BUDGET: Will gamble on new betting tax fail?

Why government imposed 15% tax on betting winners but cut that of betting houses   

Kampala, Uganda |Julius Businge| There is continued debate surrounding the recent move by government to impose 15% withholding tax on winnings from gambling and the reduction in income tax on betting houses by 15% to 20%.

Finance Minister Matia Kasaija while reading the budget speech on June 08 said taxing sports betting winners would widen the tax base and increase compliance in the gambling sector.

Kasaija and others support taxing heavily the betting and gaming industry and a new law has just been enacted to regulate the sector. Betting is becoming popular and widespread in the country although, the officials say, the sector’s ability to create jobs for the unemployed and its eventual contribution to national gross domestic product is not substantial at the moment.

In their view, it is better to discourage people from taking part in its activities so they are driven to important sectors like agriculture, which account for over 25% of the GDP and employs majority, over 70% of the total population.

Based on these arguments, some analysts say for Kasaija’s move to yield results, income tax on betting houses should have remained at 35% or even increased alongside the new 15% withholding tax on winnings.

In fact, Kenya’s latest budget raised taxes on betting, lottery, gaming and competition from the previous rates of 7.5%, 5%, 12% and 15% to a uniform tax rate of 50%. Some analysts say that Tanzania that charges gaming 15% of gross revenue and Rwanda 13%, could also raise taxes in the coming years to drive people to production.

In the case of Uganda, in the financial year 2015/2016, the government combined the two taxes (15% and the 20% withholding tax on winnings and income tax on betting houses respectively) and gave responsibility to betting houses to remit it to the Uganda Revenue Authority. Most betting houses did not and government lost revenue.

Moses Kaggwa, the commissioner for tax policy at the Ministry of Finance told The Independent on June 20 that most betting houses evaded the 35% tax arguing that most bets would favour bettors.

Unfortunately government did not have any mechanism to monitor transactions at betting centres. It only depended on what betting houses would declare. That did not help.

The new plan 

Desperate to make things work in its favor, in a separate interview with The Independent, Edgar Agaba, the chief executive officer, for the Lotteries and Gaming Regulatory Board (LGRB), the regulator of gaming and betting industry, said government is working with betting companies to come up with an electronic monitoring system that would give rights to government agencies to access betting houses systems that facilitate transactions.

This system would improve transparency in tax declaration and collection by the growing industry players – betting houses and URA respectively.

Agaba said there are 30 betting houses, 10 casinos and eight slot machine companies licensed in Uganda.   European football is the most popular game amongst bettors in Uganda generally.