National gambling tax: Overburdening legal operators or a cure for social ills?
· Citizen
A debate is simmering about the government wishing to take a bigger slice of the massive gambling pie.
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Public comments on the National Treasury’s discussion paper were due to be submitted before the end of last week.
Some have argued it could double revenue collection to aid rehabilitation and education, while others say it could push gamblers and operators underground.
Over R70 billion in operator profits
The Treasury in November released its discussion paper on a possible national gambling tax, suggesting a figure of 20% on top of existing licensing fees.
The National Gambling Board (NGB) said R1.5 trillion was wagered in South Africa in 2024-25, with R74.5 billion earned by operators after paying out winners.
This represented a 25% increase in revenue for operators, with 70% of all revenue coming from online betting.
Treasury’s discussion paper stated it was not motivated by the extra tax revenue, but a duty to protect South Africans.
“The main aim of a market-based tax intervention by government is to reflect the social costs that the gambler imposes on others in the price of gambling.
“A tax could be considered to correct for the social externalities imposed by the gambler,” the discussion paper said.
Treasury noted the country’s gambling addictions were broken into two categories: pathological and problem gambling.
It explained that pathological gambling was a recognised mental disorder resulting in “continued gambling despite negative physical, psychological, and social consequences”.
Problem gambling is related to a “behavioural addiction” resulting in the gambler being unable to control their desire to spin the proverbial wheels.
Western Cape and Mpumalanga cashing in
Rise Mzansi made its submission public on Monday, detailing several recommendations.
The party pointed out that no national tax existed, only value-added tax (VAT) and fees payable to a provincial licensing authority (PLA).
PLAs had differing licensing agreements, which allowed betting operators to decide where to register their businesses.
Western Cape and Mpumalanga are the most popular, exceeding R20 billion in revenue, followed by Gauteng, just short of R15 billion and KwaZulu-Natal and the remaining provinces at R5 billion or less.
Rise Mzansi’s recent analysis showed that for R1 billion in revenue, provinces were making just over R60 million in licensing revenue and the government was taking in R130 million in VAT.
The 20% national tax would increase tax revenue from a combined R190 million per R1 billion from VAT and provincial licensing, to a combined R360 million per R1 billion in betting revenue.
“We recommend that the revenue generated by the national gambling tax should be divided between the national government and provincial governments.
Additionally, Rise Mzansi proposed national incentivising and the ringfencing of the additional revenue to fund social education and rehabilitation programmes.
Poor economic circumstances
The Free Market Foundation (FMF) also submitted a proposal recommending that the idea of a national gambling tax be withdrawn altogether.
“The proposed tax undermines provincial authority, overburdens legal operators and risks distorting the legal online gambling market,” wrote FMF’s Ayanda Zulu.
FMF’s submission acknowledged the social ills of gambling, but these were downstream from poor economic circumstances in the country.
“South African communities should take the lead in dealing with these costs, rather than externalising that responsibility to a state apparatus whose evident main interest is simply in generating additional revenue,” Zulu said.
Cliffe Dekker Hofmeyr’s Nicholas Carroll also questioned whether enough would be done to address illegal gambling.
“Without clear, targeted interventions, there is always a risk that punters switch to illegal, untaxed operators.
“Introducing a new tax requires careful thought for it to achieve its objectives without resulting in unintended consequences,” wrote Carroll.
Offshore casinos already prevalent
Rise Mzansi attempted to answer these questions of non-compliance, stressing that internet regulation would be the answer.
The party’s proposal placed the responsibility on the minister of communications and digital technologies and internet service providers to block illegal online operators.
“Any funds received from such sites can also be seized by South African residents’ banks and be handed over to the NGB,” Rise Mzansi said.
FMF argued that tax revenue and centralised regulation would not be enough to cure gambling addiction, claiming offshore online casinos already made up 62% of the digital market.
“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,” Zulu said.
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