Betting firms Betin and SportPesa have moved to court to challenge the Kenya Revenue Authority’s move to demand tax arrears amounting to Ksh14 billion.
The move comes barely a week after the taxman announced that the Labour Court had allowed KRA to collect Ksh2.7 billion monthly tax on withholding taxes on winnings from betting firm SportPesa.
KRA is also demanding Ksh11 billion levy from Betin.
Read: KRA Allowed To Collect Over Ksh2.7 Billion Withholding Taxes On Winnings From SportPesa
In their respective suits, the firms argue that KRA’s move is deemed to paralyze their operations and lead to huge losses.
KRA is reported to have issued notices to Safaricom and the firms’ respective banks to demand the levy.
In its application, SportPesa says the taxman has not conducted any prior assessment before making the demands.
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“The funds held by Safaricom belong to individual players who placed bets through SportPesa. Those funds do not belong to and are not held by Safaricom on behalf of SportPesa,” the application reads.
Consequently, SportPesa is seeking orders to suspend the notices by KRA until the case is heard and determined.
In its statement on Monday, KRA noted that the move to collect the funds follows a ruling delivered on May 23, by Milimani Commercial Courts Chief Magistrate, Peter Gesora, allowing the taxman to collect the monthly tax on winnings from betting games on the SportPesa platform among others, that have been failing to withhold tax on winnings.
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In the suit filed by Benson Irungu in 2014, the applicant sought to stop SportPesa from making any withholding tax deductions on any person’s winnings from a bet or game of chance conducted by the firm.
Irungu went ahead to obtain orders on May 22, 2014, restraining the firm from withholding tax deductions from its customers.
The orders had temporarily stopped the operations of crucial Income Tax Act sections (Sections 2, 10, 34 and 35) effectively rendering KRA unable to collect the levy.
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Aggrieved by the orders, KRA, which had not been a party to the case, sought to be enjoined as an interested party and successfully obtained orders setting aside Irungu’s orders on March 29, 2019.
Dismissing the case, Chief Magistrate Gesora noted that the nature of sports betting, winnings are unpredictable and a player cannot be certain the amount that he will win.
“That being the situation, it is not sound to argue that certain amounts should not be collected by withholding tax agents. Revenue collection is well regulated by statute, and by the fact that SportPesa is a tax agent is a clear indicator that all those using its platform are obligated to pay tax on their winnings,” Gesora ruled.
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