South Africa’s Proposed Online Gambling Tax Sparks Industry Backlash Over Potential 39% Effective Rate

South Africa’s gambling sector could soon face one of the highest tax burdens in the world if the government proceeds with a proposal to introduce a 20% national levy on gross gambling revenue (GGR) from online betting.

While officials argue that the measure is intended to address the growing social impact of online gambling, industry stakeholders contend that the policy amounts to a revenue grab that will disproportionately penalize licensed operators without delivering tangible benefits to consumers or harm-reduction initiatives.

According to industry representatives, the proposed tax would significantly increase the overall tax burden already imposed on licensed betting companies. Sean Coleman, chief executive officer of the South African Bookmakers Association (SABA), warned that once the new levy is combined with existing provincial taxes and value-added tax (VAT), the effective rate paid by operators could climb to between 38% and 39%.

Licensed bookmakers in South Africa currently pay a provincial tax of 6.5% on gross profit from online betting. In addition, they must pay 15% VAT on their GGR. When the recovery of vatable expenses is taken into account, this VAT component translates to an effective combined tax rate of roughly 18% to 19%. Coleman argued that policymakers failed to adequately consider these existing obligations when designing the new measure.

“It is therefore manifest that the impact of VAT on the South African licensed betting industry has been completely overlooked or ignored in the analysis performed in support of the proposed tax,” Coleman said. “If a further national tax at a flat rate of 20% of GGR is to be levied on licensed bookmakers, over and above the provincial taxes and VAT, the effective tax rate will soar to between 38% and 39%. A rate of this nature comfortably outstrips the rates applicable in all but four of the international jurisdictions sampled.”

The tax proposal was first unveiled by the government of South Africa in late November 2025. Officials said the measure could generate approximately 10 billion South African rand (about $596 million) during the fiscal year. Authorities initially scheduled public consultations on the proposal to conclude on 30 January, but the deadline was later extended to 27 February. Government officials are expected to hold a workshop with industry stakeholders before drafting a bill that would proceed through the standard legislative process.

In a discussion paper explaining the proposal, the national treasury linked the initiative to rising levels of online betting and its potential social consequences. “Due to the surge in online gambling and its impact on society, it is proposed that a 20% tax is applied on GGR from online betting, including interactive gambling, which would be in addition to the currently applied provincial taxes,” the Treasury stated. “The main objective of the reform would not be to raise further revenue, but rather to discourage problem and pathological gambling and their ill effects.”

Figures from the National Gambling Board illustrate the rapid expansion of the country’s gambling sector. During the 2024/2025 financial year, approximately 1.5 trillion rand—around $89 billion—was wagered nationwide, representing a 31.3% increase compared with the previous year. The betting segment accounted for about 75% of total wagers, while casinos contributed 19.5%. Limited payout machines represented 3.6% of the total, and bingo operations made up 1.8%. By 2024, the industry supported roughly 34,316 jobs across the country.

Additional data from Statistics South Africa shows strong revenue growth among companies providing bookmaker and online gambling services. In its 2023 report on the personal services sector, the agency noted that industry income rose to 152.6 billion rand (approximately $9 billion), marking a 72% increase over the period between 2018 and 2023.

Gross gambling revenue reached 74.5 billion rand (around $4.4 billion), representing a year-on-year rise of 25.6%.

Despite the government’s emphasis on social concerns, officials confirmed that the proceeds from the tax would not be earmarked for gambling-related programs. Instead, the funds would flow directly into the national revenue pool. Christopher Axelson, deputy director general for Tax and Financial Sector Policy at the National Treasury, told local publication MyBroadband on 26 February that the revenue could help ease pressure on other tax streams.

“If there’s a reduction in online gambling because of this tax, we would be happy with that even if it reduces revenue,” Axelson said. “It’s a good thing. It’s good for development and it’s good for social expenditure. It might mean that there’s less pressure on other taxes to go up.”

