Part 2 of the A Review of the Regulation and Taxation of the Gaming Industry in Nigeria (A Comparative Study) By Oshobugie Irumekhai And Oluwatobiloba Adesemowo

  • Comparative Tax policies of Governments vis-a-vis the Gaming industry

Benjamin Franklin is reported to have said that nothing can be said to be certain except death and taxes. In the gaming industry, tax burden is a certainty. Tax is usually imposed on the income, profits or gains of both gaming operators and customers.

Governmental policy worldwide is what determines whether gaming activities are taxable or not. There is an absence of taxes in respect of gaming activities in jurisdictions where gaming has not been legalized. In other jurisdictions where gaming is legal, taxes are usually imposed on the income derived from gaming activities although this is not always the case as some jurisdictions like the United Kingdom have abolished taxes dealing with gaming activities.

This part of the study is devoted towards treating the comparative tax policies of various governments on the subject of gaming.

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 The Nigerian Position

Generally, incomes accruing from the gaming industry are taxed at both Federal and State levels. This is done pursuant to various enactments regulating the imposition and collection of taxes applicable to the gaming industry. The writer shall treat the major laws in detail below.

 Taxes and Levies (Approved List for Collection) Act 1998

In order to resolve the problems arising from internal double taxation within the country and to streamline the taxes collectable at the various levels of government, the Federal Government enacted the Taxes and Levies (Approved List for Collection) Decree, now Act in 1998. The Act has now listed the various taxes and levies that each level of government can validly collect and it specifies taxes to be collected in respect of the gaming industry.

Item five (5), Part II of the Schedule to the Act empowers only the State Government to collect taxes on pools betting, lotteries and casinos. The consequence of this is that the Federal and Local Governments have no legislative backing to collect taxes in respect of gaming activities. This however is not the correct position of the law on tax imposition and collection as other existing enactments empower the Federal Government to impose and collect taxes in relation to the gaming industry.

Casino Taxation Act

The Casino Taxation Act imposed a casino revenue tax on the net gaming revenue of every casino licensed under the Casino Gaming Act of 1964[1].  The tax payable is at the rate of twelve-and-one-half percent and it is to rank in priority to the Companies Income Tax Act[2].

Perhaps the most salient part of that Act as it relates to tax collection vis-a-vis Taxes and Levies (Approved List for Collection) Act 1998 is that casino revenue tax is a debt recoverable by the Federal Board of Inland Revenue and as such only the Federal Board of Inland Revenue (now known as the Federal Inland Revenue Service[3]), an agency of the Federal Government, is empowered to collect casino revenue taxes[4]. It should be stated that from the tenor of the Act, the legislature clearly intended that the Federal Board of Inland Revenue should be the only body responsible for collecting taxes under the Casino Taxation Act as the statute went on to vest the Board with powers incidental to the collection and recovery of taxes arising from the Act.


It is also interesting to note that the legislature equated the Casino Taxation Act to the Companies Income Tax Act which suggests the exclusionary nature of the tax as taxes due under the Companies Income Tax Act are collectible solely by the Federal Government. To buttress the exclusionary nature of the Casino Taxation Act, the Act expressly recognizes that licensees under the Casino License Act of 1964 are companies duly incorporated under the Companies and Allied Matters Act[5]. The Act further provides that tax which shall be a first charge on the assets of the licensee shall be chargeable to the licensee thus:

  1. In the name of the licensee
  2. in the name of the managing director, or director as the case may be of the licensee in Nigeria in like manner and to like amount as such company would be chargeable; or
  • In the name of a receiver or liquidator, or of any attorney, agent or representative thereof in Nigeria, in like manner and to like amount as the licensee would have been chargeable if no receiver or liquidator had been appointed.

This further buttresses the position raised earlier on by this writer that the Federal Government still collects taxes in respect of income or gains accruing to the gaming industry notwithstanding the provisions of Item five (5), Part II of the Schedule to the Taxes and Levies (Approved List for Collection) Act 1998.

It should be noted that the Casino Taxation Act having not been expressly repealed by any legislation is an existing law by virtue of section 315 (1) (a) of the Constitution of the Federal Republic of Nigeria 1999. However, the constitutionality of the Casino Taxation Act is very much in doubt as going by the decision in Edet’s case[6] as well as other judicial authorities dealing with the subject of taxation, it can be argued that the Federal Government lacks the legislative competence to impose tax on an item which solely falls within the legislative competence of the State Governments.

