Treasury's proposed online gambling tax faces growing opposition from licensed operators
Licensed operators in the gambling industry have raised concern over the National Treasury's proposoed 20% tax on online gambling, citing constitutional concerns and dire economic implications
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Opposition to the National Treasury’s proposed 20% national tax on online gambling is growing sharply, with leading industry bodies and legal experts warning that the plan is unconstitutional, economically destructive and likely to drive South African consumers toward unregulated offshore operators.
The proposal, outlined in Treasury’s recent discussion paper would require both licensed and unlicensed online betting operators to pay a national tax of 20% on gross gambling revenue (GGR).
For locally licensed bookmakers it has been noted that this tax would be added on top of existing provincial gambling taxes and VAT, pushing their effective total tax burden to nearly 40%.
The South African Bookmakers’ Association (SABA) has cautioned that the tax would “comfortably outstrip the rates applicable in all but four” of the 50 international jurisdictions reviewed in Treasury’s own study and would be “unsustainable” for the domestic industry.
SABA argues that Treasury has “completely overlooked or ignored” the effect of VAT on local operators and warns that the measure would “have the counter-productive effect of imploding the legitimate market.”
Prominent gambling law specialist Garron Whitesman, founder of Whitesmans Attorneys, has added his voice to the growing backlash, describing the proposal as “constitutionally unacceptable in fact and in law and totally flawed in its logic.”
According to Whitesman, the policy “fails to recognise the clear jurisdictional boundaries of and limits on the national government on the regulation and taxation of gambling and betting in South Africa.”
He further contends that Treasury’s actions, combined with what he calls the National Gambling Board’s “recent complete misstep in relation to the Supabets case raise “serious constitutional concerns about fiscal centralisation.”
Whitesman says the tax is “particularly concerning” because it proposes “a punitive tax rate that is way out of kilter with any balanced approach to taxation of gambling activities.”
He notes that licensed operators already face extensive fiscal obligations, including “provincial betting tax, a national gambling tax, VAT at 15% on bets, corporate taxes, withholding taxes, employment taxes and more,” as well as “substantial BBBEE, upliftment and CSI contributions.”
Under the proposed regime, he warns, “business will become unsustainable… and lead to business closures and job losses,” with “massive” negative fallout across the supply chain.
Treasury’s statement that “the main objective of the reform would not be to raise further revenue, but rather to discourage problem and pathological gambling and their ill effect” is, a claim that Whitesman says is “misleading.”
There has been a growing call for action against online gambling with 107 organisations from South Africa’s labour, civic, faith-based, and welfare sectors signing a declaration calling for a national ban on all forms of online betting.
SABA has also questioned the logic of using an operator-side tax to influence gambler behaviour, arguing it is “difficult, if not impossible, to discern how the imposition of a punitive national 20% tax… will have the desired deterrent effect.”
According to Whitesman, the proposed tax will inflict far more harm than it prevents: “An additional tax at this rate will cause far more harm than good.”
He warns that punters will “flock” to unlicensed platforms, which authorities “will absolutely not be able to keep out of South Africa,” resulting in “a smaller regulated industry, less customer choice and protection, and a tax base that has been eroded for the provinces.”
“This is an unacceptable outcome by any measure,” he says. “In short, raising taxes, particularly in the manner and extent proposed by the National Treasury, will absolutely not achieve the Treasury’s stated objective. It must be vigorously opposed.”
Whitesman argues that “there are far better ways to achieve Treasury’s alleged objective,” insisting that the legal industry takes player harm reduction “extremely seriously” and that the issue is “exceptionally worthy of extensive appropriate debate and regulation.”
However, “taxing the industry to death is absolutely not the answer here and will not achieve this.” He concludes that “the general public should view the National Government’s motives here with a tremendous degree of skepticism.”
SABA echoes the need for meaningful reform, particularly in clarifying what constitutes legal and illegal online gambling activity, a long-standing issue that it says stems from “a lack of precision in the applicable legislation.”