The sports betting, gaming, and lottery industries in Nigeria are significant contributors to the country’s economy. This fact is not surprising, given that around 60 million Nigerians participate in sports betting alone. This level of activity means that around $5.5 million are spent on sports betting each day.
As the increased use of smartphones in the country makes access to digital betting and gaming easier, the related industries’ contribution to the economy should also increase. However, unlike countries such as the United Kingdom (UK), Nigeria does not greatly benefit from taxation of the industry. Gaming and lottery companies do not pay anything under the Company Income Tax Act (CITA), and they do not pay VAT. The only tax they are subject to is Lottery Tax at 7% of net proceeds. This situation seems likely to change as a result of the Finance Bill 2022.
When the Finance Bill 2022 is signed into law, gaming and lottery companies will be taxed at the same level as other companies that operate in Nigeria. This level is 30% of revenue. Money paid out in prizes, operating expenses, and agency commission are exempt from this tax. Another important fact to note is that nongaming-related revenue will be taxed in the same way as revenue that is directly related to gaming.
Interestingly, there is no mention of the VAT position in the Finance Bill 2022. Currently, the tax position as determined by the National Lottery Regulatory Commission (NLRC) means gaming and lottery companies that pay Lottery Tax do not pay VAT. Once these companies become subject to regular taxation, they could become liable to pay VAT as well. However, the precise VAT position is yet to be clarified.
Currently, the tax situation of gambling operators in Nigeria is very different from that in the UK, one of the biggest gambling markets in the world. Operators in Nigeria are subject to only Lottery Tax of 7%. In the UK, operators pay tax based on gross gaming yields (GGY). This tax ranges from 15% to 50%. Tax on remote gaming is charged separately at a rate of 21%.
Once the Finance Bill 2022 becomes law, Nigerian operators will be subject to similar rates of tax to operators in the UK. However, one major difference will remain in that online casinos that are regulated in the UK are not regulated in Nigeria. Regulation in the UK means that casino operators are licensed by the UK Gambling Commission (UKGC) and taxed accordingly. These casino operators also ensure fair play and are part of the GAMSTOP scheme that allows players to self-exclude from all registered casinos at once. Some people prefer to play at casinos not on GAMSTOP, which are based overseas and not taxed by UK authorities, thereby taking money away from the country. However, many people argue that this is a better position to be in than not having a regulated online casino industry at all, as is the case in Nigeria.
This situation regarding regulation could be more problematic once the Finance Bill 2022 becomes law, as it will lead to the Nigerian government missing out on substantial potential tax revenue. However, there is nothing to suggest that the regulation of online casinos in Nigeria will be reconsidered in the near future.
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