Mexican Gaming Association Again Lobbies For Tax Reform

August 26, 2022
Back
The Association of Licensees, Operators and Providers of the Entertainment and Gambling Industry in Mexico (AIEJA) has requested that the federal government restructure and simplify taxes for casinos.

Body

The Association of Licensees, Operators and Providers of the Entertainment and Gambling Industry in Mexico (AIEJA) has requested that the federal government restructure and simplify taxes for casinos.

The AIEJA, which counts Merkur, Zitro and several local entities as members, is a trade association that represents gambling operators in Mexico. Its proposal is centred on creating a “single and proportional tax, which is fair for casinos”.

The revenue of the single federal tax, according to the AIEJA plan, would then be distributed to municipalities. The group first called for changes at the end of May in response to a new fee that was levied in Nuevo Leon for so-called administrative facilities.

This week, Miguel Angel Ochoa, the president of AIEJA, said that the organisation believes that land-based casinos pay a disproportionate and unfair amount of taxes, which is therefore detrimental to their business.

“The goal is to better control income and make payments by casinos more flexible, since the high tax cost drives clandestine gambling and makes potential investors not motivated to open new gambling rooms,” said Ochoa.

In Mexico, gambling is a matter of federal regulation and it is the federal Congress that is responsible for issuing laws regarding taxes in general. However, the 32 different states of Mexico are entitled to issue taxes pertaining to commerce within their municipalities.

According to Alfredo Lazcano, a gaming lawyer and chairman of law firm Lazcano Sámano: “In order to get money from the casinos and from the gaming industry, they sometimes seek ways to impose taxes that legally are not defined as gaming taxes, but at the end of the day, end up taxing game businesses.”

Examples include the entrance fee that is sometimes charged to players to enter a premises, alcohol licences and taxes on the number of slot machines a site. These state-by-state taxes make it difficult for operators to establish cohesive business planes, among other obstacles, the AIEJA said.

“Some states are actually very aggressive or sometimes they are excessive, or they just don't understand, for example, the gaming industry or how their income is generated. So there can be cases where they [the states] can impose a tax that are just impossible to pay. That is why it will be very important, if AIEJA or the industry in general is able to convince the government to establish this. And I think that the idea is good,” Lazcano told VIXIO.

He also said the gambling industry, by far, contributes the most to the coffers of the Ministry of the Interior (SEGOB), and although the Ministry of the Treasury keeps track of the money, it is not always clear where the money goes within SEGOB.

For example, Mexican casinos and online gambling operators pay a “participation” tax, also known as a SEGOB fee. According to Article 5 of the gaming law, the revenue collected from SEGOB fees should go to the “the improvement of the Social Prevention [penitentiaries] and Assistance [health]”.

But Lazcano said this is not done in practice. “SEGOB fees do not necessarily reach the Mexican prison or health systems, at least not directly. Ultimately, the Ministry of Treasury — and not SEGOB — is the one who determines the destination of the resources coming from the SEGOB fees.”

It would be more practical, he reasoned, to have the single tax that the AIEJA proposes, which could be effectively distributed within the federal and municipal governments and audited.

As for whether that is likely in the near future, Lazcano was pessimistic: “I don't really see that this is very viable, but let's see.”

Our premium content is available to users of our services.

To view articles, please Log-in to your account, or sign up today for full access:

Opt in to hear about webinars, events, industry and product news

To find out more about Vixio, contact us today
No items found.