SportPesa hits out at regulator amid tax dispute

19 August 2019

Kenya's SportPesa is gearing up for a protracted legal battle with the country's government as a dispute, that has already seen the operator's mobile payment solution shut down and its activities in the market suspended, rumbles on.

The operator told iGamingBusiness.com that the government was deliberately politicising a dispute over tax to interfere with its Kenyan operations. This has has left SportPesa unable to process mobile payments, prompting it to cancel all sports sponsorship agreements in the country, and place all Kenyan staff on paid leave until the dispute is resolved. 

On 1 July, Kenya’s gambling regulator, the Betting Control and Licensing Board (BCLB), declined to renew the licence applications of SportPesa and 26 other companies. The BCLB claimed it was owed a total of KES60.56bn (£483.7m/$586.4m/€528.1m) in unpaid taxes, claiming that Kenya’s Gaming Bill states that the country’s 20% tax on winnings applies to both profit and to the bettor’s original stake. A SportPesa spokesman said the company is fully compliant with the law, which it says the BCLB has misunderstood.

“The intervention from the BCLB and the Interior Ministry took place in the context of wider tax disputes between the Kenyan Revenue Authority and BCLB and the industry, which are largely based on the authorities’ misunderstanding of how revenue generation is calculated in the sector,“ the spokesman explained. “SportPesa is fully tax compliant in all of the markets in which we operate. We have been recognised by the KRA as such, receiving tax compliance awards in 2016, 2017 and 2018.

“The dispute between the industry and the Kenyan authorities is the result of a deliberate politicisation of tax figures, supporting the Kenyan government’s own political agenda. The government has wrongly claimed that the entire betting sector only paid KES4bn (£31.9m/€34.9m/$38.7m) in tax last year. SportPesa alone paid KES6.4bn in tax.”

The SportPesa spokesman said the company secured a High Court order that overruled the regulator and prevented the authorities from suspending payment services and interfering with the company. However, on 10 July, the state ordered telecoms company Safaricom to block banking services to the 27 companies, leaving customers unable to deposit funds, a move SportPesa believes is in direct violation of the court order. On 22 July, SportPesa opted to take legal action against the regulator to overturn the blocking order.

“In instigating this block, the BCLB and the Interior Ministry directly ignored an order from Kenya’s High Court not to interfere in our business,” the spokesman said. “SportPesa believes that this action was therefore illegal and have sought compensation for lost revenue during this shutdown period.

“SportPesa has therefore taken legal action against the betting regulator and sought compensation for lost business during this time. The High Court is currently considering whether the authorities acted illegally in blocking access to customers’ accounts. A verdict is due to be delivered on 19 September.”

On 9 August, Sportpesa announced it was suspending all of its sport sponsorships in the country. Sportpesa sponsors the Kenyan Premier League as well as several of its clubs and boxer Fatuma Zarika. SportPesa’s spokesman said sponsorships outside of Kenya - which include English Premier League club Everton - will not be affected by the decision, nor will any other operations outside of Kenya such as the company’s UK-facing operations.

“It is with great regret that the Kenya CEO of SportPesa has announced the discontinuation of all of the brand’s local, Kenyan based sponsorships and partnerships,” the company said in a statement issued at the time. “This decision has been made in light of continued illegal and unfounded actions against SportPesa’s business in Kenya by the Kenyan government and regulators. This action by the Government has for now removed the business case for our continued patronage in Kenya.

“All local clubs and partners received notices of this cancellation, as provided for in their contracts.”

SportPesa previously suspended its Kenyan sponsorship deals in 2018, after the introduction of a 35% betting tax that the company claimed was “unworkable”. The tax was later reduced to 15%.

In addition, SportPesa has placed its 453 Kenyan employees on paid leave until the company can resume offering its services in the market.

On 11 August SportPesa was also named in a Sunday Times investigation into the advertising of betting to children in Kenya. However a SportPesa spokesman denied the operator was deliberately targeting minors.

“SportPesa takes its commitment to ensuring responsible gaming in Kenya extremely seriously,” the spokesman said. “We do not advertise to children and are compliant with all advertising regulation in every market we operate in.”

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