Alarm bells over proposed new tax for South Africa’s online gambling industry

If there’s one thing South Africans know well, it’s tax season anxiety.

Now, a new proposal from the National Treasury has sparked debate, not about income tax or fuel levies, but about online gambling.

Treasury wants to introduce an additional 20% tax on the gross gambling revenue of online operators. Supporters say it could bring in billions and even ease pressure on other taxes. Critics warn it may punish legal businesses while doing little to rein in offshore casinos operating in a legal grey zone.

And as usual, the country is split.

A 20% tax on top of existing levies

The proposal would see a national 20% tax imposed on the gross gambling revenue of online operators. Importantly, this would come in addition to provincial gambling taxes already paid by licensed operators.

That’s where concerns begin.

Speaking publicly, Ayanda Zulu of the Free Market Foundation argued that the industry is already heavily taxed. Adding another layer, he said, risks overburdening compliant businesses.

His bigger concern? Most online gambling activity in South Africa isn’t even happening on locally regulated platforms.

The offshore problem

According to data cited from YieldSec, offshore casinos account for around 62% of online gambling activity linked to South Africa.

That’s more than half the market operating outside direct local regulation.

Zulu argues that before government imposes new taxes, it should first address the unresolved legal status of online gambling. The National Gambling Amendment Act of 2008 was never promulgated, leaving online casinos in a murky space neither fully legal nor fully outlawed.

In practical terms, this means enforcement is limited. If customers are defrauded by offshore platforms, there is little recourse.

Critics say Treasury’s proposal attempts to tax an industry without first fixing its regulatory foundation.

Treasury’s “sin tax” logic

On the other side of the debate, Treasury sees things differently.

Christopher Axelson, deputy director-general for tax and financial sector policy, has framed the measure as similar to a “sin tax” aimed at discouraging harmful behaviour while raising revenue.

He has been clear on one point: the money would not be ringfenced. Revenue generated from the gambling tax would flow into the national revenue fund, supporting general government spending like education, health and policing.

There’s also a broader fiscal argument at play.

If the gambling tax raises significant revenue, it could reduce pressure to increase other taxes such as personal income tax. In a country already grappling with rising living costs, that possibility has caught public attention.

Interestingly, Axelson has suggested that even if the tax reduces gambling activity and lowers projected revenue, Treasury would still consider that a success.

Public reaction: divided and vocal

Online reaction has been swift.

Some South Africans support the idea, arguing that gambling addiction is a growing social problem and should be discouraged through taxation. Others are sceptical, questioning whether government can realistically collect revenue from offshore operators that currently dominate the market.

There is also frustration from legal operators who say they are being punished for playing by the rules while unregulated competitors thrive.

On talk radio and social media, the debate has shifted beyond gambling. It has become a broader conversation about tax fatigue. South Africans already face VAT, fuel levies, excise duties and rising municipal tariffs. Any new tax even one aimed at gambling companies, triggers concern about unintended consequences.

The bigger issue: regulation before taxation?

The Free Market Foundation’s submission to Treasury argues that clarity must come first. Legal status, enforcement mechanisms and regulatory structures should be resolved before designing a fiscal framework.

Otherwise, they warn, the policy could widen the gap between compliant local operators and untouchable offshore platforms.

Treasury, however, appears to be weighing both social and fiscal objectives. The proposal was first introduced in late 2025, and the public comment period has now been extended until 27 February 2026. A stakeholder workshop will follow, with draft legislation expected later in the year.

In other words, nothing is final yet.

A familiar South African tension

This debate reflects a broader South African dilemma: how to balance revenue generation with economic competitiveness and social responsibility.

Gambling taxes are politically easier to justify than income tax hikes. But in a digital world where money crosses borders instantly, enforcement becomes the real challenge.

If 62% of activity sits offshore, the question is simple: can government tax what it cannot fully regulate?

As consultations continue, both sides agree on one thing, the status quo is unsustainable.

Whether the solution is a new tax or a new regulatory framework remains to be decided.

For now, South Africa’s online gambling industry and its players are watching closely.