SABA Provides Preliminary Comments on Proposed 20% National Online Betting Tax
2025/11/28 – SABA (South African Bookmakers’ Association) has read the discussion paper produced by the National Treasury, proposing the implementation of a 20% national tax on online betting and interactive gambling. While detailed written comments, based on an in-depth analysis of the proposal, will be submitted during the course of the stakeholder engagement process, certain preliminary comments are considered necessary and appropriate at this juncture.
Reduced to its essence, the proposal is that providers of online betting and interactive gambling products, whether licensed or unlicensed in South Africa, will be required to pay a 20% national tax on the gross gambling revenue (the amount wagered less the amount paid out in winnings) generated by their operations. In the case of licensed operators – typically bookmakers licensed in the various provinces – this tax would be over and above the national (vat) and provincial (gambling) taxes already paid by them, which when combined currently average between 18% and 19% of gross gaming revenue (“GGR”). The paper postulates that a tax rate of this nature would be justified, because, of 50 other international jurisdictions in respect of which data was collated, 11 charge a tax rate of 20% on GGR, while a further 16 levy even higher rates.
The paper, which In SABA’s understanding was produced without any prior consultation with industry stakeholders, projects that in excess of R10 billion will be generated for the national fiscus if the proposed tax regime is introduced. The primary purpose to be served by the planned imposition of the proposed tax is not, however, revenue generation, but instead harm minimisation, which is required to address the recent surge in online gambling and the adverse corresponding effects of this trend in the context of problem and “pathological” gambling. The express intention behind the proposed tax is to discourage the betting public, and particularly problem and “pathological gamblers”, from participating in online gambling, and in this manner, to address its negative effects on society.
A number of the basic building blocks for this proposal merit closer attention. While it is true that in various foreign jurisdictions, a tax rate of 20% or higher is in place, these tax rates are generally stand-alone rates which are not supplemented by other pre-existing or parallel levies, such as VAT. In this regard, it is instructive to note that of the 50 jurisdictions listed in Figure 5 of the paper, 22 (or 44%) do not levy VAT in respect of gambling or betting, while in respect of a further 24 (or 48%), information as to whether gambling or betting transactions attract VAT is not readily available. Only in one case (or 2% of the entire sample) is VAT levied, while in a further three (or 6%) VAT may be chargeable, depending on the nature of the transaction in question.
In contrast, in South Africa, licensed bookmakers not only typically pay a provincial tax of 6.5% of gross profit in respect of online betting, but are also liable for 15% VAT on their GGR, which, when adjusted for the recovery of Vatable expenses, translates into an effective combined rate of between 18% and 19%. It is therefore manifest that the impact of VAT on the South African licensed betting industry has been completely overlooked or ignored in the analysis performed in support of the proposed tax.
If a further national tax at a flat rate of 20% of GGR is to be levied on licensed bookmakers, over and above the provincial taxes and VAT, the effective tax rate surges to between 38% and 39%. A rate of this nature comfortably outstrips the rates applicable in all but four (or more than 90%) of the international jurisdictions sampled in Figure 5 of the paper. Moreover, such a rate would equate to more than double the existing tax burden currently borne by bookmakers, which self-evidently, would be unsustainable. As history has consistently shown, and is acknowledged in the paper itself, unduly high or punitive tax rates generally have the counter-productive effect of imploding the legitimate market, resulting in the exodus of legal operators and a burgeoning underground industry, none of which serves the interests of either the economy or the problem or “pathological” gambler.
It is equally important to note that online betting operations are not inevitably purely remote offerings with limited positive economic impacts on the community. Many licensed bookmakers throughout the country operate businesses with a retail footprint, which create sustainable employment opportunities on an ongoing basis. In many cases, these retail operations are cross subsidised by online betting offerings, creating the necessary synergy to enable the industry to continue to offer tangible, and undoubtedly vital, economic and community-related benefits.
Another noteworthy aspect of the paper is its stated objective of discouraging problem and “pathological gamblers” from continued participation in gambling, in the face of the upward surge in participation in online betting and interactive gambling in recent years. While harm minimisation, in the context of addictive or compulsive gambling, is of undeniable importance, it is difficult, if not impossible, to discern how the imposition of a punitive national 20% tax on providers of online betting, such as licensed bookmakers, will have the desired deterrent effect – or indeed any impact whatsoever – on the problem gambler or play any role in inducing a change in addictive gambling or betting patterns or habits. Inasmuch as the proposed tax will adversely affect no person other than the betting operator, there can be no identifiable correlation between the harm sought to be addressed and the method chosen to do so.
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Furthermore, if as stated in the paper, the intention is explicitly not to enhance revenue generation, but to address the various socio-economic harm which spring from unbridled access to gambling and betting opportunities over the medium of the internet, then it is remarkable that no attempt has been made to allocate the revenue to be generated, which amounts to a mammoth projected R10 billion, to defined, proactive and tangible measures designed to alleviate the symptoms of problem gambling within our society.
Perhaps the most remarkable and potentially contentious aspect of the paper is its suggestion that the proposed online betting tax should be levied, not only on licensed operators (whether or not their operations are perceived to be in compliance with the prevailing laws), but also on persons who are unlawfully engaging in unlicensed betting or interactive gambling, in contravention of the existing law. It is unthinkable that revenue generated by conduct which (correctly or incorrectly) is branded as being unlawful by the National Treasury should be the subject of taxes. Taxing unlawful and unregulated activities would be in clear violation of constitutional principles of legality and fairness, leaving aside the absence of a legal nexus with the pseudo licensed operator.
Significant debates continue to rage in South Africa regarding which activities amount to unlawful interactive gambling and which are authorised by law. These debates have been prompted and spurred by a lack of precision in the applicable legislation which requires urgent attention. Rather than imposing taxes on activities which are, or in some cases, may be, illegal, and giving unwarranted space and recognition to offshore and other unlawful operators, to the prejudice of local licensed operators, the emphasis should be on refining and articulating a clear policy on interactive gambling and online betting, through a process of cooperation between the provincial and national spheres of government, culminating in the enactment of the required legislation. Taxes presuppose legality, and legality demands precision and certainty. The proper regulation of the online gaming industry depends squarely on this. Only once this has been achieved, should taxes follow.
Source: South African Bookmakers’ Association
