The High Court delivered this judgment recently in relation to a petition brought by key representatives of the Association of Gaming Operators of Kenya (AGOK).

10 February 23

The Petition sought to challenge the amendments introduced to the Excise Duty Act, 2015 (the EDA) which is contained within the Finance Act, 2021 (the FA). These amendments introduced excise duty on betting, gaming, price competitions and lotteries as well as raising the tax to 30% and apportioning it at 7.5% across each of the four activities.

The amendment came into operation on 1 July 2021 and to that end, the Kenya Revenue Authority, (the KRA) was writing to various casino operators requiring the filing of returns and payment of the excise duty.

The Finance Bill, 2021 (the Bill) was published for public participation on 29 May 2021 and stakeholders had been invited to provide comments through a letter dated 26 May 2021. The Bill had proposed to introduce excise duty at the rate of 20% on betting activities. The period for obtaining comments from members of the public closed on 2 June 2021.

The Bill was presented for a 2nd Reading on 22 and 23 June 2021 and for a 3rd Reading on 24 June 2021, where it was passed and then assented to by the President on 29 June 2021. Among the amendments during the 2nd Reading was the introduction of two new paragraphs to Part II of the First Schedule to the EDA that would charge excise duty at the rate of 7.5% on gaming and lotteries.

The Petitioners argued that the introduction of excise duty on gaming and lotteries was not subjected to public participation as it was introduced as an amendment during the 2nd Reading by the National Assembly, outside the period provided for comments from members of the public.

Other arguments raised by the Petitioners were that:
a) gaming and lotteries were not an excisable good nor was any service being provided. As such no excise duty could be levied;
b) the excise duty proposed was too high and would drive investors out of the market as the gaming and lotteries industry was already highly taxed;
c) the entire process was undertaken in contradiction to the Public Finance Management Act, 2012 which requires the National Assembly to consider the principles of equity, ease of collection, its impact on development, investment, and other factors.

The Petitioners, therefore, prayed that the excise duty amendment is declared unconstitutional.

The Attorney General opposed the Petition on the main ground that the National Government has the power to impose tax, including excise duty. As to whether gaming and lotteries were excisable services, KRA submitted that they were defined as such the moment the amendment introduced gaming and lotteries to the EDA. They believed that once a company enabled a person to place a wager, a service was provided.

The National Assembly submitted that it made adverts on print media requesting for comments from members of the public and relevant stakeholders and further organised meetings on the same. According to the National Assembly, public participation did not mean that each individual’s view would be taken into account. The introduction of the rate of 7.5% from 20% was to divide excise duty on all transactions including gaming and lotteries.

High Court Analysis
The High Court observed that the Bill as initially published, had proposed to introduce excise duty on betting on the amount wagered or staked and this made its way to the FA, although at 7.5% as opposed to the initial proposal of 20%. However, taxation on gaming and lotteries was not included in the Bill, and neither were there any discussions in the record of public engagements in this regard. The first time the provision to tax gaming and lotteries appeared was in the FA.

The High Court analysed that the decision to introduce an amendment after public participation was an administrative action that affected the legal rights and interests of the Petitioners, among members of the public. As such it had to pass the constitutional and statutory tests of lawfulness, reasonableness and procedural fairness. In the High Court’s view, the National Assembly was required to:
a) give notice of the intended amendments to the Petitioners and the public at large;
b) afford an opportunity to the Petitioners and the public to be heard on the question; and
c) give reasons for the decisions made.

Since none of the above took place, the High Court held that the amendment was unconstitutional for failure to undertake any form of public participation, stakeholders’ engagement, and fair administrative procedures.

The effect of this decision is that at present, excise duty at 7.5% is not applicable to gaming and lotteries, subject to the KRA obtaining orders from the High Court to stay the decision or a decision by the Court of Appeal overturning the High Court’s decision. It remains to be seen whether the KRA will appeal the High Court’s decision at the Court of Appeal and whether an application for a stay will be made.

Should you have any questions regarding the information in this legal alert, please do not hesitate to contact, Daniel Ngumy and Kenneth Njuguna.


Salma Khamala – Associate
Eden Gatuiku – Trainee Lawyer