Major new tax could backfire badly for South Africa
South Africa is currently considering a 20% national tax on gross gambling revenue (GGR) amid significant growth in online betting.
However, tax experts warn that the tax could tank legitimate operators and push players to unregulated, offshore platforms, where money flows out, and the state gets nothing.
The move to tax gambling comes as the online gambling industry experiences significant growth, accounting for over 85% of total betting GGR in the 2024/2025 period.
This has led to a staggering R1.50 trillion turnover—though the South African Reserve Bank has given a much softer edge to this figure.
The proposed 20% levy aims to generate over R10 billion annually for the state while also addressing the social risks associated with gambling addiction.
However, experts warn that adding a national tax on top of existing provincial duties could create an overly burdensome tax environment.
This may lead operators and players to seek unregulated offshore platforms.
Existing provincial gambling taxes range from 6% to 9% for online betting and 10% to 15% for casino gambling.
If the 20% national tax is implemented, it would be placed on top of these existing rates, which could see operators facing an effective tax rate of 26% to 29%.
This is broadly in line with other countries that have already instituted high taxes on online gambling.
Tax experts have raised concerns about the implementation of the tax and whether it would be imposed directly on licensed operators or operate as a withholding tax, deducted at the transaction level.
“If established as a standard GGR tax at the operator level, administration could occur through routine filings,” said Forvis Mazars Senior Manager Devakalyani Moodley and Head of Tax Althea Soobyah.
“However, this approach may duplicate provincial taxes and contribute to increased regulatory complexity.”
If imposed as a withholding tax, Moodley said it would require intermediaries, such as payment processors or banks, to withhold the tax before funds reach the recipient.
“This model is significantly more complex in the betting ecosystem and may be potentially unenforceable where offshore operators or cryptocurrency are involved,” the experts said.
Concerns over imposed tax
The experts said that if the tax is levied on turnover rather than on gross gaming revenue (GGR), it could diverge from international practices and could potentially impact the viability of businesses in the sector.
The rationale behind this proposal extends beyond revenue generation.
It also seeks to address the social repercussions of online gambling, including addiction, financial distress, and the associated pressures on social services.
The always-accessible nature of online gambling, coupled with its anonymity, could rapidly escalate these issues.
The proposal has garnered political support, with leaders such as the KwaZulu-Natal Finance MEC endorsing the taxation of online gambling to enhance service delivery and diversify revenue sources.
However, tax experts warn of significant risks.
Should the tax burden become excessively high, both players and operators may be incentivised to migrate to offshore or illegal platforms.
This concern is underscored by Kenya’s experience, which, after implementing a similar 20% wagering levy, saw operators withdraw from the market.
This resulted in a decline in tax revenue rather than an increase.
“South Africa is even more exposed to this risk because interactive online gambling is still illegal at a national level,” the experts said.
“Offshore operators already serve local players without regulation, making it easy for gamblers to switch to unlicensed platforms if local taxes rise too sharply.”
There are also governance challenges. Gambling is regulated by both national and provincial authorities, with provinces already levying their own taxes.
The experts warned that implementing a national tax on top of the existing system could lead to duplication, administrative inefficiencies, and potential legal conflicts.
The National Treasury has even proposed that a national licensing framework might be necessary to prevent this fragmentation.
Enforcement poses another significant challenge, they said.
Illegal online gambling is still prevalent, and the National Gambling Board frequently highlights the difficulties in monitoring cross-border transactions, cryptocurrency betting, and offshore sites.
In the absence of stronger enforcement measures, legal operators may bear the burden of compliance costs while illegal operators face minimal consequences.
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