The rationale behind removing the national lottery from gambling tax in Rwanda
Rwandas approach to regulating its gambling sector has undergone a transformation with the recent passing of a new income tax bill. This legislation exempts national lottery operators from a gambling tariff, which has ignited debate regarding the nature of gambling and lottery.
Tax revisions in the gambling sector
The newly enacted income tax bill testifies to Rwandas resolve to make its tax regime stronger in the gambling sector, both socially and economically. Possibly the most contentious amendment is the move to exempt companies involved in the national lottery from the new heightened gambling revenue tax of 40%. The tax increase, up from 13%, is meant to generate more revenues from a sector that has expanded rapidly while also encouraging responsible gambling.
MP Odette Uwamariya, Chairperson of the , explained the rationale behind this exemption. While lottery and gambling may appear similar, the national lottery is considered a government business, she asserted. Uwamariya highlighted a crucial point: half of the revenue generated from the lottery directly benefits the national treasury, with a plan to increase this share to 60%.
Concerns about double taxation
One of the points raised by advocates for the exemption relates to the subject of double taxation. Uwamariya stated that the companies operating the national lottery contended that imposing additional taxes on them would result in unfair financial burdens. The status of the national lottery as a government-controlled entity differentiates it from private gambling operations, and this distinction serves as a cornerstone for maintaining its tax-exempt status.
However, the move has also drawn criticism from some lawmakers. Parliamentarian Thogne Munyangeyo had voiced concerns over the social implications of gambling, arguing whether theres much of a difference between lotteries and other forms of betting. Even those engaged in the lottery, we consider that as betting. But because the government has a stake in it, they have been exempted, he argued.
Munyangeyo articulated that even non-cash rewards, such as a motorcycle valued at Rwf2 million (USD 14,526.81), can foster addiction in much the same way cash winnings might.
Distinguishing the national lottery from gambling
The official definition of a, underscores its government-controlled nature. According to this law, a national lottery is any lottery scheme wholly or partially owned by the government and promoted nationwide. Companies running a national lottery must be licensed and adhere to specific agreements with the government covering revenue sharing and taxes.
Uwamariya reiterated this distinction by stating, National lottery is distinct in that it is organised under government control and contributes a defined portion of its revenue directly to the treasury. By framing the national lottery as an entity working in tandem with the government, the exemption from the gambling tax aims to position it as a public good rather than merely a gambling operation.
Economic implications of tax reforms
Examining broader economic implications, Uwamariya pointed out that while the gambling sector has accumulated Rwf260 billion (USD 183.2 billion) since 2013, the government has only managed to collect Rwf8 billion (USD 5.6 million) in taxes. This discrepancy illustrates the significance of adjusting tax rates to curb abuse and address gambling-related social issues, including addiction and trauma.
Godfrey Kabera, the state minister for the National Treasury, also emphasised the need for reform. He stated, These reforms are not designed to cause losses to those engaged in gambling, but to ensure the sector develops in a responsible and effective way. The main aim appears to be the development of the gambling industry while protecting public welfare.
The decision to exempt the national lottery from the gambling tax in Rwanda illustrates a complex interaction of economic policy, social responsibility, and government interest. Whereas supporters believe that the lottery is for a noble cause, opponents are concerned about the repercussions of differentiating between the lottery and gambling. As Rwanda continues to navigate its evolving regulatory landscape, the outcomes of these decisions will likely play a pivotal role in shaping the future of its gambling and lottery sectors.
