Concerns Expressed Over South African Gambling Tax

by Lorys Charalambous, Tax-News.com, Cyprus

03 March 2011

Some participants in the gambling sector have expressed concern over the South African government’s proposal, in its 2011 budget, to levy a 15% withholding tax on all winnings above ZAR25,000 (USD3,600), with effect from April 1, 2012.

The Minister of Finance, Pravin Gordhan, in his budget speech last month, pointed out that the government had already indicated last year that the taxation of gambling winnings would come under review. The new tax, he said, is in line with practice in a number of other countries, such as the United States. He hoped that it would assist in discouraging excessive gambling, but, “despite the obvious merits of this argument, I expect vigorous debate during the parliamentary process.”

The gambling industry is, in fact, particularly concerned with the effect that the proposed tax could have on horse racing in South Africa, where thousands of jobs could be affected. In the opinion of Rian du Plessis, group chief executive of Phumelea, which operates horse races in South Africa, the new tax, which is in addition to the 6% provincial tax, would have a significant effect by reducing the attraction of gambling.

He is reported as saying that his company would be looking to have a meeting with the government as soon as possible, to point out the serious effect the tax would have. The betting sector is particularly put out by the fact that it was not consulted at all by the government before the announcement of the tax measure.

This was confirmed by the chief executive of the Casino Association of South Africa, Derek Auret, who was reported to be particularly angry at the lack of consultation. He added that casinos provide jobs for around 30,000 people in the country, and already suffered heavy taxation, with the government receiving some 37% of casino revenues.

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