Perceived effects of tax policy on organizational performance of gambling and lottery companies in Nairobi County, Kenya

Abstract

Organizational performance in the betting industry can be measured by the revenue they generate. The betting companies in Kenya have been recording good performance since 2015. For instance, in 2015, betting industry made Ksh. 2.1 billion, this rose to Sh204 billion in 2018. However, the Kenyan government concern with betting companies is on tax. In 2018, the betting industry made around Sh204 billion but only remitted Sh4 billion in taxes. Moreover, most of the companies did not submit the 20% withholding tax on payouts. Sportpesa, Betin and Betway who together accounted for 85 percent of the market were accused of undercutting the tax man and ordered to close operations immediately. Due to the issues between the Government and betting companies over tax compliance issues, large betting firms in Kenya halted their operations in Kenya owing to what it termed as a hostile operating environment, with the taxation regime on the betting industry making the company’s operations in the country unviable. Given the aforementioned, the general objective of the study was to establish the perceived effect of tax policy on organizational performance of gambling and lottery companies in Nairobi County, Kenya. Specific objectives were; to establish the perceived effects of corporate tax, withholding tax and betting tax on organizational performance of gambling and lottery companies in Nairobi County. The study adopted an explanatory research design. The target population was 250 senior managers and middle level managers from gambling and lottery companies. Simple random sampling technique was utilized to choose the respondents in sports betting companies. The study sample size was 154 managers. Primary data was gathered by the use of structured questionnaires. Quantitative data gathered was examined by use of descriptive statistics and inferential statistics and presented as percentages, means, standard deviations and frequencies. A multiple regression analysis was conducted to determine the effect of tax policy on organizational performance of gambling and lottery companies in Nairobi County, Kenya. The study found that perceived corporate tax had a negative significant relationship with organizational performance (β = -0.467, P=0.003), perceived withholding tax had a negative significant relationship with organizational performance (β = -0.455, P = 0.003) and perceived betting tax had a negative significant influence on organizational performance (β = -0.472, P = 0.002). The study was important to betting and lottery companies. The companies would comprehend the tax policy. They would be skilled to comply with the tax requirements. The government assured the companies comply with the tax policy through regular analysis. The study recommends that the government should consider striking a balance between revenue generation goals of the government and organizational goals of the gambling and lottery companies. The study recommends that another study should be conducted on challenges facing gambling and lottery companies in Kenya like regulations imposed on the firms, legislation and competition.