The Taxation of Gambling in Africa François Vaillancourt René Ossa

International Studies Program Working Paper 11-10 May 2011 The Taxation of Gambling In Africa François Vaillancourt René Ossa International Studies Program Working Paper 11-10 The Taxation of Gambling In Africa François Vaillancourt René Ossa May 2011 International Studies Program Andrew Young School of Policy Studies Georgia State University Atlanta, Georgia 30303 United States of America Phone: (404) 651-1144 Fax: (404) 651-4449 Email: [email protected] Internet: http://isp-aysps.gsu.edu Copyright 2006, the Andrew Young School of Policy Studies, Georgia State University. No part of the material protected by this copyright notice may be reproduced or utilized in any form or by any means without prior written permission from the copyright owner. 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Economic analysis and revenue forecasting, including micro-simulation, time series forecasting, For more information about our technical assistance activities and training programs, please visit our website at http://isp-aysps.gsu.edu or contact us by email at [email protected]. The Taxation of Gambling In Africa1 François Vaillancourt and René Ossa 1 We thank Sijbren Cnossen for tasking us with preparing this paper and Jamie Leanne Ronson for her research assistance. 2 International Studies Program Working Paper Series Introduction The taxation of gambling in Africa as a whole appears to have been the object of little attention. In this paper, we first present the importance of gambling for Africa from a world perspective then disaggregate that within Africa. We then turn to the nature and importance of taxation of gambling, focusing on the major markets identified in the first part of the paper. In the third part we present the available evidence on the incidence of gambling in Africa which is limited to South Africa. 1. Gambling in Africa: its importance For gambling to attract the interest of government as a source of revenue, it must be a substantive amount Table 1 presents the evidence on the importance of gambling in Africa compared to other continents and of African countries compared to other countries. The first column is effective gambling turnover (EGT) which is akin to gross sales before the payout of winnings. This indicator represents the overall gambling market and is amenable to public policy interventions in terms of payout ratios and taxation. The second column is government gambling income (GGY). While a priori more interesting than EGT, it is less useful since it is properly measured only for lotteries with prizes and expenses subtracted from revenues. For casinos and video lotteries /gambling machines, GGY and EGT are treated as equal which is not the case. We report both in tables 1 and 2. Table 1 % EGT % GGY %GDP % Population Africa 1.2 1.4 3.2 19.8 Asia & M.E 22.8 20.8 30.7 59.1 America(north) 27.5 35.2 24.4 5.1 America 8.6 5.2 11.9 9.1 (south/central) & Carib. Oceania 4.7 4.7 1.3 0.5 Europe 35.1 32.7 28.5 7.0 Total World $ 631.3 bn US$ 313.0 bn US$ 69 489 bn Int$ 6.8 billion or # persons Source: Global Gaming Report 2008, United Nations Population Division, CIA world factbook and author’s calculations But what are the largest markets for gambling? We present them by absolute size, noting that results would differ if calculated on a per capita basis. The Taxation of Gambling In Africa 3 Table 2. Ten largest national gambling markets by decreasing size and largest African country Countries $GGY (US$bn) $ EGT (US$bn) % world total GGY/EGT 1. United States 94.87 151.37 (1) 30.3/24.0 2. Japan 35.43 74.42 (2) 11.3/11.8 3. Italy 15.97 31.28 (4) 5.1/4.9 4. UK 15.12 53.81 (3) 4.8/8.5 5. Canada 14.68 21.3 (9) 4.7/3.5 6. Australia 13.2 26.92 (5) 4.2/4.3 7. France 11.76 25.47 (7) 3.8/4.0 8. Spain 11.68 23.64 (8) 3.7/3.7 9. Germany 11.23 17.89 (10) 3.6/2.8 10. Macau 7.19 8.23 (15) 2.3/1.3 Largest African 2.02 3.08 (below 25) 0.65/1.6 country 22. South Africa Source: Global Gaming Report 2008 ________________________ Table 1 shows that Africa is the smallest continental market for gambling; it is even smaller than Oceania; this explained by the high gambling per capita of Australians. But what are the largest national markets for gambling? We present them ranked by absolute size in table 2, noting that results would differ if calculated on a per capita basis. Table 2 shows that there is no African country amongst the ten largest gambling markets in the world. South Africa is the first ranked 25th in the world in absolute size. Having established the relatively small size of the gambling market in Africa, the issue of what countries matter in Africa remains? Figure 1 provides the answer; it shows the 12 most important gambling markets for that continent. They account for 90% of that market in the 53 countries of Africa. South Africa alone accounts for almost half of all gambling activities, followed by two island countries, Comoros and Mauritius at about 10% each. Table A-1 provides information on gambling in all African countries as well as various indicators for each country. All other countries each account for less than 1% of gambling turnover (EGT) in Africa and for eleven countries- 20% of African countries - no gambling is recorded. 4 International Studies Program Working Paper Series Figure1. Share of Gambling turnover (EGT) in Africa, 2006, 12 largest gambling countries% 50.0% 44.2% 40.0% 30.0% Share of Gambling 20.0% 11.0%11.3% turnover % 6.4% 10.0% 1.0%1.3%1.3%1.4%1.7%1.8%3.4%5.3% 0.0% Egypt Nigeria Senegal Namibia MoroccoComorosMauritius CameroonSeychelles South Africa Burkina Faso Cote d'Ivoire Source: calculations by the author using data from Global Gaming Report reported in table A-1. We used a share of 1% as the arbitrary cut-off in the figure. ___________________________________________ These gambling markets vary not only in size but also in their composition as Figure 2 shows .Four countries have no lotteries, two have only casinos targeted at tourists and three francophone markets see a dominance of lotteries in gambling activities. This has consequences on the type of taxes used. We now turn to taxation of gambling. Figure 2. Share of types of gambling, twelve main African gambling markets, 2006 120 100 80 60 Other* 40 Casinos % 20 Lotteries % 0 Source: calculations by the author using data from Global Gaming Report reported in table A-1. * Other = Betting + gaming machines + other The Taxation of Gambling In Africa 5 2. Taxation of gambling in Africa: evidence for key countries We begin by discussing the case of South Africa since it is the dominant gambling market in Africa. We then turn to other countries South Africa There is both national and sub national (provincial) taxation of gambling in South Africa National taxation A national lottery was introduced in South Africa in March 2000 with a gap in 2007. Its establishment was accompanied by the abolition of two provincial lotteries (Ciskei and Transkei). It is administered centrally by the national Lotteries Board and operated by private firm (Uthingo until March 2007, Gidany since October 2007) under contract (concession) to the Board.

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