Personal Income Tax Act

By virtue of Section 3(1) (f) of the Personal Income Tax Act 2014 (As amended), winnings from gaming activates are taxable. Section 3(1) provides thus:

(1) Subject to the provisions of this Act, tax shall be payable for each year of assessment on the aggregate amounts each of which is the income of every taxable person, for the year, from a source inside or outside Nigeria, including, without restricting the generality of the foregoing-

(a) gain or profit from any trade, business, profession or vocation, for whatever period of time such trade, business, profession or vocation may have been carried on or exercised;

(b) any salary, wage, fee, allowance or other gain or profit from employment including compensations, bonuses, premiums, benefits or other perquisites allowed, given or granted by any person to any temporary or permanent employee other than so much of any sums as or expenses incurred by him in the performance of his duties, and from which it is not intended that the employee should make any profit or gain;

(i) medical or dental expenses incurred by the employee;

(ii) the cost of any passage to or from Nigeria incurred by the employee;

(iii) any sum paid in respect of the maintenance or education of a child if any provision of this Act provides that any sum received by the employee during a year of assessment shall be deducted from the personal reliefs to be granted to him for the next following year;

(iv) so much of any amount of rent the employee is treated as being in receipt equal to the annual amount deemed to be incurred by the employer under section 4 of this Act;;

(v) so much of any amount of rent the employee is treated as having received under the provisions of section 5 of this Act;

(vi) so much of the amount of rent subsidy or rent allowance paid by the employer, to or on account, for the employee not exceeding N100,000 per annum;

(vii) meal subsidy or meal allowance, subject to a maximum of N5,000 per annum;

(viii) utility allowance of N 10,000 per annum;

(ix) entertainment allowance of N6,000 per annum;

(x) leave grant, subject to a maximum of ten per cent of annual basic salary;

(c) gain or profit including any premiums arising from a right granted to any other person for the use or occupation of any property;

(d) dividend, interest or discount;

(e) any pension, charge or

(f) any profit, gain or other payment not falling within paragraphs (a) to (e) inclusive of this subsection.

It is submitted that the omnibus nature of Section 3(1) (f) is sufficient to capture the gains (winnings) made by gaming customers.

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  • The UK Position

The position in UK is radically different from what obtains in many jurisdictions and quite complicated. To start with, whereas we have hitherto used the word gaming as a blanket term to cover gambling services, in the UK, gaming forms a subset of regulated gambling.  The UK distinguishes between three forms of regulated gambling; betting, gaming and lotteries. In this part of the study, we shall substitute the word ‘gaming’ for ‘gambling’ and all references to the word ‘gambling’ should be interpreted as regulated gambling that covers a wide range of gambling services.

The UK Gambling Act 2005 is the principal statute governing the gaming industry in the United Kingdom[7]. Section 20 of the Act established the Gambling Commission which is the regulatory body for gaming in the United Kingdom.[8] The scope of the Gambling Commission covers bookmaking, lotteries and gaming.[9] The Commission’s primary duty include the formulation, fixing and enforcement of regulations under which authorized gambling may be carried out. .

Her Majesty’s Revenue and Customs (HMRC) oversee tax matters relating to gambling entities[10]. However, spread betting falls outside HMRC’s purview as it is regulated by the Financial Conduct Authority[11]. It is important to note that taxation of gambling services is addressed by the Betting and Gaming Duties Act 1981, as amended by various Finance Acts from time to time.[12]

Gambling in the UK is regarded as a commercial activity subject to tax. Therefore, companies that operate as gaming providers pay corporation tax at normal rates while sole unincorporated entities are liable for personal income tax.[13]  Gambling services in the UK are generally exempt from Value Added Tax (VAT), instead, the services are subject tax in the form of various gambling duties.

To remain legally compliant, gambling providers must register with and pay betting duties to HMRC based on the nature of their business[14]. The three types are General Betting Duty (GBD), Pool Betting Duty (PBD) and Remote Gaming Duty (RGD). This Duty must be paid if bets are accepted from UK customers in betting or gaming offered from outside the UK, betting from a UK shop and spread betting conducted from the UK[15].

 Pre 2001 position.

Under the Betting and Gaming Duties Act 1981 HM Customs & Excise was responsible for collecting gaming duty[16]. Originally, gaming license duty was what was prescribed under section 13 of the Gaming and Betting Duties Act 1981 but this was replaced with gaming duty as provided by S.10(1) of  the Finance Act 1997 which provided thus:

“(1) A gaming licence shall not be required under section 13 of the Betting and Gaming Duties Act 1981 (gaming licence duty) for any gaming on or after 1st October 1997; but a duty of excise (to be known as “gaming duty”) shall be charged in accordance with section 11 below on any premises in the United Kingdom where gaming to which this section applies (“dutiable gaming”) takes place on or after that date.”[17]

Section 11 of the Finance Act 1997 sets out the rate of Gaming duty. They are however subject to change.

