The National Gambling Tax: A Case Of Paternalism And Demonising Enterprise?

Apart from outright criminal operators, there is nothing inherently malevolent about the gambling industry generating profit through voluntary adult behaviour.

Photo by Kaysha on Unsplash

Unsurprisingly, National Treasury recently released a discussion paper that proposes a 20% national tax on the gross gambling revenue of all forms of online gambling – including legal online sports and horse race betting. This tax would be imposed in addition to existing provincial taxes and other levies.

As I suggested in a recent article, the tax proposal is a dangerous, yet predictable, response to a moral crusade against interactive gambling that is being led by political parties such as Rise Mzansi. While correct about the social consequences of overindulgence in interactive gambling, this crusade is erroneously portraying all kinds of gambling operators – whether explicitly or implicitly – as “evil” predators who are preying on helpless people and, therefore, deserve to be cracked down on.

While it hasn’t been surprising to see the EFF or the MK Party seize the opportunity to express their disdain for enterprise, it was somewhat surprising to see Mukundi Budeli, in Prohibitionist responses to gambling risk pushing activity underground, unwittingly perpetuating this framing of “evil” operators and helpless victims.

Aside from its valid points about the catastrophic impact of gambling overindulgence on socio-economically disadvantaged people and the need for what I believe should be a robust discussion on interactive gambling regulation, the dominant theme in Budeli’s article is that of vulnerable, helpless people who need protection from “evil” operators.

This theme underpins the support for restrictions on advertising and player activity, for instance, and it is evident in the following extracts (among others):

“This new ecosystem hits young people and low‑income households particularly hard. Reports of NSFAS recipients using allowances for betting, and of social‑grant beneficiaries losing key income to wagers, point to a troubling pattern: the financially vulnerable are being lured by targeted marketing and easy access. Minors are also exposed: children sometimes use family members’ personal details to sign up, and advertising in public spaces or on devices can become their first encounter with betting brands.”

“South Africa needs measured reforms that curb predatory practices, shield young people, protect public transfers and scale treatment and research. With clearer rules and better support, gambling can be managed as a regulated pastime rather than a hidden source of ruin.”

As I’ve already noted, the harm associated with overindulgence is real and not in question.

What should be questioned, however, is the paternalistic framing that not only sidesteps a key driver of interactive gambling but also infantilises gamblers and portrays them as helpless people with no agency.

Closely tied to this is the demonisation of all gambling operators and their portrayal as vultures who are preying on individuals that cannot think or reason for themselves.

People have agency, and markets are not inherently “evil”. Gambling operators, including those in the legal grey area of interactive gambling, are providing a high-risk service that consenting adults voluntarily engage in. While aggressive marketing and easy access are undeniable, they do not negate personal responsibility or choice.

It obviously isn’t politically correct to say this, but the gambling industry is largely no different from other industries in South Africa. It just happens to provide a high-risk service in which many people choose to partake, with huge sums of money. As expected, there is no love – whether from other players in different economic sectors or the public – for a fabulously wealthy industry that profits from risk.

But apart from outright criminal operators, there is nothing inherently malevolent about the gambling industry generating profit through voluntary adult behaviour.

Moralising about profit-making has always been a dangerous exercise that partly explains why this punitive tax has been proposed, why interactive gambling regulation is likely to be stringent and far-reaching, and why the growth of enterprise in other sectors of society is generally treated with suspicion and viewed as something that must be contained.

It is possible to be concerned about social harm and to reluctantly accept that some regulation of interactive gambling is inevitable. However, what even well-intentioned interventions must avoid is paternalism and the inadvertent perpetuation of the demonisation of profit and enterprise.

There is room for a discussion on harm reduction, but it should primarily focus on addressing the underlying drivers of gambling and strengthening existing voluntary efforts in civil society and the gambling industry, particularly around education. There should be no rush to impose taxes and other restrictions that do not tackle some of these root causes.

The balance that should be aimed for is one that respects individual choice and agency, encourages voluntary action for harm reduction, and avoids negating personal responsibility and villainising market activity.

Ayanda Sakhile Zulu holds a BSocSci in Political Studies from the University of Pretoria and is an intern at the Free Market Foundation.