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October 25, 2014

South Africa feels the squeeze anew with yet more tax constraints


Finance Minister of South Africa Pravin GordhanYou don't have to go very far back at all to find that South African casinos suffered heavily the last time the countries authorities decided to tax them, and now the very same thing could be happening again to the same casinos, most still barely recovering from the events of last year.

New amendments to South Africa's income tax laws could wrap their coils tighter around the South African gambling and gaming industry if they are enforced it was reported this week. If the amendments go through it will see South Africa's entertainment sector smashed apart with another tax reform of an additional 1% gambling tax from April next year.

In February, Pravin Gordhan proposed the new tax hike on gambling incomes whereby winnings of 25,000 ZAR or more would be taxed at fifteen percent. Whilst the new tax would also apply to the national lottery in South Africa, it is widely felt that the additional 1% on top of an already high income tax and VAT in the country would finally deliver the death blow to gambling in South Africa.

Despite the laws and a general crackdown on the casinos, there are still thirty seven in operation throughout the country, providing a massive source of revenue for the South African government as gambling happens to be one of many South African's favorite pastimes. Over 4.5 billion ZAR was brought in as a direct result of gambling taxation last year alone and there are growing fears that will drop dramatically should the new fifteen percent hike be authorized.

At present, the land-based casinos do not do nearly half as well as those in other countries, with their margin for profit sometimes being reported as low as 1% from the games that they offer. The deathblow would strike first at the high rolling players it is felt, who will certainly not wish to have 15% of their winnings (which are always high when high rollers win) withheld automatically. Without the high rollers, it is felt that the casinos would not rake in enough money and so the overall cut for the government due to gambling taxes would be greatly diminished.

At present the laws would come into effect as of April 2013 if it was ratified, meaning that gamers would likely throw caution to the wind before this proposal is accepted, if it ever is to be of course. Lottery players will also face similar taxation rises on wins too, meaning the future may indeed look grim for the already suffering gamblers of South Africa.


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