Prior to 2001, gamblers were legally required to pay a betting duty on every single bet made. The duty was calculated at 9% and the gambler would have to choose whether they wanted to pay 9% on their stake or 9% on their winnings. It was required that the gambler made the choice before the bet was made. This tax and the initial rise in the potential of the internet led to more and more gamblers looking for cheaper, alternative ways to make their bets. This was offered to them through offshore gaming providers which they could access straight from their computer. The increase in gamblers going ‘offshore’ resulted in a loss of revenue for the UK government who acted accordingly by abolishing any betting duty imposed on gamblers. From 2001, gamblers did not have to pay 9% on their stake or winnings neither did they have to declare their winnings to HMRC. Instead, a 15% betting tax was introduced on the gross profits of gaming providers.

Abolition of Gaming Duties in 2001

The UK in 2001 abolished general betting duties thus leaving all winnings from sports bet, casino play, lotteries and other forms of gaming completely tax free. Instead, tax was levied at the rate of 15% of the gross profits of gaming providers.[18] The Chancellor of the Exchequer announced that ‘General Betting Duty’, levied as a proportion of betting stakes, would be replaced by a ‘Gross Profits Tax’ based on the net revenue of gaming providers. The Chancellor proposed a tax rate of 15% for fixed-odds and pari-mutuel bookmakers, 10% for sports spread bookmakers and 3% for financial spread bookmakers[19].The philosophy behind abolishing taxes on the gains of gambling customers was that the majority of gambling customers are net losers and therefore, a liability to taxation on their gains may give rise to compelling argument that gambling losses are tax deductible[20].

Post-2014 Position

The Remote Gaming Duty which came into force from December 1 2014 changed the way gaming operators were taxed.

The principal law on Remote Gaming Duty are contained in the Finance Act 2014 C26, Part 3 Chapters 3 Sections 154 to 162, Chapter 4 sections 163 to 198 and schedules 27, 28 and 29.[21] Secondary legislation is contained in the General Betting, Pool Betting and Remote Gaming Duties (Registrations, Records and Agents) Regulations 2014[22] and the General Betting, Pool Betting and Remote Gaming Duties (Returns, Payments, Information And Records) Regulations 2014[23].

The UK Government reformed Remote Gaming Duty, General Betting Duty and Pool Betting Duty with the effect being that from December 2014, gambling and gaming activity have been taxed on a ‘point of consumption’ basis, meaning that it is the location of the customer rather than the gaming provider that will determine the tax liability. Offshore gaming providers, such as online gaming websites, offering gaming services to customers living in the UK are liable to pay gaming duty which is charged at the rate of 15% of the gaming provider’s profits with UK persons[24].   

  • The Australian Position

Australia operates a federal system of government with six states, two mainland territory governments and a national government.  State and territory governments regulate and provide gaming services in addition to taxing it.

Australians reportedly spend a significant amount of household income on gaming. This is reported to be in the figure of AUD 19 billion a year.[25] This constitutes the highest rate of gaming in the world. Taxation of gaming is done by the state governments on different bases. Gaming taxes constitute an important source of revenue for the state governments.[26] In 2015-2016, the revenues derived from gaming were reported to constitute 7.7% of state and territory taxation exercise.  Gaming revenue made up 2.5% of total state revenue when other revenue sources were taken into account.[27]

Generally, gaming customers do not pay tax on their winnings unless they conduct gaming in such a systematic way that it can be regarded as carrying on a business. The rationale behind not taxing the gains of the customers is that gaming is not seen as a profession but rather as a hobby. The government views gains from gaming activities as a fortunate windfall. This received judicial recognition in the case of Brajkovich v. Federal Commissioner of Taxation[28] where the Full Federal Court held thus:

‘The gambler who seeks to demonstrate that he is… a businessman has to show by way of system and profit motive than those who engage in more conventionally ‘commercial activities’’

Gaming operators on the other hand shoulder the tax burden with taxes being levied on them through the gaming products they offer. Gaming products in Australia have specific taxes tailored to each product, in addition to Federal goods and services tax. The taxes can take the form of turnover on gross or net profit, and often as licence fees or payments for exclusivity rights. A form of tax known as ‘product fees’ are paid to regulatory bodies by gaming providers for racing and sports on which their products are based. There are other taxes which operate in the form of community benefit levies, health levies, etc.[29]


Conflict of Laws

In the case of Constance Shareholders Association of Nigeria V. National Lottery Regulatory Commission[30], the Federal High Court, Lagos division delivered judgment in favour of the plaintiffs to the effect that the NLRC had no right to issue licenses and voided all licenses it previously issued. Justice Okechukwu Okeke who delivered the judgment affirmed the exclusivity of the license granted by the President to SET PLC formerly National Sports Lottery.

