Rise Mzansi, Online Gambling, And The Case For Legal Clarity First
If harm is to be reduced, then public policy must be guided by reason and evidence, and it must ensure that individual freedom is respected...
Rise Mzansi’s broader anti-gambling stance, and its burning desire to clamp down on an industry it believes has destroyed lives and livelihoods in South Africa, appears to be blinding it to the dangers of the 20% national online gambling tax that National Treasury has proposed.
Comments by party National Organiser and MP, Makashule Gana, are a reminder of how emotional reasoning can render one inflexible to a critical analysis of public policy and distort their perception of those who hold dissenting views.
From the very outset, the organisation is conveniently overlooking the fact that Treasury’s proposed tax would also apply to online casinos, which remain illegal because no single piece of legislation - including the uncommenced National Gambling Amendment Act of 2008 - has been enacted and brought into force to formalise them.
Aside from effectively endorsing non-standard legal procedure, Rise Mzansi is not merely suggesting that it will be possible to tax a largely offshore sector of the gambling market that has yet to be formalised. It is also implying that, should some online casino operators choose to pay tax, they may do so while remaining illegal. This position is morally incoherent because it directly undermines the organisation’s stated objective of harm reduction.
If roughly 60% of all online gambling market activity takes place on these illegal online casinos - some of which are guilty of outright theft and fraud due to a lack of oversight - it’s obvious that they pose the greatest threat to people and their livelihoods. How can Rise Mzansi, which is firmly anti-gambling, not demand that their legal status should be addressed? How can it be satisfied with a haphazard attempt to simply tax them?
There is no need to expand on the legal argument regarding Treasury’s centralisation of fiscal authority and its potential implications for constitutionalism because Gana has already dismissed it as being “absurd”. However, what needs to be addressed is the underlying claim that licensed online betting operators, which operate nationwide but are licensed and taxed in only one province, are not contributing enough in provincial taxes, and that a national intervention is therefore necessary.
This claim is false. Existing data demonstrates that the average provincial tax rate on gross gambling revenue (GGR) for licensed operators ranges from 6% to 8%. Including VAT, the total tax burden rises to around 18% to 19%. Imposing a national tax on top of this would push the overall burden to roughly 38% to 40%.
This would risk destabilising the legal online gambling market, driving players to illegal, largely offshore online casinos - which already account for a significant portion of online gambling market activity - and eroding the existing revenue stream from licensed operators.
But even if the claim is entertained, Treasury’s rationale, which is based on international benchmarking and the claim that a national tax is needed to create equity between land-based casinos and all forms of online gambling (which generate fewer jobs), is flawed and self-serving. Land-based casinos face a higher tax burden because their entire business model differs fundamentally from licensed online operators. The equity argument is masking an intellectually dishonest attempt to extract more revenue from the gambling industry amidst public concern over online gambling.
Rise Mzansi needs to recognise that those who hold dissenting views are not denying the harms of gambling, which stem from people’s voluntary choices. The real problem here is Treasury’s proposed national tax that, should it be introduced, is almost certain to do more harm than good.
The submission window for comments, which was recently extended from 30 January to 27 February, presents a critical opportunity for the organisation to consider pushing for the resolution of the legal status of online casinos. These platforms remain unregulated, and yet they generate billions in GGR annually without contributing to domestic tax revenue. They account for most online gambling activity and cannot simply be ignored.
Any meaningful policy must first formalise in coordination with provincial gambling boards. Only after this should a fiscal framework be considered. Doing nothing to address the legal status of online casinos, while simultaneously imposing a crippling national tax on licensed online operators, is a recipe for disaster.
If harm is to be reduced, then public policy must be guided by reason and evidence, and it must ensure that individual freedom is respected and that any intervention places the least possible burden on those who already operate within the law.
Ayanda Sakhile Zulu holds a BSocSci in Political Studies from the University of Pretoria and is a Policy Officer at the Free Market Foundation.
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One appreciates that political parties need to differentiate themselves and Rize is trying to do so around this issue. But is it gambling the most important challenge facing SA?
I would argue that education, or rather state school dystopiatiation by the ANC is our biggest crisis. The direct consequence of which is unemployability, hence poverty and, indirectly, gambling.