask and question whether the accusations leveled against some of the betting firms are true. The government seems to be selling the idea of the betting firms being “evil” to capitalize on the emotions of Kenyans.

What is happening against betting firms, according to me is what can be termed as “mob justice” constructed on ideas meant to elicit emotions without even an iota of truth.

They say that numbers don’t lie. When the numbers are wrong, they will be wrong and if the numbers are correct, they will display the correctness in them. In the case of the betting firms, the numbers released by the government do not add up.

It is estimated that the betting sector in Kenya is worth 200 billion shillings and that it is estimated to hit the 500-billion-shilling mark by the year 2050.

The government seems to have turned the above to mean that the betting firms made 200 billion shillings in 2018. The government also says that all the betting firms combined paid only 4 billion shillings in taxes. This is not true.

At one point, they said that SportPesa made 100 billion shillings in 2018. This is not true. The truth is SportPesa made 20 billion shillings in revenues in 2018. The net profits stood at 9 billion shillings and paid 6.4 billion shillings in taxes.

Where did the government get the 4 billion shillings figure for all betting firms if SportPesa alone paid 6.4 billion shillings? As I said, the numbers don’t add up.

I find it hypocritical for the Kenya Revenue Authority (KRA) to accuse SportPesa of not being tax compliance when for three years in a row, in 2016, 2017 and 2018 KRA honored SportPesa as the top taxpayer in compliance.

What happened? Why did KRA honor SportPesa for being tax compliant if indeed it was not? In fact, the latest award from KRA was in March 2018. Again, things are not adding up and something fishy seems to be cooking.

Read:

• The SportPesa Factor: Separating Facts From Chaff
• We Are Tax Compliant – Ronald Karauri, CEO SportPesa

Preview of the Betting Sector

SportPesa the most popular online platform in Kenya with 82 percent percent of gamblers subscribing to it, followed by Betin at 40 percent, Elitebet at 22 percent, Betika at 12 percent, Mcheza at 12 percent, and Betpawa at 10 percent.

Kenyan youths bet the most with 79 percent of bets placed on football matches.

The mobile phone has become the most convenient tool for those gambling. 75 percent of those who bet do so using their mobile phones with Kenya having the highest number of mobile usages for gambling at 96 percent.

The success of this booming industry is also evidenced by the advertising spend of top betting companies.

In 2018, out of the top spenders in advertising in the media, 3 of the top spenders were from the betting and gambling sector, with Tatua being the highest spender at 5.36 billion shillings, followed by Lotto at 4.59 billion shillings and Shabiki at 3.16 billion shillings.