Should betting tax be abolished?

In 2023, the Government of Ghana, through the Ghana Revenue Authority, introduced a "sin" tax of 10 percent as withholding tax on the winnings of betting. This policy aimed to make betting less attractive while mobilizing much-needed revenue for national development.

The Ghana Revenue Authority (GRA) have projected that by the end of 2024, Ghana would have been able to pull GH¢1.2 billion in betting taxes. As of September 2023, about a month after the implementation of the new tax regime, the GRA announced that monthly betting taxes stood at GHS15 million, projecting that the figure would be up to GH¢60 million by the end of the football season.

“During the first month of implementation, we averaged GH¢20 million for the GGR,” said Edward Gyambra of the Domestic Tax Revenue Division of the Ghana Revenue Authority. “As for the withholding tax, we’ve just started the betting season, but during the lean season, we averaged GH¢15 million. We anticipate this to quadruple by May,” he added.

The GRA believes it could collect more revenue from betting operators in Ghana as it aims to introduce a gaming revenue assurance monitoring system. This system will enable the GRA to integrate their systems with that of the betting operators to enable GRA monitor in real time transactions happening and the expected tax revenues thereof.

However, this tax has raised several arguments both for and against. Proponents for the betting tax argues, it’s a way to disincentive the youth who engage in betting to reduce the likelihood of problem gambling. They also argue considering tax constitute under 14 percent of gross domestic product in Ghana, this tax will shore up government revenues especially in the face of IMF bailout programme for which the government is tasked to improve revenue collection.

Proponents against, most of whom are young people who engage in betting argue that betting is a substitute for unemployment as it affords them the opportunity to earn some income. Hence, taxing their winnings while there are no jobs appear to be insensitive. They therefore vowed to vote against any party/government that seek to keep the tax.

This matter therefore became a contentious issue during the recent presidential elections. The two leading presidential candidates, Dr. Mahamudu Bawumia of the New Patriotic Party (NPP) and Mr. John Mahama of the National Democratic Congress (NDC) all promised to abolish the betting tax once voted for. Ironically, it was the NPP that introduced the betting tax.

Eventually, the NDC won and are now obliged to fulfil the social contract of abolishing the betting tax.

Yes, many young people involved in betting may have voted for the NDC with the hope that they may abolish the betting tax. They believe in the absence of jobs, winnings from betting provide an escape from harsh livelihood and might provide bread and butter. It’s not surprising that Mr. John Mahama, the President-elect, made this pledge at a campaign at Nkwabeng in the Nkoranza South Constituency “We will remove the betting tax. If you win, spend your money wisely. Don’t waste it on unnecessary things—use it to improve your life in a meaningful way.”

So I ask? Is betting an alternative source of livelihood? Should the young be emboldened by politicians to bet? Should the 10 percent tax on bet winnings be abolished?

The harsh realities of sports betting: Betting relies on luck, not strategy

While many believe that thorough analysis and strategy can lead to consistent wins in sports betting, the reality is far more complex. Sports outcomes are inherently unpredictable, influenced by countless variables such as injuries, weather conditions, referee decisions, or last-minute game dynamics. These factors can disrupt even the most well-reasoned bets in an instant, making luck the true determinant of success.

The illusion of long-term gains

A few early wins may create the impression of a profitable endeavor, but the odds are systematically designed to favor bookmakers. This imbalance ensures that over time, most participants experience losses. The allure of a "big win" is often overshadowed by the harsh financial reality that sustained profitability in sports betting is almost impossible for the average player.

Financial and emotional risks

In Ghana, sports betting has become a beacon of hope for those seeking financial breakthroughs. However, this hope often leads to reckless behavior. Many individuals borrow money, drain their savings, or neglect essential responsibilities in their pursuit of an illusory jackpot. Such habits can spiral into severe financial distress, leaving individuals and their families in turmoil.

The emotional toll is equally devastating. Repeated losses can cause stress, anxiety, and depression, fostering a dangerous cycle of desperation. In extreme cases, betting addiction takes root, leading to compulsive gambling behaviors that are difficult to break.

Real-life consequences: Stories of loss

Real-world examples illustrate the perilous consequences of sports betting. In 2022, the Daily Graphic reported that an administrative officer with Kabfam Company Limited was remanded in police custody for embezzling over GH¢1 million from his employer to fund his betting habits.

More recently, an accountant admitted in court to stealing funds from his employer to gamble on Aviator, an online betting game. His statement highlights the depths of despair:

"I spent the money by playing Aviator. I staked it and never won. I was desperate to win but lost."

These stories underline the devastating impact sports betting can have on individuals, their careers, and their families.

