New Gambling Tax in South Africa Causing Furor

February 28, 2011 Taxation in South Africa

New Gambling Tax Causes Furor A newly announced gambling tax could heavily damage South Africa’s horse racing industry and lead to job cuts across the country’s entire gambling sector.

Over the weekend prominent figures from the South African gambling industry have stood up in protest against a newly announced tax on gambling winnings. The tax was announced on February 23rd by the Finance Minister of South Africa Pravin Gordhan in the latest government budge. The Minister revealed that winnings on gambling activity would now be subject to a new 15 percent withholding tax from April 2012.

Commenting on the newly announced measure Lisa Haines, director of South Africa’s biggest sport betting outlet SportsBet, labeled the levy as “ridiculous”, saying that it was the third levy that gamblers would be subject to, after VAT and a 6 percent provincial gambling tax. Derek Auret, chief executive of the Casino Association of South Africa, said the new tax was announced without any consultation with the gambling industry. He claimed that the Casino Association sent a letter to the government when the idea for the tax was first raised last year, voicing the industries concerns, but no reply was given and no discussions were held.

It is believed that the new tax will have the most significant impact on the country’s horse racing industry. Rian du Plessis, group chief executive of one of South Africa’s largest horse racing organizers Phumelela, issued a statement saying that the company will seek to hold an urgent meeting with the Finance Minister to explain that the tax will have a devastating effect on the business and will cost thousands of jobs across the country. He said that horse betting in South Africa is supported largely by the practice of “tote betting”, whereby an average gambler will make small daily bets in the hopes of one day winning a large prize. The new 15 percent tax, in combination with existing taxes, will significantly reduce the winning amounts and make gambling an unattractive activity.

While announcing the new levy, the Finance Minister conceded that the tax will be a controversial measure, saying,”…despite the obvious merits of this argument, I expect vigorous debate during the Parliamentary process.”

Photo by MarkyBon