Morals Or Money Behind Gambling Levy?

The sugar tax didn't turn out sweetly in the end

Horseracing has been continuing on its merry way since a 15% tax on gambling winnings was mooted some eight years ago.

It was touched on again in last week’s budget speech and could well eventually see the light day given the desperate financial times government finds itself in.

Fin 24 reports that the introduction of a “gambling levy”, to mitigate the negative effects of excessive gambling, was once again proposed in Finance Minister Tito Mboweni’s in his 2019 Budget speech.

“We are reminded of the sugar tax that took effect on 1 April last year leaving a bitter taste in the mouths of industry. This tax was also introduced for philanthropic reasons due to the impact sugar has on chronic diseases such as diabetes and obesity,” commented Nicole Erlank, a tax consultant at Mazars.

“In reality, producers of soft-drinks reduced their bottle sizes with no reduction in price to negate the effects on consumer spending. As a result, this tax exceeded revenue generation expectations, and there is little evidence to suggest that the tax had any progressive impact on public health.”

Regarding a proposed “gambling levy”, Mishka Fledermaus, also a tax expert at Mazars, said that, as far back as the 2011 Budget, Cabinet proposed a 15% withholding tax on gambling winnings, which was later amended in 2012 to a 1% levy on gross gambling revenue of the casino.

“There was no real traction since this announcement was made, however, the minister has confirmed that the national gambling levy proposition with regards to the 1% levy is indeed still alive and well,” said Erlank.

“One wonders what will be done with the levy and where South Africans will see this money going. How successful will government be in utilising these collections for gambling awareness and rehabilitation as proposed?”

In addition, the practicality of the implementation of the levy should be considered, believe Erlank and Fledermaus.

“The levy will most definitely create an additional compliance and financial burden on the gambling industry,” said Fledermaus.

“It seems we will need to wait with bated breath for the release of the draft legislation due to be published for comment later this year.”


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