However, critics say the government’s justification overlooks key international comparisons. Coleman noted that while the Treasury pointed to several countries with gambling taxes above 20%, many of those jurisdictions do not impose VAT on gambling transactions.

“In this regard,” Coleman said in a submission during the consultation process, “it is instructive to note that of the 50 jurisdictions referenced, 22 (or 44%) do not levy VAT in respect of gambling or betting, while in respect of a further 24 (or 48%), information as to whether gambling or betting transactions attract VAT is not readily available. Only in one case (or 2% of the entire sample) is VAT levied, while in a further three (or 6%) VAT may be chargeable, depending on the nature of the transaction in question.”

Opposition has also come from policy organizations. The Free Market Foundation (FMF) urged authorities to withdraw the proposal, arguing that it lacks provisions for harm reduction and could unfairly target licensed businesses while leaving unregulated operators largely unaffected. Ayanda Zulu said the rise in online gambling reflects broader socioeconomic pressures in the country.

“The surge in online gambling is largely driven by the country’s socioeconomic crisis, with many individuals seeking to generate income,” Zulu said.

He also warned that the tax would be difficult to enforce against offshore operators. “The proposal, instead of resolving the legal grey area surrounding online casinos, puts forward a 20% national online tax. This tax would be largely unenforceable against online casinos and would disproportionately burden licensed bookmakers, which already contribute substantial taxes to provincial regulators. The likely result is that more users will be driven to offshore online casinos, which operate outside the existing regulatory regime and do not pay gambling taxes.”

Legal experts share similar concerns. Wendy Rosenberg, head of digital media and electronic communications at Werksmans Attorneys, emphasized that the tax would be paid by operators rather than bettors, meaning gamblers may not feel the financial impact directly.

“If the proposed tax were introduced, the South African online betting industry would become one of the highest taxed online betting industries globally,” Rosenberg said.

She added that the country already stands apart from many jurisdictions because operators must pay multiple layers of taxation. “South Africa is an outlier in that online betting operators are already required to pay 15% VAT, as well as provincial gaming taxes. Online betting operators would thus have to pay provincial gaming taxes plus the national online gambling tax, as well as VAT, all of which are calculated based on gross gambling revenue.

This is in addition to contributions to the South African Responsible Gambling Programme and other costs.”

The rapid growth of the sector has been closely tied to expanding internet access and the digital shift that accelerated during the COVID-19 pandemic. Online betting participation increased from about 64% in 2020 to between 82% and 83% in 2025. Over the same period, the number of internet users in the country rose from 36.5 million to roughly 50 million.

Alexis van Eeghem of HJW Attorneys and Conveyancers cautioned that the proposed tax could damage the competitiveness of licensed betting operators and push more players toward offshore platforms that fall outside South Africa’s regulatory framework.

He also pointed to inconsistencies between the proposed tax and the country’s existing legal structure for gambling. “From a regulatory perspective, the proposal also raises questions about alignment with South Africa’s existing gambling framework,” van Eeghem said.

“Gambling is largely regulated at the provincial level, with operators licensed and taxed by provincial gambling boards under the broader framework of the National Gambling Act. In any event, the National Gambling Amendment Act of 2008 was never promulgated, meaning that online gambling remains somewhat of an illegal grey area in South Africa. As such, it is interesting to see how tax proposals are being implemented, notwithstanding that there is a lack of mechanisms and enforcement infrastructure.”

SABA maintains that the measure risks destabilizing the regulated betting market and duplicating existing provincial taxation structures. The association argues that the policy could ultimately reduce tax collections if licensed operators lose market share to unregulated competitors. According to Coleman, the proposal also fails to directly address problem gambling behavior.

Coleman questioned why a tax supposedly designed to discourage gambling contains no provisions for targeted intervention. “Put differently,” he said, “this is a weak motivation for a national tax grab.”

By fLEXI tEAM