Findings from research on financial literacy and betting

As part of my Master of Science in Accounting and Finance program at the University of Ghana Business School, I conducted a study titled “Assessing the Effect of Financial Literacy and Financial Education on Financial Risk-Taking (Sports Betting) Behaviour Among the Youth of Ghana.” This research included 300 participants aged 18–35, with over 68.4 percent being employed and an overwhelming 98.7 percent holding at least a diploma, bachelor’s degree, or master’s degree.

The study revealed a surprising trend: 70 percent of the employed participants were involved in sports betting. This finding challenges the narrative that sports betting is merely a response to unemployment or lack of education. The study also revealed that over 90 percent of the employed who engaged in betting did so with the aim of making money.

It’s therefore erroneous for any policy maker to think betting is for the unemployed. Even among educated and employed youth, betting remains prevalent, suggesting that the allure of quick money and entertainment often overshadows the risks and the stability provided by formal employment.

Why betting cannot substitute for sustainable jobs;

1. Betting is not driven solely by unemployment

The research findings clearly indicate that a significant proportion of individuals involved in sports betting are gainfully employed. This undermines the argument that sports betting serves as an alternative to employment. Instead, it highlights a behavioral pattern influenced by factors like financial literacy, societal trends, and the appeal of instant gratification rather than a lack of job opportunities.

2. Betting does not offer financial security

Unlike formal jobs that provide consistent income and opportunities for growth, betting is unpredictable and does not guarantee financial stability. Even educated and employed individuals who participate in betting may experience financial losses that negate their earnings from stable jobs.

3. Erosion of productivity

Betting among employed youth points to a deeper issue: misallocation of financial resources and time. Instead of saving or investing in long-term assets, many individuals divert funds into betting, which yields little to no economic value.

The way forward

Rather than viewing sports betting as a substitute for jobs and abolishing the betting tax, the government should channel the revenue into programs and initiatives that create sustainable employment opportunities for the youth. Here are some practical ways this revenue can be utilized:

1. Establish youth enterprise funds

Part of the revenue can be used to create a dedicated fund to support young entrepreneurs. These funds could provide low-interest loans, grants, or equity financing to youth-led businesses, particularly in sectors like agriculture, manufacturing, technology, and creative arts.

2. Invest in Technical and Vocational Education and Training (TVET)

The government can direct betting tax revenues into expanding and upgrading TVET institutions across the country. These institutions can train young people in skills that are in high demand, such as carpentry, plumbing, auto mechanics, and digital skills like software development and graphic design.

3. Support Agro-Processing and Agribusiness

Agriculture remains one of Ghana’s largest economic sectors. Betting tax revenues could be used to support youth-driven initiatives in agribusiness, such as providing access to machinery, seeds, and fertilizers or establishing agro-processing facilities to add value to raw agricultural products.

4. Create Green Jobs

With the growing importance of climate action, revenues from the betting tax could fund programs that train and employ youth in renewable energy, waste management, and sustainable farming practices. This approach not only creates jobs but also contributes to environmental sustainability.

5. Promote Digital Economy Opportunities

The global digital economy is expanding rapidly, with opportunities in freelancing, e-commerce, and software development. Betting tax revenue can be used to establish digital hubs, provide affordable internet access, and offer training programs to equip youth with the skills needed to compete in this sector.

To young people involved in betting:

While the notion of turning betting into a profitable venture might sound appealing, it is vital to understand that sports betting is not an investment. It is not an alternative to employment. You’re more likely to lose than to win and therefore:

•    Recognize Betting for What It Is: Sports betting is entertainment, not a financial strategy. Understand that it is meant for recreation, not income generation.

•    Set Limits: Never gamble more than you can afford to lose. Treat it as a hobby, not a source of livelihood.

•    Avoid the Investor Mindset: Stop framing betting as an "investment." Doing so distorts its purpose and increases the likelihood of reckless behavior.

•    Consider Alternatives: Instead of focusing on betting, unemployed individuals can explore government initiatives, vocational training programs, or entrepreneurial opportunities that offer genuine economic empowerment.

•    Seek Support if Necessary: If gambling begins to interfere with your financial, emotional, or social well-being, seek help from organizations like Gaming Commission of Ghana (31 Fifth Circular Road, Cantonments – Accra (027) 469 8935 / (054) 013 2100/ 00800454545 - Toll free

Conclusion

Betting is not a sustainable substitute for jobs. It does not create value, foster growth, or guarantee financial security. Instead, it perpetuates economic risks and unproductive behaviors. The government should retain and optimize the betting tax, using the revenues to empower the youth with sustainable employment opportunities and financial education.

The writer is Dickson Assan (+233242771314)