Sportybet Kenya limited shutdown in Kenya

The taxman has pursued another betting company over a Sh5 billion tax debt, shining a brighter light on the multi-billion-shilling business that is already being closely inspected by government agencies for purportedly failing to report the requisite taxes.

SportyBet Ltd. filed a lawsuit against the Kenya Revenue Authority (KRA), alleging that the KRA's actions in blocking its accounts at six banks and their Safaricom pay bill numbers due to overdue tax claims totaling Sh5 billion had negatively impacted its business operations.

SportyBet Ltd. informed Justice Alfred Mabeya in a matter currently before the High Court that it has been unable to meet its commitments due to an enforcement order secured by the KRA in April and renewed last month.

The company testified before the court that the taxman unlawfully got the orders and frozen the bank accounts at KCB, Standard Chartered, Equity Bank, Stanbic, ABC Bank, Co-operative Bank, and a number of Safaricom paybill numbers.

The company claimed in the application that because the respondent currently employs more than 20 Kenyans, the persistent freezing of its bank accounts due to the preservation orders issued herein has forced it to find more expensive alternative ways to pay its employees' salaries and other contractual obligations to third parties.

The business claimed that during its eight years of operation in Kenya, it had continuously paid taxes and even received tax compliance certifications from the taxman each year.

The KRA claimed to have evaluated the company's tax compliance and determined an obligation of Sh5 billion.

On April 12, the taxman filed a lawsuit, requesting that the firm's bank accounts be preserved while the audit is ongoing.

The KRA may, without the party's knowledge and in accordance with Section 43 of the Tax Procedures Act, attempt to preserve a taxpayer's funds in the possession of a third party.

Before going formally to court, the freeze is given for a little time. This comes after the KRA started a significant operation pursuing betting companies in which it demanded SportPesa pay an astounding Sh95 billion, a sum that the company has disputed.

According to the KRA, it has been difficult for many years to assess and collect every penny of tax revenue because of the actions, inactions, and illicit behaviours of some taxpayers, which lead to inaccurate tax filings and deny the government income.

The KRA claimed through attorney Sega Addah that SportyBet had no other assets in the nation outside the funds kept in the six banks and the Safaricom paybill numbers.

The taxman was compelled to file a lawsuit to protect the assets due to the sizeable sum that may be moved outside of the country, according to the lawyer who testified in court that SportyBet under-declared the profits for the three years between 2018 and 2021.

She said that the tax data was gathered from the company's bankers and paybill accounts with Safaricom, and that the KRA purportedly observed the significant discrepancy between deposits and self-declarations after analysing the data.

The company, however, asserted to the court through attorney Kenyatta Odiwuor that all of its directors, with the exception of one foreigner, are Kenyan citizens.

He said that the company received confirmation in January that its systems are completely connected with KRA's I-tax System Integration Data Report, which offers real-time data.

"What this implies is that the person who submitted the request is able to access all data in real-time," he explained.
As the government aims to take a larger share of the billions gained from the gambling frenzy, the implementation is part of the taxman's new digital plan to enhance tax compliance.

The KRA aims to collect Sh41.1 million per day from betting companies, with the Treasury expecting to get Sh15 billion from gambling this year.

The KRA has since sent it three assessment notifications, the most recent of which was in August, according to Odiwuor. The company's serial defaulter status and assertions that it planned to shut down operations in Kenya were both refuted by the attorney.

"The defendant is therefore in receipt of a valid current tax compliance certificate that demonstrates it has paid all its outstanding taxes as provided by law," he stated.

The betting company tried to explain to the taxman that internal transfers take place within its multiple pay bills and that calculating all pay bill transactions will only lead to counting the same monies several times.

The betting company said that it was feasible for consumers to make deposits to their paybills but not use all of the money for stakes.

If these consumers can't discover a good betting opportunity, they can deposit and withdraw later without placing a wager, the company added.

A pay-bill transaction is not considered net income by SportyBet.

Since then, the excise tax on gross gaming income has been raised to 12.5 percent, plus a 20 percent win withholding tax and a 30 percent corporate tax.

The company claims in the appeal that the KRA miscalculated by selecting Sh7.3 billion as the starting point for calculating the winnings withholding tax.

The company asserts that according to the data provided by the Betting Control and Licencing Board, the proper gross payouts are Sh1.9 billion.

The freeze was prolonged by the court until the application's decision date. On the day the decision is made, the parties will be informed. 

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