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The High Court has made a ruling on the taxation of betting stakes and winnings. In its decision, the Court dismissed a constitutional petition challenging the legality of the 12.5% excise duty on betting stakes and the 20% withholding tax on winnings.
Justice Stephen Mbungi, sitting at a High Court in Kakamega, found that the new gambling taxes did not break the law and did not result in double taxation, as the petitioner claimed.
“It is a cardinal principle of the law on interpretation of a statute that all the provisions of the statute should be read in a holistic manner but not in isolation,” ruled the Judge.
High Court Upholds Gambling Taxes
The judge explained that laws should be understood as a whole, not by examining parts in isolation.
He also ruled that the 12.5% excise duty on betting stakes, introduced through the 2023 Finance Act, did not violate the Constitution, which states that any law conflicting with the Constitution is invalid.
“It is my finding that Paragraph 4A of Part II of the First Schedule of the excise duty act of 2015 as amended by the Finance Act of 2023 is not in contravention of Article 2(4) of the Constitution which provides that any law, including customary law, that is inconsistent with this constitution is void to the extent of the inconsistency,” said the judge.
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The main issue in the petition was whether it was legal to charge a 12.5% excise duty on the amount people bet, as introduced by the Finance Act, 2023. The judge ruled that this tax is legal and clearly different from the 20% withholding tax charged on winnings.
He explained that excise duty is charged when someone places a bet, while withholding tax applies only when someone wins. He also noted that betting companies pay a separate tax called Gross Gaming Revenue, which is different from the taxes paid by punters (persons betting).
He added, “Therefore, it cannot amount to double taxation. Similarly, it is not the same tax.”
About the Petition
The petition, which dates back to August 21, 2023, had been filed by Edward Okwama, who enlisted the National Assembly as a respondent alongside Milestone Gaming Limited, Standard Global East Africa, the Kenya Revenue Authority, and the Attorney General.
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The petitioner claimed the imposition of 12.5% excise duty on the amount wagered, played, or staked plus an additional 20% withholding tax on winnings, and argued that not subjecting the same requirement to similarly situated persons in the country was discriminatory and in contravention of Article 27 of the Constitution, and therefore ought to be declared null and void.
In its objection to the petition, the National Assembly defended the legislative process leading to the enactment of the law, particularly Article 95 of the Constitution regarding the enactment of the Finance Act 2023 that actualizes those clauses.
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