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Kenya’s High Court will force the removal of a controversial 7.5 percent excise duty tax on gambling activities and has declared the capital Nairobi's gambling law void in two landmark decisions delivered on the same day.
Both of the successful legal petitions were launched by the Association of Gaming Operators of Kenya (AGOK), an industry trade group.
The petition against the excise duty saw the AGOK take on the National Assembly, Attorney General, the Kenyan Revenue Authority (KRA) and the Betting Control and Licensing Board.
In the excise duty case, the judge found that parts of the Excise Duty Act 2015, amended by the Finance Act 2021, which detail a 7.5 percent wagers tax, are in violation of the constitution for failing to comply with "public participation, stakeholder engagement and fair administrative procedures requirements".
The judge declared the taxes “unconstitutional, null and void and of no legal effect. They are hereby quashed.”
“There is no doubt that the public ought to have been accorded an opportunity to also express themselves on the issues of gaming and lottery. That opportunity was, however, not accorded,” the ruling states.
The judge singled out two paragraphs in the Finance Act 2021.
Paragraph 4b states that “excise duty on gaming shall be seven-point five percent of the amount wagered or staked”.
Paragraph 4d states that “excise duty on the lottery (excluding chargeable lotteries) shall be seven-point five percent of the amount paid or charged to buy the lottery ticket”.
The court apologised in its ruling for the late delivery of the judgment, caused mainly by the number of election-related matters that had been filed in the Constitutional and Human Rights Division since December 2021.
At the time of writing, VIXIO GamblingCompliance is awaiting a response from the KRA about the decision to remove the excise duty on bets.
Just weeks ago, the KRA had outlined its plans to have all online gambling operators transmitting both daily payments and transactions data in real time by the end of March 2023, aimed at retrieving the excise tax (7.5 percent on stakes) and withholding tax (20 percent on winnings).
A second ruling on the petition submitted by the AGOK against the government of Nairobi’s Betting, Lotteries and Gaming Act 2021 found the law “unconstitutional, null and void and of no legal effect”.
The court found that the act was in breach because of a lack of "reasonable public participation and stakeholder consultations".
The Nairobi Gaming Act established a regulator called the Nairobi City County Betting, Lotteries and Gaming Control Board. The law also limited gambling venues to five-star hotels in the county.
Petitioners successfully claimed the law allowed the local regulator to illegally impose a local tax on all betting, lotteries and gaming activities at the rate of 10 percent on gross winnings.
According to Kenya’s constitution, a county government may only impose entertainment taxes and any other tax it is authorised to impose by act of parliament.
Both rulings were published on January 31, 2023.
It is likely that both quashed laws could be reintroduced in another guise, but the rulings mark a massive win at least in the short term for Kenya’s gambling industry.
