Today in Canada, sports betting company Sportpesa was unveiled as the title sponsor of the Racing Point Formula One team in its latest international sponsorship venture.
Others sponsors of the team are Bombardier, JCB, BWT and team officials also announced there was room for more sponsors to push the team forward to better performances on track during the season that begins in March 2019 in Australia. The team’s drivers said their realistic aim for the year was for fourth place in the constructor’s championship (i.e. behind the perennial top three teams – Mercedes, Ferrari, Red Bull), to get some podium finishes, and perhaps even a race win.
Racing point is the former Force India team that ran into financial difficulties during the 2018 season. The Force India team had its best performances in 2016 and 2017 when it finished fourth in the formula one standings.
This also ends an unfortunate joke era when the newly-elected governor for Machakos, Alfred Mutua, unveiled his dream for a formula one track in his county, back in 2013.
The RaceFans site which broke the story last month reported that SportPesa is understood to be paying $8 million (i.e. ~Kshs 800 million) for its first year followed by $10 million in 2020 and a further $12 million if they remain for 2021.
The President of Kenya signed the Finance Bill 2018 after a stormy debate in Parliament last week that saw chaotic arguments about vote procedure methods used and actual vote counting mainly with regards to VAT on petrol products.
Some of the earlier clauses in the Finance Bill had been highlighted and KPMG, which has done a series of articles, has provided a further update on aspects of the laws in Kenya and which they termed “..the changes present an unprecedented disruption of the tax regime that will impact the economy and citizenry for years to come.”
Their perspective on the signed Finance Bill implications:
- Excise duty on services: The President accepted Parliament’s decision to drop a Robin Hood tax of 0.05% on money transfers above Kshs 500,000 (~$5,000). But the shortfall was replaced by an increase in taxes on all telephone and internet data services, fees on mobile money transfers, and all other fees charged by financial institutions which all now go up by 50% – and which KPMG writes may have a negative impact on financial inclusion.
- A national housing development levy was approved. With the country’s wage bill of Kshs 1.6 trillion, KPMG estimates that government can potentially collect Kshs 48 billion a year (~$480 million) from the levy, (Kshs 24 billion of which will be from employers) – a massive amount when compared to the Kshs 12.8 billion that NSSF – the National Social Security Fund collects in a year. Regulations for the National Housing Development Levy Fund (NHDF) have not been set, other than that the payments are due by the 9th of the following month. For employees who qualify for affordable housing, they can use that to offset housing costs but for those who don’t qualify, they will get a portion of their contributions back after 15 years.
- Petroleum VAT: KPMG says that a significant portion of the government’s tax targets for 2018/19 was dependent on value-added tax (VAT) on petroleum products and that is why they have been insistent on having this implemented. Sectors that supply exempt services such as passenger transport (PSV’) and agriculture producers are expected to raise their charges to customers as they are unable to claim back the 8% VAT tax.
- Kerosene, which is used by low-cost households, takes a double hit with the introduction of VAT as well as an anti-adulteration tax of Kshs 18 per litre. Already kerosene now costs more than diesel in some towns around the country.
- Excise duty on sugar confectionery, while opposed by sugar industry groups, was reinstated in a move similar to other countries that are trying to address lifestyle diseases by introducing taxes on sugar products.
- The betting industry, whose survival which was at stake, gets a reprieve as the gaming and lotteries taxes, introduced on January 1, were reduced from 35% to 15%. Many of the prominent betting companies had scaled back their advertising and sponsorship and had turned to engage in serious lobbying efforts ever since. Also, an effective 20% tax on winnings has now been introduced. The earlier tax law allowed bettors to claim some deductions if they kept records, but that has been removed altogether.
In a year in which there were crucial changes proposed to Kenya’s tax system, the National Assembly passed the Finance Bill 2018, but the President refused to assent to it and sent it back to Parliament with his proposed amendments to fuel, banking, housing, gambling and other taxes.
Sectors affected by the memorandum.
- Banking: For every transaction your bank charges you, currently there is a 10% levy which will now go up to 20%. Also, the fee on money transfer and mobile banking services will be 20% on excisable value – up from a proposed 12.5%.
- Telecommunications: a tax on telephone and Internet services will be 20%, up from an earlier 15% tax on the excisable value
- Food: He proposed reinstating a sugar confectionery tax that parliament had dropped.
- Fuel; Kerosene will cost the same as diesel after the introduction of an anti-adulteration tax. VAT which Parliament had pushed back by another two years, and which the President wrote would cause a Kshs 35 billion shortfall in this year’s budget. He, therefore, proposed an immediate reinstatement of VAT at 8%. (VAT in the country is levied at 16% for all other goods and services that qualify).
- Housing: Employers shall pay a new housing development levy on behalf of employees – with the employer’s contribution at 1.5% of salary and the employees at 1.5% of salary – up to a maximum of Kshs 5,000 – to be remitted on the 9th of the following month to the proposed National Housing Development Fund.
Employees who don’t qualify for the low-cost housing proposed will still have their money go to the Housing Development Fund and will get it back when they retire,
- Gambling: tax reduced from 35% to 15%.
The President also asked Parliament to reduce the national government budget by Kshs 55 billion. Parliament was on a month-long recess but has resumed this week for special sitting sessions relating to the Finance Bill 2018. They received the President’s memorandum on Tuesday 18th September, with the budget committee meeting on Wednesday to review and approve these changes for Parliament to vote on Thursday 20th September.
The 2018 World Cup is now in its semi-final stage. Let’s look at how some banks made their picks to win the tournament.
Who was Predicted to Win the 2018 World Cup?
- Germany: Was picked by UBS (Germany has a 24% chance of winning football’s ultimate prize, followed closely by Brazil and Spain, who respectively have a 19.8% and 16.1% chance).
- Brazil: Picked by Goldman Sachs (Brazil to defeat Germany).
- France/Spain: Picked by Nomura (France and Spain to meet in the final).
- Spain: Picked by ING.
Here is a good write-up of the Goldman Sachs picks and a summary of some of the different bank forecasts.
The teams in the semi-final today are England, Croatia, France, and Belgium. With both of its initial finalist picks now out of the competition, Goldman Sachs has revised its model and …With Brazil now out of the world cup, Belgium is at the top of our probability table with a 32.6% chance of lifting the trophy, closely followed by France (29.8%). Similarly, our model’s modal projection is for Belgium to defeat France and England en route to winning the tournament….
Look back at the 2006 World Cup banker predictions.
Today, the Pambazuka National Lottery (PNL) followed partner Sportpesa in suspending its operation in Kenya following a new 35% tax that came into force on January 1, 2018.
PNL, which is operated by Bradley Limited, interpretation of the tax change is that, whereas they had been paying out 55% out as prizes and 25% as a tax to charities, the new 35% tax makes operations impossible as their tax costs will be 115% before deducting any operating costs.
PNL was established in 2016, and the suspension announced on January 7 will allow any winners of prizes to claim them up to April 7, 2018. The Pambazuka statement reads that “operating any lottery under this framework is not possible and therefore business operations are forced to close” but, as with Sportpesa, who had become arguably the leading betting company in Kenya, but who cancelled all local sports sponsorships last week, there is no mention of what the numbers actually are i.e revenue and taxes (in dollars or shillings), to compare how they were faring before the tax, to how unsustainable business will be under the new tax.
EDIT PNL’s directors say they had invested over two billion shillings (~$19.5 million) and employed over 500 people.