Court quashes betting tax, limit on gambling in 5-star hotels
Thursday February 02 2023
The High Court has quashed laws that restricted gambling in the city to five-star hotels with casinos and the 7.5 percent excise duty imposed on cash set aside by punters in their wallets for gaming.
Justice Anthony Mrima said the two laws were not subjected to public participation in breach of the Constitution— which demands community input before major decisions are taken.
The Nairobi City County Betting, Lotteries and Gaming (Amendment) Act, 2021 confined gambling to five-star hotels and limited their operations to between 8 p.m. and 6 a.m.
In the second case, the judge handed gamblers a reprieve after quashing the 7.5 percent excise duty imposed on the money they have set aside in their wallets for gaming. The excise duty was introduced through the Finance Act of 2021.
The Act compelled betting firms to withhold and forward Sh75 out of every Sh1,000 wagered regardless of whether the punter wins or loses.
Justice Mrima said paragraphs 4B and 4D of the Excise Duty Act, were unconstitutional for lack of public participation.
“As the impugned Act affected the entire public, there was a need for serious and wider public engagement,” said the judge.
The Nairobi County Government had defended the law arguing that it sought to curb gambling, insisting that it had become a menace for the young and poor.
The City Hall regulation limited where gambling premises can be located, stating that such businesses will only be housed within five-star hotels as rated by the Tourism Regulatory Authority.
This means City Hall will only issue operating permits to owners of betting, lotteries or gaming premises who have complied with the regulations, spelling an end to establishments without five-star hotels.
Those in breach faced a fine of Sh5 million or imprisonment for a term not exceeding two years or both.
Justice Mrima said the public input sought by the Nairobi county assembly did not pass the required constitutional requirement.
The law restricting operating hours also targeted mobile betting, with firms running gaming activities required to close their paybills and apps until after working hours.
On the 7.5 percent excise duty, Justice Mrima noted that the amendment was introduced by MPs without affording the public an opportunity to give their views.
“By the respondents’ own admission, the Finance Act did not propose the introduction of any taxes on gaming and lottery, but only the Finance Act. As such, no efforts whatsoever were taken to ensure compliance with Article 47 of the Constitution and the Fair Administrative Actions Act,” said the judge.
The betting industry has become one of the targets for ‘sin’ taxes, which the government levies on goods and services considered harmful, costly to society or morally suspect.
Sports betting is popular among the youth, with some funding their gaming addiction with a stream of loans from banks and digital lenders.
The case was filed by the Association of Gaming Operators of Kenya (AGOK) through their officials Judith Kiragu, Daniel Mogeni and Nickson Mwangi.
They claimed the process leading up to the introduction of excise duty on betting, gaming, price competitions and lotteries and the provision raising the tax to 30 percent and apportioning it at 7.5 percent on betting, gaming, price competitions and lotteries, fell short of various constitutional edicts and other statutory provisions.
They argued that gaming and lottery is not a product to be subjected to excise duty and termed the 7.5 percent tax costly.
Kenya Revenue Authority (KRA) defended the Act saying there was adequate public participation before the drafting of the Finance Bill 2021.
The taxman argued that excise duty on stakes, is a consumption tax and it is borne by the punters collected by the bookmarker.
Parliament also dismissed the allegations and said the amendments had the backing of the public.
The judge, however, said the imposition of Excise Duty on betting at 20 percent of the amount wagered or staked was discussed at public engagement fora, but legislators went ahead and provided further taxes on gaming and lotteries, which was not part of the Finance Bill and consequently not discussed during the public engagement.