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The Colombian government’s plan to apply value-added tax (VAT) to online gambling threatens to make the sector “completely unviable”, according to a leading trade association representing local operators.
Although it has yet to introduce a formal legislative proposal in Congress, the government of President Gustavo Petro on Tuesday (September 3) discussed various details of an upcoming tax-reform plan with congressional budget committees.
Applying Colombia’s 19 percent VAT to online gambling and other digital services, such as Airbnb rentals, is a key plank of the plan, which aims to raise some 12 trillion pesos in additional revenue to fund a 2025 budget package.
In a statement published on X, industry association Fecoljuegos warned that the government’s proposal would threaten an estimated 150,000 jobs among Colombians who work for the country’s 15 licensed online gambling operators and the various companies that support them.
The tax initiative comes as Colombia’s licensed online platforms continue to face fierce competition from illegal operators that are not subject to any taxes, according to the Fecoljuegos statement, which was released after elements of the forthcoming tax-reform initiative were presented to a Senate committee.
“To apply new taxes to a sector that already faces high costs, that has survived despite the phenomenon of the illegal market, and which is subject to numerous taxes, makes the activity completely unviable,” warned the association, whose members include most of the 15 operators active in the Colombian market.
Fecoljuegos called on the government “to find formulas that allow the industry to be competitive, sustainable over time and totally viable, and to take measures to combat the asphyxiating phenomenon of illegality in gambling”.
The proposal to apply VAT to online gambling would be a direct reversal of a policy established under an earlier tax reform bill enacted in late 2016.
That legislation expressly exempted online gambling from VAT and was supported by the then government to attract licensees, when Colombia was establishing the first fully regulated market for online gambling in Latin America.
To take effect, the new tax reforms sought by Petro’s government would need to be approved by both chambers of the Congress of the Republic.
It is not the first time that a possible application of VAT to online gambling has been put on the table in Congress, with a similar initiative proposed three years ago under a former government, noted Juan Camilo Carrasco of Asensi Abogados in Bogotá.
“Fortunately, it was possible to demonstrate that it would not only destroy the sustainability of the industry, but also directly affect the revenues that are distributed to the health system through gaming duties,” Carrasco told Vixio GamblingCompliance.
Colombia’s online operators currently pay a 15 percent headline tax on revenue plus additional fees, amounting to an effective rate of around 20 percent, per Fecoljuegos.
The Colombian market was worth an estimated US$543m in total revenue in 2023, according to Vixio data and statistics released by regulator Coljuegos.
Licensed operators include Corredor Empresarial’s BetPlay, Rush Street Interactive’s Rushbet, Entain’s bwin, Playtech-partnered Wplay, Codere, Betsson and Stake.
