The South Africa National Treasury has published an online gambling tax proposal draft, with a 20% national GGR tax included for implementation.
The draft, ‘The Case For a National Online Gambling Tax’ stressed that while land-based bookmakers and casinos are currently taxed between 6%-9% of winnings or gross gaming revenue by the licensing provinces, they still generate employment and other communal benefits for the citizens. The same cannot be said about online and interactive gambling despite the significant spike in its user engagement.
A recent publication from the market’s regulatory bodies showed GGR from online gambling went up 60% on data from the previous year.
According to a report from Statistics South Africa, firms providing bookmaker and online gambling services saw a massive income boost up to R152.6 billion ($8.9 billion) as of 2023, representing a 72% increase between 2018 and 2023, a figure which clearly surpassed all other activities in the sports and recreation sector.
Why this proposed tax rate is cause for concern
With online gambling being in direct competition with land-based casinos as part of the interactive gambling industry in most countries, tax rates should be aligned to ensure fairness, the draft stipulated.
And as up to 11 other jurisdictions are already charging a 20% tax on GGR, with a further 16 regulators collecting an even higher tax rate, the National Treasury explained why the proposed rate should be upheld and implemented. The national gambling tax would be in addition to the provincial tax rates and would lead to a tax rate of between 26% and 29% for all online gambling activities.
The new rate is expected to translate to an additional R10 billion in revenue generation to the South African government. However, the proposed reform was not particularly aimed at further revenue generation but to curb the issue of problem and pathological gambling and its consequences.
Enforcing oversight
In respect to that, the National Treasury has also mapped out a procedure to ensure oversight and the collection of the proposed tax rate when approved.
Every online operator will be required to register and provide the South African Revenue Service with similar information to that currently available to the provincial gambling boards they are licensed to, which is used for gambling tax revenue collection. That way, compliance will be enforced.
Local industry players who are involved in interactive gambling will also be subjected to the proposed tax, depending on the extent of the GGR of every gaming activity in which they are involved.
In its conclusion, the Treasury’s proposal noted that regulatory bodies have not kept pace with the evolving market over the years as forms of gambling (like online and interactive gambling) other than lotteries and sports pools have been let off, hence the need for the new rate on their operations.
As online gaming continues to surge in popularity, South Africa’s Treasury is seeking tighter oversight through a proposed 20% GGR tax regime.