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The Chilean Chamber of Deputies' Economy Commission, which has for the past month been deep in negotiations to settle the final text of an online gambling bill, has agreed on a headline tax rate of 20 percent of gross gambling revenue (GGR) for online operators.
But the overall effective tax rate will be more like 38 percent of GGR, as that rate is exclusive of value added tax (VAT) that, to the dismay of online operators, will also be applied under the pending bill.
The tax breakdown, according to the newly edited Article 46 of the bill, will be 19 percent VAT applied to GGR. The remaining 81 percent of revenue will be taxed an additional 20 percent, plus 1 percent for responsible gambling and another 2 percent for sports betting.
The Economy Commission is in the process of approving the final text of the bill that it has passed in principle on an article-by-article basis. The body settled on the tax rate this week after receiving further testimony from the chief of Chile's Casino Gaming Superintendence, Vivien Villagrán.
The bill will next be passed to the Chilean Senate.
Villagrán told local Spanish language outlet Diario Financiero weeks ago that the proposed rates in the pending bill represent “a high tax, but it was set this way because there are a series of negative externalities from which we seek to protect ourselves”.
She continued that “whether or not an industry is attractive is combined into many elements, not only the tax rate; you have to have a panoramic vision”.
Carlos Baeza, a gambling lawyer who works with Chile-facing offshore operators Latamwin, Coolbet, Betsson and Betano, and who also has testified before the commission, disagrees that the industry would remain viable under a high tax rate.
“This addition of VAT is the hardest thing, because it raises the tax burden,” he said.
“When this industry is highly taxed, the effects are well known. The first one is very low channelling. The effect between tax burden and channeling is inversely proportional. The higher the tax burden, the lower the channeling. In the end, the news is really bad for the government and for Chile as a whole, because it does not increase tax revenue.
“Secondly, because there is a great lack of protection for users, because all those who do not switch to the regulated market are ultimately unprotected.”
Baeza said that operators plan to fight the proposed tax rate when the bill progresses to the Senate.
Brazilian operators are pitching a similar argument in their own lobbying battle over sports-betting regulation, in the face of an overall tax rate that could be closer to 30 percent. They, too, cite channelisation rates as a chief concern.
In other news, also like Brazil, Chile this week also announced its own investigation into potential match-fixing.
The public ministry of Chile will be looking into crimes of fraud as alleged by athletes such as Cobreloa footballer David Escalante, who triggered the investigation by saying before the Economy Commission that his teammates were “lost in betting” and that it affected the outcome of matches.
