Government has proposed a 15 per cent withholding tax on winnings by those who engage in sports betting, splitting, for the first time, betting taxes between players and owners of gaming centres.
The proposal, contained in the Income Tax (Amendment) Bill 2017, seeks to relieve owners of gambling centres from solely shouldering the burden of paying withholding tax on winnings from gaming and pool betting.
Currently, under the Lotteries and Gaming Act 2016, gaming tax on lotteries stands at 35 per cent, a lumpsum paid by the owners of gambling houses. But on Monday, the state minister for planning, David Bahati, revealed the government’s plan to restructure tax payment for earnings from betting by instituting a cost-sharing approach between the owners and players.
Bahati told legislators on Parliament’s Finance committee that an individual who wins a lottery or bet will pay 15 per cent withholding tax from his earnings, while the owner of the machine or gambling centre will pay a gaming tax of 20 per cent.
“What we have discovered is that the 35 per cent tax, which is currently the highest in the whole world, was becoming problematic to implement. That’s why we are saying that, since gaming and gambling is a zero-sum game, let each one of them bear the burden of tax. That’s the rationale of spreading it,” Bahati said.
Last year, Parliament passed the Lotteries and Gaming Act, following an outcry from communities about the growing gambling trend, which had attracted a considerable number of jobless youths across the country.
These concerns were re-echoed during the meeting to discuss the tax bills, as a number of legislators raised concern over the trade and called for it to be banned.
Mitooma Woman MP Jovah Kamateeka complained that youth in the villages have abandoned gainful employment to engage in betting.
However, ministry officials said that under the law, betting and gaming centres can only be set up in cities, towns and municipalities. Moses Ogwapus, acting commissioner, Tax Policy, in the finance ministry, warned that banning the activities would encourage illegal trade and cause revenue loss for government.
“This is a worldwide phenomenon. It’s not in Uganda only as a form of business and entertainment, and even a tourist attraction. If you don’t regulate and allow people to do this activity on the table, they will do it under the table which is more harmful,” Ogwapus said.
Edgar Agaba, chief executive officer, Lotteries and Gaming Regulatory Board, said his organisation plans to embark on countrywide sensitization workshops to encourage youths to engage in other areas of gainful employment.
“Our work as the Lottery Board is to ensure compliance and regulate the sector but specifically not to promote gambling. We know the youths are out in the shops. We want to teach these people out there that there are other activities they can gain in for gainful employment,” Agaba said.
The chairman of Uganda Sports Betting Association (USBA), Denis Kikonyogo, welcomed the move to tax players’ winnings, saying it is a progressive move that will encourage more investment in the sector.
Alongside the new tax regime, the regulatory board is also expected to establish and maintain a national central electronic monitoring system to detect and monitor any irregular betting and gambling transactions.
Bahati said the new technology, which will be shipped into the country soon, will also be linked to the Uganda Revenue Authority (URA) system for clear monitoring.