New Betting Withdrawal Tax Sparks Concerns Over Unregulated Platforms and Revenue Risks
The Parliamentary Budget Office has raised alarms over the introduction of a new tax regime on betting withdrawals, warning that it could push bettors toward unregulated platforms, potentially undermining government revenue and the growth of the regulated betting industry. The caution comes as part of a broader analysis of the Finance Act 2025, which imposes a 5 percent tax on all withdrawals from betting or gaming wallets, regardless of whether the funds represent winnings or the original deposit.
Under the previous tax framework, only betting winnings were subject to a 20 percent tax under the Income Tax Act. The new policy, however, taxes any money withdrawn from a betting account, even if no bets were placed or no profits were made. The Parliamentary Budget Office highlighted that this approach could discourage casual and small-scale bettors, who may perceive the tax as unfair. For example, a player withdrawing their initial deposit without placing a bet would still incur the 5 percent tax, potentially reducing participation in licensed betting platforms.
The report projects that the new tax could significantly boost government revenue, increasing it from Ksh5.4 billion to Ksh11.4 billion. However, this target is at risk if bettors abandon regulated platforms for unregulated alternatives, which are not subject to the same tax obligations. A decline in active betting accounts or potential legal challenges to the withdrawal tax could further jeopardize these revenue projections. The Parliamentary Budget Office emphasized that the policy, while designed to formalize the betting sector, may inadvertently weaken it by driving users to less regulated environments.
In addition to concerns about the betting tax, the Parliamentary Budget Office also addressed the government's plan to merge state corporations as a strategy to enhance efficiency and reduce reliance on public funding. The report acknowledges the potential benefits of these mergers, including improved service delivery, better regulatory oversight, and more effective use of public resources. These changes are seen as a step toward long-term fiscal sustainability and stronger institutional performance.
However, the consolidation of state corporations is not without challenges. The Parliamentary Budget Office warned of potential overlaps in management, which could lead to inefficiencies or conflicts in roles. The loss of technical expertise is another significant concern, particularly in sectors such as research, education, and agriculture, where specialized knowledge is critical. Mergers could also disrupt essential services if not carefully managed, potentially affecting the quality and accessibility of public services.
Institutional resistance poses an additional hurdle, as agencies may fear losing autonomy or relevance during the merger process. This resistance could slow down implementation and negatively impact staff morale, further complicating the transition. Legal and regulatory obstacles may also delay consolidation efforts if not addressed proactively, adding to the complexity of the government's plan.
Despite these risks, the Parliamentary Budget Office views the mergers as a strategic move toward creating more self-sufficient state corporations. By reducing dependence on government financing, merged entities will need to explore innovative funding mechanisms to sustain operations and ensure service continuity. The success of these reforms will depend on careful planning, stakeholder engagement, and robust legal frameworks to address potential challenges.
The Parliamentary Budget Office's report underscores the delicate balance between implementing ambitious fiscal policies and maintaining public trust and industry stability. As the government moves forward with the betting withdrawal tax and state corporation mergers, it will need to navigate these challenges to achieve its goals of increased revenue, improved efficiency, and sustainable governance.