Ghana: Betting tax sparks public outcry and economic skepticism

Accra, Nov 17, GNA – Ghana’s government implemented a controversial 10 per cent withholding tax on betting and lottery winnings last August, accompanied by a 20 per cent withholding tax on gross gaming revenue for betting companies.

This choice has not just sparked public dissatisfaction but has also prompted uncertainties among experts regarding its potential economic repercussions.

The feelings expressed at various sports betting centres in Accra overwhelmingly lean toward the negative. Gamblers are demanding the removal of the tax, arguing that it unfairly targets their hard-earned winnings. 

A History of Controversy: From 2015 to 2023

This isn’t the first time Ghana has attempted to impose such a tax. Originally introduced in 2015, the tax was abandoned in 2017 due to implementation challenges and stakeholder protests.

Initially framed as an income tax amendment law imposing a flat 5 per cent rate on all lottery and bet winnings from local betting sites as well as physical establishments, it faced opposition from bettors who argued that their winnings were only after several failed stakes.

The following modification established a threshold of GH¢2,592 ($225), where solely earnings exceeding this sum are subject to taxation.

In 2017, the tax was completely removed to attract more lottery operators.

Economic Doubts: Experts Question the Effectiveness of the Betting Tax

Mr Edward Gyambrah, who oversees the Domestic Tax and Revenue Division at the Ghana Revenue Authority, provided a rationale for the recent reintroduction.

He emphasized the significance of this action, stating that it is essential “to enhance the mobilisation of domestic tax revenue, considering that Ghana’s overall tax-to-Gross Domestic Product (GDP) ratio is notably lower compared to that of other nations in the sub-region.”

However, tax consultant Francis Timore Boi questions the potential impact, stating that the tax “may not really be a game-changer” for the economy. He argues that the government needs more comprehensive revenue sources to address its financial needs effectively.

Ghana, under an IMF program, aims to reduce the debt-to-GDP ratio from over 100 per cent to 55 per cent by 2028, with increasing tax revenue being a crucial element in achieving this target. The IMF estimates Ghana’s current tax revenue at 17.2 per cent of GDP, anticipating an increase to the Sub-Saharan Africa average of 20 per cent by 2028. This may affect local betting sites in Ghana as well, as they are also part of the gambling industry.

Despite scepticism regarding its economic impact, the Ghana Revenue Authority anticipates generating GH¢1.2 billion ($104 million) in revenue from betting by the conclusion of 2023.

Proponents argue that the tax serves a dual purpose of generating revenue and addressing the growing gambling craze in the country, particularly among the youth. Reports of people gambling away company funds, offertory and school fees have fueled the morality debate around gambling in Ghana.

Majority leader Osei Kyei Mensah Bonsu expressed his reservations about betting, stating, “I don’t believe in betting… I believe in hard work and sweating to get money.” He sees the tax as a means to discourage gambling and promote a stronger work ethic.

In response, Richard Aguda, a convener of a group of bettors challenging the new tax, hopes for a reduction to 3 per cent. He argues that many youth are unemployed and rely on betting for survival. Aguda emphasizes the potential negative consequences of the 10 per cent tax, stating, “Some people will go back into crime if this continues.”

The global sports betting industry has witnessed significant growth, estimated to have reached 242 billion dollars in 2022. In Ghana, more than 22 sports betting firms are registered, along with over a dozen lottery agents, underscoring the swift growth of the industry.

Nevertheless, difficulties might emerge in the tax collection process for offshore companies facilitating online betting and prize redemption, as they could potentially operate beyond the regulatory oversight of the Ghana Revenue Authority.

As the debate over the betting tax continues, it remains to be seen how the government will balance its revenue needs with addressing the concerns of a significant portion of the population reliant on betting for their livelihoods.