Unregulated Gambling Set to Rise in Nigeria as FIRS Plans 5% VAT On Nairabet, Bet9ja Stakes

It is no longer news that the Nigerian government has plans to introduce new taxes on a host of taxable consumer products. However the Federal Internal Revenue Service (FIRS) has now included a new item to its bucket list: lottery and gambling.

#WednesdayMarketing #lslbng The General Manager, Lagos State Lotteries Board, Mr. Oluwaseun Anibaba, has announced that enforcement operations for the automation of gaming platforms in Lagos State will commence on April 5, 2019. #NairaBET #AccessBET #playbabijebu #LionsBetting pic.twitter.com/cptBf16G5Q

— Lagos State Lotteries and Gaming Authority (@lslga_) April 10, 2019

According to several reports, the FIRS is looking to charge value added tax (VAT), on lottery and gambling activities.

The report hit the news cycle following a recently held forum organized by the FIRS and the National Lottery Regulatory Commission.

The plan is to charge a 5% VAT on gambling and lottery services provided by regulated industry players like Nairabet, Lotto and Bet9ja. According to the FIRS Chairman, Tunde Fowler, the VAT collection will be automated to ensure the process is smooth and transparent.

“Tax has to do with law and the law says that every transaction is VATable, 5% should be charged. This is not a tax on the business, but on a bettor who hopes to win. You also have to realize that 85% of VAT goes to the state… in this case we are all winners,” Mr Fowler says. 

Now what this means is that for every bet users make, the gambling platform is mandated to collect an extra 5% on their bet stake. So for instance, if a user stakes a bet of N200, they’ll also have pay 5% VAT on that stake. Which means rather than pay just N200, they will pay N210.

However the move is proving quite unpopular amongst industry players and they are speaking out. Following the revelation, founder of Nairabet, Akin Alabi said the decision and the process of automating the VAT payment are quite problematic.

“There must be another mode of collecting VAT, rather than from the top level, which is on every stake. Telling operators to pay from the stake is almost impossible and would force customers to move elsewhere,” Akin Alabi says. 

FIRS charges VAT on betting and lottery games, as stakeholders protest https://t.co/ANkdgHVXxA pic.twitter.com/lxTJVhGaCU

— Ugodre (@ugodre) April 9, 2019

According to Akin Alabi, the gambling market is already a pretty saturated one with both local and international players. But only a few of these platforms are regulated by Nigerian authorities. Placing VAT on gambling stakes on the locally regulated platforms simply forces bettors to consider placing bets on the other unregulated platforms.

And indeed this could be the reality. Locally regulated platforms have the advantage of operating shops in various locations in the country and this helped fuel growth in the early years. But when the VAT gets implemented, those popular N100 and N200 stakes will go up to N105 and N210 respectively. Users could become frustrated by the lower denomination requirements when betting at physical shops. Others will simply go to other online platforms.

But Fowler explains that even if Nigerians decide to switch to unregulated platforms, they’ll still have to pay the VAT when they make transactions. This doesn’t sound practical, but the FIRS boss seems sure he knows what he is doing.