Francis Timore Boi writes: All you need to know about tax on lottery and gambling

The inclusion of lottery or gambling income as taxable income is strongly influenced by a country’s choice of tax system. For those countries with worldwide tax system, gambling winnings are in principle, subject to tax whether they arise from windfall (occasional transactions) or from a professional gambler.

When tax is imposed on gambling and lottery, the Tax Base is only on the winnings and the losses are ignored.

Losses incurred in gambling or lottery are not deductible because each gambling occasion is a separate event.  Gambling or lottery losses arising on one occasion cannot be deducted against winnings derived on another occasion.

These restrictions presumably reflect the administrative difficulties of verifying gambling losses. Even in the case of a professional gambler or lotto “staker”, losses for the year can be deducted only from the gambling income or winnings from the stake.

The Practice in some countries

Most countries tax lottery or gambling income as Occasional Income (windfall) and some countries consider gambling income as taxable only if the gambler can be found to be in the business of gambling. For example in Germany, gambling income of a professional card player is taxable as business income and gambling from TV shows is taxable as other income.

In Ghana, when Act 896 was passed in 2015, lottery activity was recognized as an investment activity. Since 2015, lottery taxation has gone through several changes leading to it being repealed.

In 2015 when Act 896, a withholding tax of 5% was imposed on the winning amount under 1st Schedule Par 8(1)(b)(viii).

In 2016, the Income Tax Amendment Act, 2016 (Act 907) amended it to exempt only the first GHS 2,592 and any excess wining above the GHS 2,592 was taxable at 5%.

In 2017: The National Lottery Authority (NLA) made a proposal to the Ministry of Finance for the scrapping of taxes as a way of attracting more mainstream operators. The tax was then repealed.

Regulations 24 of the Income Tax Regulations, 2016 (L.I 2244) defined winnings from lottery to include gambling, betting and any game of chance.

Does the exemption of Lottery in Ghana mean that a professional gambler (CASINO, lotto forecaster, etc), engaged in gabbling business (unregistered lotto forecaster) is also exempt?

It appears not. But the law in my view needs to be clarified or enforced. What about other forms of TV shows and promotional winnings?

2023 10% TAX ON LOTTERY WINNINGS

The gaming industry continues to grow.  From $70 billion in 2016 to $92 billion in 2022. With the use of technology, the industry is booming. In the 2023 budget, the government has reintroduced the tax at the rate of 10%. This time, there is no exemption as in the case of 2016. This 10% affects all forms of gaming, lottery and any game of chance.

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BY Francis Timore Boi Esq

The writer is a Tax Consultant.

 

email: mytimore@yahoo.ca