South Africa: Plan to Use Tax to Tame Internet Gambling

Linda Ensor
Cape Town

Tax policy will be used to constrain the growth of internet gambling, says trade and industry acting deputy director-general Fungai Sibanda.

He told Parliament's trade and industry portfolio committee yesterday that this was the policy framework within which discussions were taking place between the trade and industry department and the treasury on the taxation of internet gambling.

Many states try to prohibit online gambling because of characteristic dangers, including internet fraud, children's access to gambling sites, a rise in gambling addiction and the need to preserve state revenue generated from legally enforced and state-run gambling operations.

The absence of tax measures for internet gambling in the National Gambling Amendment Bill was a concern raised by the Casino Association of SA (Casa) during a public hearing this week.

Casa chairman Jabu Mabuza said the tax regime would be fundamental in determining the success of internet gambling and its consequences for bricks and mortar casino operations.

Sibanda said the bill could not include tax measures as this was the remit of the treasury, which would have to introduce a separate money bill.

"The level and rate of tax will be determined by the policy approach which will be motivated by a desire to cap and limit the expansion of gambling. Taxation is a powerful instrument to control gambling activities."

Sibanda said studies on internet gambling provided no convincing proof that existing casinos had been affected negatively by interactive gambling.

Casinos in SA were profitable and required no protection. Sibanda rejected suggestions to give casino operators the automatic right to operate interactive gambling, saying the two activities required different licences. Automatic licensing was in principle a bad idea.

"We believe licence applicants must prove that they are fit and proper and have the expertise to conduct this form of gambling."

He rejected criticisms that the bill was poorly researched and hastily drafted. It had been under consideration and widely consulted on since 2005, when a committee was established to formulate a policy approach on regulating internet gambling.

Further investigation was needed on whether to allow person-to-person gambling or tighten restrictions on access of minors to internet gambling. The bill prohibits anyone other than bookmakers from providing player-to-player gambling.

UK-based internet sports betting and gaming company Betfair argued for inclusion of player-to- player gambling. It objected to the requirement that licensed providers locate all their interactive gambling equipment in SA.

The Online Institute for Cyberspace Law and Policy estimated in 1998 that by the mid-2000s internet gambling would be worth at least $10bn a year.

News Added: 24 August, 2007

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