Push for additional levy on putting operators’ profits
Isaac AIDOO in Accra, Ghana
INVESTMENT advisory services firm, C-NERGY Ghana is pushing for a 2.5 percent additional levy on the profits of gambling and betting operators to specifically fund gambling research, education and treatment of addictions that gamblers are diagnosed with.
Felicia Owusu, a senior analyst with the firm, in a research paper noted that “this levy would augment the top-line revenue tax rate of 20% which is currently applied to operators in Ghana.”
She argued that the levy will guarantee funding for government-sponsored demand-reduction interventions which have proven to be the most effective approach to preventing gambling addictions across some jurisdictions.
Ghana’s revenue authority on August 15 commenced the implementation of a 10 percent withholding tax on all gross winnings, including betting, gaming and other games of chance. The GRA said that the new policy was in line with an amendment to the Income Tax Act 2023 (No.2), Act 1094.
The new tax has received mixed reactions from various sections of society with the most vocal segments arguing that the new tax will fail to significantly impact government revenue. The ongoing debate on the likely effect of the win tax on the growing gambling industry has put the industry under increased spotlight.
The potential dangers of gambling among African youth deserve serious attention. The high unemployment and poverty rates have made online sports betting a very attractive venture which is increasingly serving as a makeshift source of income for the youth.
The disturbing phenomenon is that the poor and desperate are more vulnerable to gambling addictions.
According to C-NERGY, in the long-term, African governments risk lower savings rates among key demographics (youth and elderly) that are most likely to develop gambling addictions.
Raise cost of operating licences
C-NERGY proposed further that licences for online betting companies should cost at least five times the current price of GH¢2 million (US$170,000) to increase government revenue. Online sports betting licence in Kenya for example is about US$1million equivalent.
“This is necessary to make up for the loss of employment and taxes associated with land-based operators. It would also ensure that only well-capitalised companies obtain and renew operating licences to sanitise the industry,” the paper argued.
Contingency deposit to protect gamblers
The Gaming Commission should consider introducing a requirement for operators to keep 25 percent of the minimum bankroll requirement with the Commission as a contingency deposit. The contingency deposit would be fully refundable once the operator exits the market with no outstanding winning claims. This would create a sizable pool of cash for the government in the short-term and enable the Gaming Commission to protect punters against defaults in the payment of winnings in the absence of a Gaming Tribunal to resolve payment disputes.
Owusu noted that across a number of major gambling markets including Macau, Portugal and Austria, online operators’ top-line revenues are taxed between 15 percent and 40 percent to cater for challenges associated with the corporate income tax approach.
“Considering the average win amount (which is less than US$50) and the low frequency of gambling winnings (85:15 in favour of the operators), the replacement of the corporate tax and VAT applied to operators with a new 20 percent tax on gross revenues is a step in the right direction since it will have a much greater impact on government revenue from the gaming industry,” she explained.
Govt defends policy
Government has defended the policy in the face of mounting criticism. Pius Enam Hadzide, chief executive officer of Ghana’s National Youth Authority said his outfit had welcomed the policy because it would discourage the youth from gambling.
But Owusu points out that though taxation has been an effective tool in disincentivizing the use of tobacco, alcohol and even sugary drinks, “application to gambling poses unique risks. It may end up doing more harm than good.
“This is because the 10 percent tax will effectively increase the net losses of gamblers as wins shrink by the tax margin. Net gambling loss correlates with incidence of adverse effects including stress, depression and anxiety among punters and their relatives and rising crime rates and social welfare costs on the societal level. Further, it will fuel the black market by allowing illegal operators to compete on price as wins on unregistered gambling platforms would be tax free and, therefore, preferable,” she explained.
We are betting our lives away
Francis Korkutse, a veteran Ghanaian journalist, in an article published in a Ghanaian newspaper in 2021, lamented the manner in which mushrooming betting houses in Ghana were gradually grooming Ghanaian children into future gamblers.
He warned, “there is the urgent need to look at the social problems the betting houses may be creating for us to handle in the future.
“In some suburbs, school children have started patronising these betting houses and it is possible some have started skipping school. Let us be clear, anyone who grew up in the inner cities in this country saw how “Lucky Numbers” affected lives. Some people spent all they earned to gamble and were left with nothing. All this is a pointer to the fact that betting is addictive and so, encouraging it in any form is dangerous,” Korkutse wrote in his piece.
Quoting reputable sources, the veteran journalist, worried about the future of the Ghanaian youth, brings to bear the dramatic destabilising effect of gambling and betting providing examples in jurisdictions that suffered similar experiences.
Africa could lose heavily from gambling addictions
Assuming the prevalence of online gamblers is held constant at three percent (trend suggests higher), African countries could collectively expect to lose more than $45 billion annually to online sports betting alone by 2050.
For a developing continent, $45 billion annually would go a long way to increase investment in infrastructure and human resource development.
It is therefore critical for African countries like Ghana to ensure that appropriate measures are taken to protect vulnerable populations from falling victim to these risks.