Betting tax: Racing in the crossfire

2026-03-02 - 11:24

Just as South Africa’s horse racing industry has recovered from its near-death experience, the government threatens to blunder into the intensive care unit and rip out the drip tubes keeping it alive. As usual with politicians and officials, it’s all a question of collateral damage thanks to poor policy making, brute force and ignorance. Put a problem to a politico – in this case a boom in online gambling that is deemed socially harmful – and he or she will reach for the blunderbuss and cast around for an easy target. Even chattering classes in the suburbs are tut-tutting about the proliferation of loud advertising campaigns by bookmaking firms. These companies are making too much money, too easily for middle-class comfort. It must be exploitative, surely. Evil Capitalism shows its true face again. Something must be done; by someone, soon. The Treasury also spotted those garish adverts and got trigger-happy. It proposed a new 20% gambling tax. Licenced bookmakers – the only ones who’ll be taxed – are fighting back. They argue that they already pay multiple layers of taxes and levies and their effective tax rate will be pushed up to nearly 40%: unsustainable for most – even in a mugs’ game like betting. There are important points to be made: • Legally licenced betting platforms being forced out of business will surely swell the illegal market (witness tobacco over Covid). • Some local betting operations will relocate offshore with consequent losses to the SA economy and fiscus. • Most gross gambling revenue (68% or R72-billion-plus a year) already flows through illegal channels, according to the SA Bookmakers Association (SABA). Policing has failed to make a dent in this unlicenced market. • Licenced betting firms like Betway and Hollywoodbets need to spend ever-greater amounts on advertising just to compete with the illegal sector and keep up with burgeoning public demand. • Treasury’s mooted R10-billion in revenue from its new tax – to be used partly to fight gambling addiction – will never materialise as the tax base shrinks. Besides, politicians would never let such a tasty lump of money be spent on good deeds. • Licenced bookmakers are prominent among saviours of the horse racing industry – and its sizeable fiscal contributions. Hollywoodbets took over and revitalised stricken Cape Racing and operator Gold Circle in KwaZulu-Natal, while World Sports Betting, Betway, Lucky Fish and others have ploughed many millions into sponsorships – of races, training yards and thoroughbred breeding farms. Without them, racing would have died – at least partly due to ill-advised Covid bans and other idiotic government meddling in tax matters. • Tens of thousands of horse workers and their attendant households will join the ever-lengthening list of the country’s poor and unemployed if licenced bookmakers vanish and the racing value chain is broken. Comment about Treasury’s tax idea closed last week and racing and the betting sectors did have their say. In its submission, as reported by Business Day, the SABA said: “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 gross gambling revenue (GGR), which when adjusted for the recovery of vatable expenses translates into an effective combined rate of 18%-19%.” It added: “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 will soar to 38%-39%. A rate of this nature comfortably outstrips the rates applicable in all but four (or more than 90%) of the international jurisdictions sampled.” Other calculations come up with similar numbers.