Is the Government a beneficiary of Samuel Abisai's 221 million?

A number of friends have asked me how betting is currently being taxed in Kenya.  I have seen a number of discussions on both print and social media  on this subject and there seems to be a little confusion on how it’s being done. From whom should the tax be chargeable? What is the correct rate of tax? is there withholding Tax on winnings? 

First, taxation on winnings has evolved in the last decade. The Government has struggled to arrive at the best approach for taxing this sector which is a multi billion-shilling industry. Its main agenda is to raise revenue as well as discourage betting obviously because of the well known negative effects.  Different jurisdictions have adopted different styles.

For simplicity I will divide it into two parts:

1    1. Taxes on Bookmakers (companies)

There are four categories provided for under the Betting, Lotteries and Gaming Act.

    v  Betting tax – payable by the betting company at the rate of 7.5% (sec 29A) of the gross turnover less the amount paid to customers as winnings.

    v  Lottery tax – payable by the lottery company at the rate of 5%( Sec 44A)  of the lottery turnover.

    v  Gaming tax- payable by the gaming company at the rate of  12% (sect 55A )of the gross turnover less the amount paid to customers as winnings.

    v  Prize Competition Tax – chargeable on  the  cost  of  entry  to  a  competition  which  is  premium rated  at  the  rate  of  15% (Sec 59B ) of  the  total  gross turnover.  

Note all the three taxes have been standardized to a rate of 50 % w.e.f 1^st Jan, 2018 (Refer to section 26-29 of the Finance Bill 2017). All these are paid by the bookmaker to the Collector (KRA) by the 20^th of the  month following the month of collection( just like VAT). 

2        2. Taxes on punters (winners)

Previously withholding tax at the rate of 20% gross winnings was chargeable. Through the finance Act 2015 the rate was reduced to 7.5% w.e.f 1^st Jan 2016. Later, through   the Finance Act 2016, this was removed from the Income Tax Act and the model of taxing bookmakers and not punters was adopted. The rates are as explained above. 

The Big Question,

Can then Samuel declare the winnings in his income tax return and pay tax at the graduated individual scale?  Please note that individuals don't pay taxes at the rate of 30%- that’s discussion for another day.

The simple answer is, although in my opinion it would be necessary to declare the winnings in the return, the money may not be taxed. Whether winnings are treated as taxable income is an issue that has been contested a lot. There have been a number of case laws on this subject. The fundamental question is whether winnings should be treated as taxable income. This would also mean that the punter (winner) be allowed to offset his losses against that particular income which is the case in some jurisdictions. Some have argued that betting is more of a hobby than a business. Post 2017,  Income Tax Act does not treat winnings as taxable income. Betting, gaming and lottery services are also exempted from VAT (refer to the first schedule).  

Conclusion. Samuel may just  end up keeping all his money. What? I know, and that also explains why when you “sportpesa” and win that 3k, no taxes are withheld.

Disclaimer:

The views expressed in this article are my own and do not reflect the position taken by  Kenya Revenue Authority on this matter.  

 

AFTER LAW SCHOOL

It has always been my dream to become a Lawyer. Well, not really, when my pre-primary teacher asked me what I would be when I grew up, I probably said a teacher. That was because the most loaded person I knew in my village was a teacher (I still think I would enjoy teaching).Or I might have said a pilot. I loved the skies, I still do, not that I had flown by then, but given how elated we would get whenever there was a plane flying over our heads, I guessed whoever was flying that thing must be having a lot of fun. You see at that age, the only ingredient I was looking for in a career was how much fun I could have.  Anyway, I really don’t  remember what I told my nursery school teacher.

Later, I discovered I really enjoyed controversy. Each time I had a conversation and someone took a certain view on an issue I would automatically assume a different view just for argument sake. I would really defend whatever position I momentarily held. This would sometimes really piss off my siblings, probably  because most times, they knew what I really stood for (I am grown now, I don't engage in fruitless arguments,I choose my battles). In class I really fancied English, sarcasm  and I specially enjoyed mooting. And there it hit me; a career in law was my calling.

So there I began my journey. I still remember one of my first classes; One Mr. Oduor asked us, “What is law?” “I pretty elementary question that is” I thought. I had always thought of Law as being a bunch of rules and regulations which if one disobeyed there were consequences. The law stated both the rule and the consequence. And there I raised my hand, and as eloquently and confidently as I could, enunciated the above words. Mr. Oduor gave me that encouraging look, “I forgive you, you are a First Year.”   

Subsequently, I learnt that the definition of law is so broad that even the greatest law scholars do not really agree on an universal definition of  law. In fact one, Thurman Arnold didn't think the law can ever be defined.  But my most interesting guy is W.H Auden, he says “Law says the judge, as he looks down his nose, speaking clearly and most severely, Law is as I've told you before, Law is as you know I suppose, law is but let me explain it once more, Law is The Law”

Deep, I know right?

Okey, Okey, I will let you know where I am going with this. One of my great professors at Law School taught as that, if we were to make successful lawyers, we also needed to inter alia indulge in reading the Bible. I remember reading this verse twice, once in Jeremiah and again in Hebrews. And God said “I will put my laws in their minds and write it on their hearts. I will be their God and they will be my people.”

Prior to joining Law school my scrape with this verse was my starved definition of what law is. My understanding of these two verses was that, God being a Superior Being would write a bunch of rules and regulations accompanied by consequences of non compliance with the ultimate punishment being a penalty of death or life imprisonment in Hell or both. And that every time we obeyed him, we made him really happy.

