National Treasury’s proposed online gambling tax will drive consumers to unregulated, offshore platforms, cost the sector thousands of jobs, and result in National Treasury losing out on tax receipts.
In its recently released submission to National Treasury’s proposed additional 20% tax on online gambling ventures, the Free Market Foundation (FMF) states: “The proposed tax undermines provincial authority, overburdens legal operators and risks distorting the legal online gambling market.”
“This is a dangerous and ill-conceived policy that will cost government income, the industry jobs, and drive players to the illegal market,” says Garron Whitesman, founder of Whitesmans Attorneys.
The FMF argues in a statement that the tax risks “driving consumers further towards unregulated offshore platforms, which already dominate the online gambling market”.
Sean Coleman, CEO of the South African Bookmakers’ Association, previously cited research by Yield Sec South Africa, which identified 2 084 illegal operators actively targeting the country in 2024/25, with 1 134 affiliates promoting illegal activities.
Some 27% of South Africans – 16.3 million people – interacted with illegal gambling during that period, says Coleman.
The International Federation of Horseracing Authorities (IFHA), an umbrella body representing 28 national racing authorities across Asia, Oceania, Africa and the Middle East, concurs.
“When legal operators face tax burdens that significantly reduce their competitiveness compared to illicit alternatives, consumers migrate to unregulated platforms that offer better odds, higher payouts, and fewer advertising as well as marketing restrictions,” it says in a January document.
Fake compliance
The FMF is concerned that offshore operators could hypothetically comply with the tax, while continuing to operate in an unregulated fashion. It also raises the point that the proposal to tax unregulated offshore online casinos raises a practical question about enforcement.
“The assumption that it would be possible to enforce a tax on offshore platforms despite the absence of any mechanism or enforcement infrastructure is fundamentally flawed,” says Ayanda Zulu, FMF policy officer and author of the submission.
National Treasury says in its discussion paper that it wants to increase the amount of tax online betting companies pay, regardless of whether they are legal or not, which it anticipates will “translate into over R10 billion in additional revenue for national government”.
Its paperwork indicates that licensed bookmakers, which already pay VAT and provincial gambling taxes totalling about 18% to 19% of their gross gaming revenue, would have to pay an additional 20% tax on top of existing charges.
No problem-solver
Among the reasons National Treasury has put forward for the need for the tax is that it seeks to clamp down on problem gambling.
“Gambling tax is not an effective policy instrument to discourage consumers from gambling as a means of lessening overall gambling harm,” says the IFHA, “and can have an adverse effect as consequent price rises in legal gambling products are likely to drive consumers to the illegal market.”
The FMF argues that National Treasury’s real priority is revenue generation “over a coherent response that would resolve the legal status of offshore online casinos”.
The National Gambling Board’s summary of the Gambling Sector Performance in the 2023/24 financial year indicates that “online betting is now firmly established as the dominant mode of gambling in the country”.
While 49% of South Africa’s gambling activity was online in that year, the segment contributed only 3% of total taxes. Land-based gambling, responsible for 51% of gross gambling revenue, delivered 97% of the R4.84 billion collected.
Yet Whitesman tells ITWeb that “the contribution that the industry makes to the wider economy is incredibly, incredibly substantial”.
Beyond VAT, contributions to the fiscus include corporate tax, withholding taxes, corporate tax pay as you earn and more, says Whitesman. “The horse racing industry would not exist but for Hollywood Bets, among others.”
Evoke’s experience in the UK market bears this out. The holding company for William Hill, 888casino and Mr Green, and a major player in the UK gambling market, will likely cut thousands of jobs following the Exchequer announcing that remote gaming duty would increase from 21% to 40% from April.
Broad impact
Last November, following the UK budget, Evoke said the increased taxes “will result in substantial and far-reaching changes to the entire UK operating environment for betting and gaming, including driving further growth in the unregulated and untaxed black-market”.
Evoke says in a note to shareholders that the duty changes will likely lower UK gambling tax generation, make it less attractive for companies to invest in the sector, and lead to several thousand job losses, while reducing industry support for sports such as horse racing.
CEO Per Widerström said the changes “will have a significant negative impact on player protection as these changes will incentivise activity moving to the illegal and dangerous black-market”.
The sector seems in agreement that the proposed move is not Constitutional given that online entities are licensed and regulated on a provincial basis and not nationally, says Whitesman.
Coleman agrees with both the policy position adopted and sentiment expressed by the Free Market Foundation, and says the organisation is wrapping up its response to National Treasury’s draft discussion paper.
“Any future policy proposal should first resolve the legal status of online casinos within the existing decentralised regime before consideration is given to a fiscal framework for them,” writes Zulu.
* The South African Responsible Gambling Foundation offers free, confidential counselling and treatment for people and their families affected by problem gambling. Contact details for Gamblers Anonymous are here.
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