The Kenya Revenue Authority (KRA) has been given a green light to collect more than Ksh2.7 billion monthly tax on withholding taxes on winnings from betting firm SportPesa.
In a statement on Monday, KRA announced that the move follows a ruling delivered on May 23, by Milimani Commercial Courts Chief Magistrate, Peter Gesora, allowing the tax man to collect the monthly tax on winnings from betting games on the Sportpesa platform among others, that have been failing to withhold tax on winnings.
In the suit filed by Benson Irungu in 2014, the applicant sought to stop SportPesa from making any withholding tax deductions on any person’s winnings from a bet or game of chance conducted by the firm.
Irungu went ahead to obtain orders on May 22, 2014 restraining the firm from withholding tax deductions from its customers.
The orders had temporarily stopped the operations of crucial Income Tax Act sections (Sections 2, 10, 34 and 35) effectively rendering KRA unable to collect the levy.
Aggrieved by the orders, KRA, which had not been party to the case, sought to be enjoined as an interested party and successfully obtained orders setting aside Irungu’s orders on March 29, 2019.
Dismissing the case, Chief Magistrate Gesora noted that the nature of sport betting, winnings are unpredictable and a player cannot be certain the amount that he will win.
“That being the situation, it is not sound to argue that certain amounts should not be collected by withholding tax agents. Revenue collection is well regulated by statute, and by the fact that Sportpesa is a tax agent is a clear indicator that all those using its platform are obligated to pay tax on their winnings,” Gesora ruled.
Further, the Magistrate added that KRA Commissioner of Domestic Taxes is mandated to collect taxes from sport betting firms and remit the same to the Sports, Arts and Social Development Fund as set out in section 35 (1) (i) and (3) (h) of the Income Tax Act.
Following the ruling, Gesora advised Irungu to explore provisions for refund if necessary as enshrined in the Tax Procedures Act.
The taxman stated that the taxes will now be directed to national development projects.
“As per the budget statement read last year by National Treasury Cabinet Secretary, Henry Rotich, taxes drawn from betting activities are earmarked to finance sports, art, cultural developments and the rollout of the Universal Health programmes, ” KRA said.