 Multiplicity of Taxes

This is a great challenge in the sense that lottery operators might be discouraged from paying taxes if they are burdened with paying so much taxes. And as the saying goes, you do not kill the goose that lays the golden egg. Hence to encourage operators to pay and keep paying their taxes, there should not be multiplicity of taxes.

Illegal gaming.

Illegal gaming can always hinder the growth of taxation in the gaming industry. When people begin to look for alternative means to escape being taxed. It creates a problem in the industry and even for the government.

  • Recommendations

Having given a detailed background of the lottery industry in Nigeria and the potential for enormous growth, the authors will like to emphatically state that effective taxation of the lottery industry can be a major source of revenue generation for the government. To this end, the following suggestions are given:

  1. The Federal Government should endeavour to streamline the extant laws regulating the industry in order to make it conform to global best practices and reflect a proactive bias towards ensuring effective regulation. It is the authors’ humble opinion that the Federal Government should place gaming and other related activities on the exclusive legislative list and make it a condition precedent for any prospective lottery operator to be registered under Part A of the Companies and Allied Matters Act before a license can be applied for and granted just like the position in Lagos state. It is argued that this requirement of registration is necessary as the impact of the activities of lottery operators has a wide-reaching effect that cuts across states of the Federation which makes it take the semblance of interstate commerce, thus warranting the intervention of the Federal Government
  2. An effective way of taxing the huge profits of the lottery operators should be devised and religiously implemented in a way that accords with effective canons of taxation.
  • Withholding tax should be applied to the gains of gaming customers in Nigeria. This should be levied at the rate of 10%.
  1. Policies that encourage investment like tax holidays, pioneer status etc. should be formulated and implemented to confer such benefits on deserving gaming operators. This should be extended to foreign players seeking entry into the Nigerian market.
  2. Tax laws currently applicable to the gaming industry should be streamlined in order to avoid forms of multiple taxation as it is necessary not to kill the goose that lays the golden egg.

[1] Section 1(1) Casino Taxation Act.

[2] Ibid. Ss 1(2) &(3)

[3] Ss 1 and 2 Federal Inland Revenue Service (Establishment) Act 2007

[4] Ibid

[5] Ibid.

[6] Supra

[7] Other statutes like the Betting and Gaming Act 1960 and the National Lottery Act 1993 still apply.

[8] Note that the UK Parliament also enacted the Gambling (Licensing and Advertising) Act 2014.

[9] NB the National Lottery Commission which previously regulated the National Lottery, merged with the Gambling Commission in October 2013.



[12] Ibid

[13] Ibid



[16] HM Customs & Excise is now a part of HM Revenue and Customs which was established by the Commissioners for Revenue and Customs Act (CRCA) 2005 thus HM Revenue and Customs functions as the taxman for the gambling industry.


[18] The March Budget of 2001 which took effect from January 1 2002, abolished the imposition of taxes as the Government was concerned that the country was losing revenue as well as jobs to offshore gambling sites. Many of the big UK brands had moved offshore where they could take bets without the punters being taxed and the abolition was a move to stop that.

NB: In the UK, proposals for tax changes and tax continuations take effect after the Chancellor of the Exchequer finishes giving the Budget statement on Budget day.  These proposals must be validated by a single motion- a Provisional Collection of Taxes motion, which is approved after the Budget speech.  See further the UK House of Commons Library Briefing Paper; Number 00813, 6 October 2017.

[19] D. Paton, D. Siegel and L. Vaughan Williams, ‘A Policy Response to the E-Commerce Revolution: The Case of Betting Taxation’ (Research Paper 2001/21), Internationalisation of Economic Policy Programme’

[20] Some also argue that the difficulties of administration and compliance of the taxing of gambling gains will create unfairness to the honest taxpayer. However, this argument can be rebutted with the fact that gaming receipts are taxable in the United States as losses are only deductible to the extent of gains. This validates the position that a system of taxing the gains of gaming customers is feasible.



[23] Ibid

[24] NB a UK Person is define by section 186 of the Gambling Act as an individual who usually lives in the UK or a body corporate which is legally constituted in the UK.

[25]Nikkinen, Janne. The Global Regulation of Gambling: a General Overview . Working Papers of Images and Theories of Addiction No. 3, p. 35. :Working Paper No. 3:2014

[26] Ibid

[27] Ibid

[28] 89 ATC 5227 at 5234; 1989 (89) ALR 408


[30] Unreported suit: FHC/L/CS/1253/2012.

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