Constitutional crisis looms as FMF sounds alarm on gambling tax
Tax Gamble
Ayanda Zulu, FMF policy officer, said the assumption that it would be possible to enforce a tax on offshore platforms despite the absence of any mechanism or enforcement infrastructure is fundamentally flawed.
Image: Supplied
IN A move that pits fiscal ambition against constitutional reality, the National Treasury’s proposal to slap a 20% national tax on online gambling has ignited a fierce backlash from free-market advocates, who warn the plan is not just premature — it’s dangerously unconstitutional.
The Free Market Foundation (FMF) has formally urged Treasury to withdraw its draft discussion paper, arguing the proposed levy represents a power grab that undermines provincial authority, punishes compliant operators, and risks accelerating the exodus of South African gamblers to unregulated offshore platforms that already dominate the digital betting landscape.
At the heart of the FMF’s objection is a stark enforcement paradox. “The assumption that it would be possible to enforce a tax on offshore platforms despite the absence of any mechanism or enforcement infrastructure is fundamentally flawed,” according to Ayanda Zulu, FMF policy officer and author of the submission.
South Africa’s gambling framework is deliberately decentralised: Nine Provincial Gambling Boards (PGBs) hold primary authority over licensing, compliance, and taxation, while the National Gambling Board (NGB) plays a supportive, norm-setting role. Treasury’s push for a uniform national tax, the FMF contends, isn’t harmonisation — it’s centralisation by stealth.
“What the paper frames as the harmonisation of South Africa’s decentralised gambling tax regime effectively amounts to fiscal centralisation,” Zulu said. “This centralisation of fiscal authority undermines the autonomy of PGBs and raises serious constitutional questions regarding the erosion of jurisdictional boundaries.”
The provocation doesn’t end there. Treasury’s assertion that online bookmakers are “undertaxed” ignores the layered fiscal burden they already carry: provincial gambling levies, VAT, and corporate income tax. Adding a 20% national surcharge, the FMF warns, would push effective tax rates into punitive territory — potentially making legal operations economically unviable.
Far from being a policy flaw, the Foundation argues, tax competition between provinces is a feature, not a bug. Jurisdictions offering lower rates can attract investment and formalise economic activity — a dynamic proven to spur growth in decentralised systems worldwide.
But Treasury’s proposal, critics say, overlooks the market reality: South African punters aren’t waiting for Pretoria to catch up. “The proposed tax is likely to drive users to offshore online casinos, which, according to industry research, already account for roughly 62% of all online gambling activity,” Zulu said.
This isn’t merely an economic miscalculation — it’s a regulatory own goal. By imposing new fiscal demands without first clarifying the legal status of online casinos, the Treasury risks deepening the very informality it claims to want to curb.
While acknowledging the genuine social harms linked to gambling, the FMF rejects the notion that a blunt national tax is the remedy. Instead, it calls for a bottom-up approach: empowering communities and civil society to lead harm-reduction efforts, while policymakers focus on resolving the foundational question of legality within the existing decentralised framework.
“The priority should be resolving the legal status and regulation of online casinos within the existing decentralised regime before consideration is given to a fiscal framework for them,” Zulu said.
The Foundation’s recommendation is unequivocal: Withdraw the draft paper, prioritise regulatory clarity, and only then revisit fiscal policy. Anything less, they warn, is not just premature — it’s a constitutional gamble South Africa cannot afford to take.
As the debate intensifies, one question looms: Will Treasury listen, or double down on a policy that may prove unenforceable, unconstitutional, and counterproductive? The stakes, for provinces, operators, and consumers alike, have never been higher.