South Africa Considers Sin Tax on Soaring Gambling Industry

The South African gambling industry has reached unprecedented levels, with total wagers hitting R1.1 trillion in the 2023/24 financial year, reflecting a 40.2% increase from the previous year. This rapid growth has prompted calls from political leaders to impose a sin tax, aimed at curbing gambling addiction and funding social programs.

Gross gambling revenue surged by 25.7% to R59.3 billion, highlighting the sector’s profitability. However, critics argue that the current tax framework is inadequate in addressing the societal consequences associated with gambling.

New tax proposals on the horizon

Member of Parliament Makashule Gana, representing the RISE Mzansi party, is advocating for an increase in gambling taxes. He has called for Parliament to prioritize two legislative efforts—the Remote Gambling Bill and the National Gambling Amendment Bill—to modernize regulations and enhance oversight of the online gambling sector.

Key elements of Gana’s proposals include:

• Higher gambling taxes: Increasing the tax rate to mirror those applied to tobacco and alcohol, with revenue directed towards addiction treatment and education programs.
• Advertising regulations: Introducing stricter controls on gambling advertisements, particularly on social media and television, to minimize exposure to vulnerable audiences.
• Awareness initiatives: Launching nationwide campaigns to educate the public on responsible gambling.
• Revenue allocation reform: Developing a revised revenue-sharing model to ensure provincial governments receive adequate funding from gambling activities.

Gana has voiced concerns over the growing influence of gambling advertisements, particularly during sports events and on social media platforms, where influencers are often used to promote betting activities without sufficient warnings about the risks involved.

Current tax landscape and industry response

At present, gambling operators in South Africa are subject to an 8% tax on their gross gambling revenue, which totaled R4.9 billion in the last financial year. Some lawmakers argue that this rate is insufficient given the industry’s massive growth and the potential harm caused to individuals and communities.

Lesedi Seforo, a tax expert from the South African Institute of Chartered Accountants (SAICA), believes that while a sin tax could help mitigate some of the negative effects of gambling, its effectiveness would depend on how well it is implemented and whether it significantly impacts gambling behavior.

Meanwhile, industry representatives such as Betway assert that they are already contributing to social responsibility initiatives through collaborations with the South African Responsible Gambling Foundation (SARGF), which offers counseling and support to problem gamblers. Betway maintains that gambling should remain a form of entertainment rather than a financial solution.

Concerns have been raised about a potential link between gambling and social grant distribution. Gana pointed out that betting shops experience a noticeable surge in activity on grant payout days, suggesting that recipients may be using their grants to fund gambling activities.

Social Development Minister Sisisi Tolashe acknowledged the issue but noted that the department currently lacks a mandate to address gambling addiction directly.

What lies ahead

As pressure mounts to address the rapid growth of the gambling sector, lawmakers will likely revisit tax and regulatory measures in early 2025, with debates expected to intensify. While industry stakeholders caution against overregulation, policymakers argue that stronger intervention is necessary to mitigate the negative social impact of gambling in the country.

Source:
Calls to tax South Africa’s R1.1 trillion addiction, BusinessTech, January 16, 2025.