Government's 20% Betting Tax Could Boost Illegal Gambling, Warns SABA CEO

Chief Executive Officer of the South African Bookmakers Association, Sean Coleman, highlights their multi-pronged strategy to fight what is a dominant illegal market in the betting industry, a market that forms over 62% of the betting industry. 

Coleman also expressed disappointment at the government for its continued radio silence in response to the backlash to their own proposed 20% tax hike.

How Big Is The Illegal Market?

Over the past few years, the betting industry has grown exponentially, with the industry registering over R1.5 trillion in wagers. 

With the growth of the industry, the illegal market has also taken advantage, as it currently makes up over 60 per cent of the betting industry, which is more than the legal market.

According to the Yield Sec Factsheet for fiscal year 2023/24, there were over 2000 illegal operators actively targeting South Africa, and over 1000 affiliates promote illegals.

The report revealed that 27% of South Africans, over 16 million people, interacted with illegal gambling. 

For that year, the report further revealed that the Gross Gaming Revenue (GGR) for the illegal market sat at over R72 billion, while the illegal market returned only R55 billion.

Sean Coleman, the Chief Executive Officer of the South African Bookmakers Association, explained that the illegal market is a big problem in the country as it does not benefit the country through taxes.

"What we did was we commissioned a report by a reputable company that monitors and tracks internet traffic and does an extrapolation in terms of estimates of the size of the legal market. It shows that there are over 2000 sites that are actively targeting South African citizens," Coleman told SportsBoom.co.za.

“The illegal market is greater than the legal market in South Africa. So, it's an existential threat. There's no revenue coming back into the country from it. There are no taxes that are being generated with a provincial gambling tax in the form of the GGR tax they pay to the gambling boards." 

“And I mean, as we've said, betting is a valuable source in terms of VAT, and therefore national governments are losing out on the VAT relative to the betting transactions that are going offshore." 

“Those companies pay no company tax or put any money back into the economy, whereas in the regulated market, licensees of gambling boards are required to have BEE components, CSR spend, responsible gambling spend, NED spend, all of those things." 

"All of that is escaping the legally regulated market, and there's absolutely no return”.

The Fight Against The Illegal Market

Coleman told SportsBoom that they are not sitting back and absorbing the hits from the illegal market and that they are actively fighting.

The CEO detailed that their strategy to fight the illegal market is multi-pronged and that it includes education and awareness.

“Education and awareness are the first pillar. That's to draw attention to the illegal market, what constitutes the illegal market and the threat of the illegal market. We've done that with the gambling boards. We've done that with the media,” he added. 

“We're lobbying the gambling boards also in their messaging to ensure that they start to educate and make consumers aware out there." 

“The second thing is to lobby governments in terms of trying to find ways to address the leakage that's going overseas. There have been a number of discussions with the National Gambling Board in that regard. They are running some interventions and trying to get those sites blocked in terms of access." 

“We've also signed an MOU with Sabrec, the Banking Risk Intelligence Centre, where we are also trying to look at ways to stop payment to the illegal market. Without a payment, you can't have a bet. And if we can really shut down the payment gateways and limit them, then it reduces access to the illegal market." 

“And then just back again on the NGB, we asked them to heighten focus on confiscation of customer winnings from the illegal market because the National Gambling Act makes provision for confiscation of winnings from the illegal market." 

“In terms of responsible gambling messaging, we've also made it clear that winnings can be confiscated and also that there are no responsible gambling tools or methodology for you to be able to exclude yourself from the illegal market, which is quite serious." 

“With the extent of gambling that's going on, we believe that those tools should be available to consumers to be able to exclude or to have a timeout or to limit yourself to losses and those types of things.”

The Imposed 20% Tax Hike

In response to the growing illegal market, the government has proposed a 20% hike in tax on online betting and interactive gambling.

The proposal was that providers of online betting and interactive gambling products, whether licensed or unlicensed in South Africa, would be required to pay a 20% national tax on the gross gambling revenue.

Coleman and SABA believe that the proposed tax imposition would not help in fighting against the illegal market and that it would actually promote it.

The CEO told SportsBoom that they made submissions to the government and that they have yet to receive feedback or an update on the imposition.

“We made submissions to the national, and we haven't heard anything back. As far as I know and understand, there hasn't been any subsequent process that's engaged or involved stakeholders,” he said.

“So, we're in the dark as to where governments are with the process. There's been no further communication on that, disappointingly so. And so we wait to see where it's going to end up. We're not doing anything as things currently stand because we're waiting to see what the next step is in the process.”