Kenya’s multi-billion-shilling betting industry is once again staring at a major shake-up after the government unveiled a new tax regime that could change how player earnings are taxed.
The Finance Act 2025 introduces a five per cent withholding tax on all withdrawals from betting and gaming wallets – a sharp departure from the previous structure that taxed only actual winnings at 20 per cent.
Under the new law, the Kenya Revenue Authority (KRA) will collect the tax on every withdrawal from betting accounts, whether it represents profit or the player’s original stake. This means even casual bettors who simply want to reclaim their unutilized deposits will still have to surrender a portion to the taxman.
According to the Parliamentary Budget Office (PBO), the move could nearly double government revenue from the gaming sector from Sh5.4 billion to Sh11.4 billion – based on projections in its Budget Watch 2025 report. The report highlights the government’s optimism that this expanded tax base will strengthen compliance and plug revenue leakages through digital monitoring systems.
However, the same report raises a red flag over potential fallout. The PBO warns that the new tax may discourage small-scale and casual bettors, who might feel penalized for simply withdrawing their own money without earning a profit.
“For example, if a player has deposited funds but decides to withdraw them without placing any bets, they could still face a five percent tax on that withdrawal, despite not earning any income,” the report notes.
The watchdog further cautions that this “blanket taxation” could backfire by pushing players away from regulated betting platforms and fueling the rise of unregulated or offshore gambling sites. This shift could ultimately hurt the industry’s growth and derail the very revenue goals the government seeks to achieve.
Also Read – Betting Boom: KRA Surpasses Betting Tax Target with Real-Time Tracking Tech
In practical terms, a player who deposits Ksh1,000 and later withdraws it without betting would still lose Ksh50 to the taxman. Such incidences, experts say, can have a significant effect on player confidence and behavior in Kenya’s fast-growing online gaming market – a sector that has emerged as a key source of income for mobile money operators and technology startups.
Despite increased criticism, the National Treasury remains firm that the new levy is necessary to make it convenient to enforce and provide a tax level playing field for all the players. The PBO, however, warns that although the policy will yield short-term revenues, it risks undermining long-term industry sustainability.
The report concludes that the direction of active betting accounts and potential legal opposition to the policy will determine if the government’s gamble on the new tax will succeed or fail.
“The lack of clarity and perceived unfairness could hurt industry growth and undermine the very revenue goals the government hopes to achieve.”
“The number of active betting accounts will also serve as an indicator of whether players are abandoning formal platforms. In addition, any legal challenges filed in court against taxing withdrawals will be critical in determining the sustainability of this approach,” said PBO in the report.
