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KRA goes after SportyBet over Sh5bn tax bill

The taxman has gone after another betting firm over a Sh5 billion tax bill, intensifying the spotlight on the multi-billion shilling industry which has come under increased scrutiny from the authorities for allegedly declaring incorrect taxes.

SportyBet Ltd has gone to court accusing the Kenya Revenue Authority (KRA) of hurting its operations by freezing its accounts in six banks and Safaricom pay bill numbers over claims of unpaid tax amounting to Sh5 billion.

In a case pending before the High Court, SportyBet Ltd told Justice Alfred Mabeya that it has been unable to pay salaries, rent and other obligations because of a preservation order obtained by the KRA in April 2023 and extended to July of the same year.

The firm told the court that the taxman unprocedurally obtained the orders, freezing the bank accounts at KCB, Standard Chartered, Equity Bank, Stanbic, ABC Bank, Co-operative Bank and several Safaricom paybills numbers.

“The respondent currently employs over 20 Kenyans and the continued freezing of its bank accounts on the basis of the preservatory orders issued herein has forced it to find alternative but costly means of meeting its salary obligations and other contractual obligations to third parties,” the firm said in the application.

The company said it has been operating in Kenya for the last eight years and has consistently paid taxes and even obtained tax compliance certificates from the taxman every year.

The KRA said it conducted an assessment of the firm’s tax compliance and established a liability of Sh5 billion.

The taxman moved to court on April 12, seeking the preservation of the firm’s bank accounts, pending the conclusion of the audit.

Section 43 of the Tax Procedures Act allows the KRA to seek the preservation of a taxpayer’s money in the hands of a third party, without notifying the party.

The freeze is granted for a limited period before moving to court formally. This comes months after KRA launched a major operation targeting betting firms in what saw it demand a staggering Sh95 billion from SportPesa, an amount that the firm has contested.

The KRA submitted that it has for many years been experiencing challenges in assessing and collecting all tax revenues because of acts, omissions and vices perpetrated by some taxpayers which result in incorrect tax declarations, denying the government revenue

Through lawyer Sega Addah, the KRA said SportyBet has no known assets in the country apart from the money being held in the six banks and Safaricom paybill numbers.

The lawyer told the court that SportyBet under-declared the incomes for the three years between 2018 and 2021 and the taxman was forced to move to court to preserve the funds given the huge amount, which might be transferred out of the country.

She said the tax information was collected from the firm’s bankers and paybill accounts with Safaricom and upon analysis, KRA allegedly noted the huge variance between deposits and self-declarations.

The firm, however, told the court through lawyer Kenyatta Odiwuor that the directors of the firm are all Kenyans save for one who is a foreigner.

He further said the firm was in January 2023 issued with a confirmation that its platforms are fully integrated with KRA’s I-tax System Integration Data Report, which provides real-time information.

“What this means is that the respondent is able to access all data in real-time,” he said.

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The integration is part of the taxman’s new digital strategy to increase tax compliance as the government eyes a bigger slice of the billions made from the gambling craze.

With the Treasury projecting to collect Sh15 billion from the gaming industry this year, the KRA targets Sh41.1 million from betting firms every day.

Mr Odiwuor further said the KRA has since issued it with three assessment notices, the latest one being in August 2023. The lawyer dismissed claims the company wanted to wind up its operations in Kenya and that it is a serial defaulter.

“The respondent is therefore in possession of a valid current tax compliance certificate that confirms it has paid all its due taxes as provided by law,” he said.

In correspondence between the taxman and the firm, the betting firm sought to explain that there are internal transfers that happen within its various pay bills and that counting all pay bill transactions will simply result in counting the same funds many times over.

The betting firm further said it was possible for customers to deposit amounts to the paybill and fail to utilise the whole amount as stakes.

“Such customers may deposit and later withdraw without placing a bet if they have been unable to find a suitable betting opportunity,” the firm said.

According to SportyBet, a pay bill transaction is not net income.

The variance in gross gaming revenue excise on stakes has since been increased to 12.5 percent, 20 percent withholding tax on winnings and 30 percent for corporate tax.

The firm says in the appeal that the KRA erred by using Sh7.3 billion as the base for computing the withholding tax on winnings.

The firm maintains that the correct gross payouts are Sh1.9 billion as per the Betting Control and Licensing Board returns.

The court extended the freeze until when it will rule on the application. The parties will be notified on the date of the ruling.

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