The Argentine federal government has published a decree to enact indirect taxes on online gambling deposits, but legal and tax experts are unsure about how they can be enforced.
Decree 293/2022, published on June 1, implements the 2020 federal Budget Law 27.591, which itself sought to enacted an indirect or excise federal tax on online gambling activities offered within Argentina by both local and offshore entities.
The tax was first created in 2016, amid much protest, by Law 27.346, which initially established a 2 percent federal tax on the gross value of each online bet alongside additional taxes to be applied to slot machine wagers in casinos and bingo halls.
According to the 2020 budget law and the new implementing decree, the value of net deposits made by Argentines with online gambling platforms is instead taxable, with the tax rate ranging from 2.5 to 15 percent depending on the circumstances of the operator in question.
Deposits placed with Argentine entities registered in a special tax registry created in 2021 will be subject to a 5 percent tax. But deposits with a non-resident company or one that is not on the Special Registry, such as an offshore company, are subject to a 10 percent tax.
Meanwhile, deposits placed with a non-resident operator based in a tax haven or “non co-operative” country are subject to a 15 percent tax.
Among other details, the June 1 decree clarifies the circumstances under which registered operators can be subject to a lower 2.5 percent deposit tax because they have made “genuine investments” in Argentina.
To qualify for the lower deposit tax rate, companies must have invested AR$200m (approximately US$1.6m) as of January 1, 2021, employed at least 20 people and grown that headcount 20 percent.
As gambling regulation in Argentina is typically governed by local provincial governments, there are concerns that this decree oversteps the federal government’s power.
Online gambling is currently legal in 16 out of the 23 provinces plus the city of Buenos Aires (CABA), and is not subject to any kind of federal regulatory oversight.
“The competence to regulate gambling in Argentina corresponds to the provinces. But indirect taxation (such as this tax) is shared by federal and provincial jurisdictions. So, in my opinion there is no constitutional issue here,” said Dario Rajmilovich, an international tax and finance specialist who ran Deloitte’s Argentine tax practice.
“Notwithstanding, there is a different position so this decree can be challenged by the provinces considering that the gambling ruling includes the power of taxation.”
Further complications arise from how to realistically collect the federal deposit taxes.
According to Argentine gambling law expert Tomás García Botta, the tax law first passed in 2016 was targeted at foreign digital services such as Spotify and Netflix to tax them and federal taxes on gambling were included as a part of it. At the same time, however, the budget law also made online gambling part of the Argentine Criminal Code.
“When they created this tax, what they did was the same law that created a tax added this provision with respect to the Criminal Code, Section 301.
“So they made it a crime to offer gaming products without a licence. Basically they were taxing something that they had, at the same time, made illegal. So they were taxing the proceeds of an activity that was criminalised,” said García Botta of MF Estudio in Buenos Aires.
Additionally, the law from 2016 and the follow up in December 2020 put the onus on the payment processors to collect the tax.
With the adoption of Decree 293/2022 it is now the responsibility of the licensed operator to pay, unless the online gambling company is an unregistered operator, when that burden falls back on the payment intermediary.
“It makes this decree a bit more concerning ... because to the extent that the party that was responsible for paying the tax was the payment intermediary, and everyone knew that this was of no application at all,” García Botta said.
“Now it directly applies to the local licensed operators. So what will happen next is that the federal central authority will issue a general resolution stipulating the procedure for paying this tax.”
Industry sources are concerned that a layer of federal taxation could make it very unattractive for foreign companies to register and pay a 5 percent tax when they could instead be paying no taxes. Furthermore, it also could make it more attractive to players to play on unregistered sites, where collection of the deposit tax could be more complicated.