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JIMMY MOYAHA: Today, we’re delving into recent appeals from South African lawmakers and others advocating for a ‘sin tax’ on gambling as a method to reduce its appeal and promote education surrounding the issue.

Joining me is Lesedi Seforo, project director for tax advocacy at the South African Institute of Chartered Accountants [Saica], who will help shed light on this matter.

Lesedi, good evening. Thank you for being here. Let’s start by looking at the existing tax regulations concerning gambling. What do these regulations entail for gamblers and service providers like casinos?

LESEDI SEFORO: Thank you, Jimmy; it’s great to be here. And a warm hello to all the listeners.

Under current law, casual gamblers are not taxed on their winnings.

This is considered ‘of a capital nature’ according to tax definitions.

However, professional gamblers who frequently engage in gambling or treat it as a business do face taxation on their winnings.

In these cases, while you’re able to deduct losses from your winnings, you will be taxed similarly to wage earners based on tax brackets.

As for gambling service providers, they are generally regulated by provincial bodies – such as those in the Western Cape or Mpumalanga – with taxes being collected at the provincial level.

JIMMY MOYAHA: Recent trends indicate a growing number of gambling participants. According to recent statistics, record revenues have been generated by these companies this year.

We have exceeded R1 trillion in wagered amounts over the past year, raising significant concerns.

Some gambling firms have reported a 25% growth in revenues.

In light of this, what is the current perspective on taxation? There are calls for taxing individual gamblers; however, a form of tax is already in place. Is it reasonable to suggest that either the gambler or the service provider should take on a heavier tax burden? What’s the reasoning behind this?

LESEDI SEFORO: As you noted, the suggested ‘sin tax’ would be imposed on gamblers to dissuade such activities.

It’s widely acknowledged that compulsive gambling can lead to various societal issues.

A few years ago, a sugar tax was implemented to combat high sugar intake. Following its introduction, we saw the rise of sugar-free alternatives like Coke Zero and Sprite Zero.

A similar tax could be implemented for consumers of gambling products. However, the effectiveness of such a tax depends on the ‘price elasticity’ of demand – meaning that certain products may still be purchased despite price hikes.

It’s hoped that gambling does not fall into that category, as its marked increase poses risks to society.

JIMMY MOYAHA: You bring up an intriguing point regarding price elasticity concerning the proposed sin tax. We have witnessed sin taxes on tobacco and alcohol, yet these measures haven’t significantly deterred consumption. Would implementing a tax truly tackle the issue, or is a more comprehensive approach needed? We see instances of gambling destinations like Las Vegas and Macau thriving without high tax rates while maintaining substantial employment levels.

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The rise in gambling activities in South Africa can be linked to increasing unemployment rates.

Moreover, the advent of online betting platforms has contributed to this phenomenon.

These companies frequently claim they don’t pressure individuals into gambling. How can we address this issue in a balanced manner, taking into account the societal impacts? Can taxation alone genuinely solve the problem?

LESEDI SEFORO: Taxation could serve as one among several regulatory strategies to alleviate the issue. For example, akin to tobacco regulations, companies might be mandated to display warning messages in casinos or on betting websites, advising users to limit their gambling habits.

Notably, in the US, where gambling is taxed unlike in South Africa, we might benefit from studying their regulatory framework.

In addition to a potential tax on winnings in South Africa, a robust set of regulations alongside any proposed sin tax may be crucial in addressing this concern.

JIMMY MOYAHA: One suggestion from advocates is to limit gambling-related advertising and implement legislation addressing this issue more comprehensively. How should we evaluate the accountability of these companies in this light? For instance, Betway supports cricket and local leagues. Are we implying that these companies should either be restricted from operating in South Africa or held to stricter regulations due to their assertive marketing tactics?

LESEDI SEFORO: Exactly, that’s the case. Without government intervention, businesses will continue promoting their products or services. This has been seen in tobacco regulations through the years.

Significant legislative adjustments have drastically curtailed public smoking, particularly indoors.

Similar measures are essential to combat gambling advertising, especially during prime time when gambling ads are prevalent.

JIMMY MOYAHA: There’s a lot to consider as we reflect on the numerous companies operating in this sector and the potential outcomes. Thank you, Lesedi, for providing your insights and perspectives. I hope to see proactive measures taken to address these issues in the future.

Lesedi Seforo is the project director for tax advocacy at the South African Institute of Chartered Accountants.

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