Later, as I spent more years at Law School studying the various fields of law. My understanding of what law is, really broadened.  I cannot claim to define law. Law touches on every field imaginable. Environment, business, property ownership, personal life such as family,marriage et cetera. The law also carries several components; systems of social norms on which laws are based, a group empowered to enforce the laws, a legitimate system of enforcement,a system of interpreting the law and so on.  

Therefore when God said, “I will put my laws in their minds and write it on their hearts…”we have to look at this law holistically. See, the law is a set of rules and regulations true, but that is only one component of it, the law bares rights and obligations we owe to other people, animals, our environment etc. The law provides for fundamental rights and freedoms we are entitled to, and the law also provides rights and obligations owed to us by other people, institutions, government etc.

In the same view, when God conveys that, he will put His Laws in our minds and write them in our hearts, He  not only daily reminds us that in his Kingdom, there are rules and that sin( disobedience) has consequences, but also that we have an obligation towards other people and the environment. We are entitled to certain Fundamental Rights and Freedoms. This Law provides for the rights and obligations owed to us by God himself. In psalms, God promises to protect us, in Isaiah, God promises to heal us, in John 3:16 he promises to LOVE us. He makes loads of promises to us through Abraham our forefather.

Assuming that the Kingdom of God is a society in which God is the king and we are the citizens, an except of  Chapter Four of our Constitution would be probably read something like this:

The Bill of Rights applies to all law and binds all State organs and all persons.

 Every person shall enjoy the rights and fundamental freedoms in the Bill of Rights to the greatest extent consistent with the nature of the right or fundamental freedom

God  and all citizens have the duty to address the needs of vulnerable groups within society, including orphans, children, widows, older members of society

a)       Every person has the right to life.

b)      The life of a person begins before conception (God declares that, He knew us before we were born)

c)      Every person is equal before God and has a right to equal protection and benefit of the law.

d)       Every person has a right to be loved by God,

e)       Every person has a right to a new beginning.

f)        Every person has a right to own property, self actualization and security.

g)       Every person has the right to health.

h)       A person shall not be held in slavery or servitude (no satanic, sijui witchcraft bondages)

i)         Every person has a right to access information (access to God) and correction or deletion of untrue or misleading information that affects the person (remember the prayer of Jabez?)

j)        A right or fundamental freedom in the Bill of Rights shall not be limited except by law, and then only to the extent that the limitation is reasonable and justifiable before God and  based on His Love towards us, human dignity, equality and freedom.

I am sure you get the drift by now. In putting the laws in our minds and writing them in our hearts. God then affirms his commitment to love us,to chasten us, to keep the promises He has made to us. On the other hand we have certain obligations towards ourselves, each other, our environment and God. Next time we are tempted to think getting saved is engaging in a life of rules and regulations, I pray that this Article shall remind us of what a life we have in Him. Let's think about it this way, His law, is in our best interest. 

So, after Law school, I can confidently tell you that, “Law is as I've told you before, Law is as you know I suppose, law is but let me explain it once more, Law is The Law.”

MY TAKE ON THE UHURUTO PRESIDENCY

It is amazing how we were all united prior to the 4^th of March, 2013. We came out in numbers never witnessed in the history of Kenya but soon all the love and peace messages we passed to each other started to disappear when the results started trickling in.  Soon hate and tribal messages started spreading around. For a while I kept asking my self, “What just happened?” The truth of the matter is that we can only have one president at a time.

RAO has a constitutional right to go to court and see that justice is done. At the end of the day, when the fat lady sings, whether it is Uhuru or RAO who is sworn in as the 4^th president of Kenya, there are a few things that we need to bear in mind.

Firstly, whoever is sworn in, shall be the president of Kenya and not the president of those who prefer him. If you find yourself believing that, if your preferred candidate doesn’t win then there is no democracy, you have issues. If you find yourself overexcited because whoever won is a member of your tribe, you also have a lot of growing up to do. If you find yourself thinking things like, we are a minority tribe, we also want one of our own as president, you have an inferiority complex. This is not a tribal superiority competition.  

Secondly your success in life has not been deferred until one of your own becomes president. I have seen Luo’s who have achieved incredible success during the Kibaki presidency; I know Meru’s who moved mountains during the Moi presidency. Think about it, has anyone ever asked you for a pass to use the recently constructed Thika Superhighway (constructed under Kibaki presidency) because you are not a Kikuyu? Speaking diverse languages and having different cultures is a beautiful thing. God never meant us to use them against each other.  

Thirdly, I am reminded of a time the Israelites where exiled in Babylon. This was a perfect opportunity to sit and whine how one of their own will not become  King. But listen to what God tells them “Seek the peace and prosperity of the city to which I have carried you into exile. Pray to the Lord for it, because if the city prospers, you too will prosper.” Jer 29:7

This is the same message I wish we would carry today. Regardless of who is sworn in as president, “seek the peace and pray for the prosperity of the city (country), for if the country prospers, you too shall prosper.” I believe that all leadership comes from God and if indeed God has appointed Uhuru to be the president at such time like this, we need to stand united and work towards a prosperous country. And to those of us prophesying doom and issuing threats of how those who voted for Uhuru shall regret after sanctions start being given, please understand this, if Uhuru is sworn in as the 4^thpresident of Kenya, any sanctions given would affect you too. We will need to stand behind our president regardless of whether it is UK or RAO who carries the day.

Lastly, unless you are among the senior counsels handling the presidential petition, or you work for the office of the president, let's stop obsessing over these things and go and work, seek peace and pray for the prosperity of the country, for if the country prospers, you too shall prosper. In the words of Barrack Obama, “In the face of impossible odds, people who love this country can change it.” 

Feel free to share