As tax disputes between between the Kenyan government and gambling companies drag on, so too is the country’s football league getting dragged down with it, as Sportpesa pulls the plug on all its sport sponsorship deals.
According to Kenya’s tax collector, as of August gambling companies owed a collective Sh61bn ($586m) to the state. That’s a near three-fold increase on the Sh25bn that Interior Cabinet Secretary Fred Matiang’i said they owed only three months ago. Betting companies claim this is a gross mischaracterization of their dues.
Whichever side will eventually win out, Kenyan football is becoming collateral damage this August.
Having had its licence revoked and access to millions of its customers cut off (after the government ordered Safaricom to stop all payments via SMS and mobile money M-Pesa) the country’s largest operator, Sportpesa, sees no commercial sense in promoting its business through sports sponsorship.
Sportpesa communications said it had been “subjected to punitive measures by regulators” which has “brought about immense pressure on the business, necessitating a reevaluation.”
For the second time in as many years, the Kenyan bookmaker said it would cancel all its current national sponsorship deals – most notably its backing of the Kenyan Premier League – just three weeks before the start of football season on 31 August.
KPL chief executive Jack Oguda said the league had “been thrown back to those days [in the mid-nineties] when we used to run the league without a sponsor.
It is very difficult to make it now and the next move will be decided by the owners of the league, who are the clubs.” “We had already planned to kick off the season on 31 August, but now we will have to convene a meeting […] What I do know is, it will not be possible to start the season without a sponsor.”
This will be the second time Sportpesa has pulled funding from local sports. It did so in 2018 to protest the Kenyatta government’s 5- fold tax hike – to 35 percent – an internationally uncompetitive rte which has since been withdrawn.
It’s hard to see which party will blink first this time around. Both Sportpesa and the government are both holding fast for now. Much of the disparity centres around the 20 percent tax on players winnings that operators were liable to collect and pass on to the tax man.
The law was suspended in 2016, and reintroduced temporarily last year. Although betting companies claim they were inundated with legal challenges from angry punters who refused to pay the fee.
In response, local bookies took their own case to the courts, challenging the KRA’s demands that they must collect taxes on punters’ winnings. Operators say the court upheld their challenge and so their balance with the tax man is correct and the regulator has no legal right to withdraw licences.
The KRA says operators have misinterpreted the new rules. In the meantime the government is pulling out all the stops to prevent them from trading until they pay up. Deputy Commissioner of the KRA, Elizabeth Meyo, said the tax collector “cannot sit back, wait and come back to Parliament and say, the sector willfully refused to comply with the provision of the law.”
“This country needs revenue,” she added, “so we invoked Section 33 of the Tax Procedure Act such that the funds are preserved.” Ronald Karauri, Sportpesa CEO, says the KRA merely exploited a tax loophole in the amended Finance Act 2018 to demand taxes on winnings – a claim, he argues, that is still before Taxation Dispute Tribunal, and should therefore stay further enforcement.
Speaking before senators at a Justice and Legal Affairs Committee on 1 August, Kaurari said: “We have paid taxes in the amount of Sh17.1bn since we began operating in Kenya, but KRA are demanding that we now have a debt of over Sh21bn. “Our prayer to this Committee is that it rules that we be allowed to resume our operations, because we cannot get into negotiations when we are out of business,” Karauri added.
“There has to be a level of good faith. Unfortunately when we try to negotiate with the KRA, they tell you: Pay first, argue later.” Some senators at least appeared to show some sympathy for operators’ plight – especially those who had directors deported.
The committee chair, Nandi Senator Samson Cheragei said it reeks of impunity for the regulator to suspend operations while court cases were pending. “People were deported when their issues were still in court.
If this is not impunity then I have no other word to call it.”