South Africa has proposed a tax amendment that might be signalling the upcoming introduction of long-forgotten reforms.

First and foremost, the proposal ponders the idea of introducing a unified online gambling tax to improve cross-country compliance. This is to avoid the practice of provinces competing with each other on the headline level of taxes in order to encourage licensed operators to register with the specific provincial gambling board.

For context, South Africa does not have a single national gambling tax rate but has instead adopted provincial-based GGY taxes between 6% and 20% depending on the province and the type of gambling. Single provinces apply the tax rates by themselves, which is then collected by the provincial gambling boards.

This fragmentation has been previously criticised by international industry figures as inefficient in tackling the proliferation of black/grey market operators.

The new proposed tax rate of 20% will share the same tax base as the provincial GGY tax on licensed online gambling, which only includes sports betting and betting on horse racing,  but will also include revenues from interactive gambling – generally all types of online casino games which are currently illegal under South Africa’s gambling framework.

If accepted, the proposal will be in addition to the already existing provincial taxes, and will lead to a total effective online gambling tax rate between 26% and 29%.

Will iGaming be legalised?

South Africa’s National Gambling Act 2004 banned all types of online casino games when it was first adopted – making online betting on sports and horse racing the only viable options. These are managed and operated by bookmakers licensed within a provincial territory.

An amendment to the Gambling Act was later introduced in 2008, which was going to modernise South Africa’s market to reflect the advancements in technology and would have provided the country’s National Gambling Board (NGB) with the legal levers to regulate and licence online gambling, but it never entered the Official Gazette – leaving the 2004 legislation as the official document.

The latest tax proposal clearly recognises the outdated regime, stating that “the regulatory environment of gambling…has not kept pace with the gambling developments over the years, creating regulatory gaps.

“Advances in technology have made online gambling more accessible, changing how people gamble and increasing the variety of gambling products available, which gamblers can now access from anywhere, at any time. It transcends the provincial boundaries and cannot be realistically and fully administered at a provincial level.”

The National Treasury’s draft proposal also specifically referred back to the 2008 amendment, reminding that it envisioned online gambling – both iGaming and online betting – to be an exclusive national competency under the remit of the NGB.

And while the government office did not explicitly call for the legalisation of online casinos, fully recognising that interactive gambling remains illegal in South Africa, the draft tax proposal still aims to tax local suppliers involved in interactive gambling based on the GGR from those activities – leaving the door open for a major regulatory shift in the near future.