Peruvian gambling lawyers have sharply criticised a new legislative decree to apply a consumption tax on online gambling turnover, but only for licensed operators based outside the country.
Peru’s government published Legislative Decree No. 1644 on September 13, amending the country’s 2022 online gambling law and separate legislation governing a selective consumption tax that is applied to certain products.
The initial 2022 law stated that online gambling would be subject to the consumption tax, but did not specify at what rate or how the tax may be collected.
Under the new legislative decree, the consumption tax will be applied at a rate of 1 percent of turnover, or each bet placed. But the decree also specifies that it will apply only to the players of licensed online gambling platforms that are legally incorporated outside of Peru.
Those operators should act as the “collecting agents” for the consumption taxes owed by their players, while credit and debit card companies would fulfil the same role in the event of a failure by operators to do so.
The legislative decree also makes another tweak to Peru’s online gambling law to enable operators to offer bonuses to players, so long as they are redeemable without conditions.
Lima-based gambling lawyer Nicolás Samohod Rivarola said the decree drafted by the Ministry of Economy and Finance (MEF) had raised many questions, indicating a lack of coordination between that ministry and the specialist gambling regulator within the Ministry of Tourism and Foreign Commerce (MINCETUR).
Samohod told Vixio GamblingCompliance that the result is a consumption tax for online gambling that is “an unconstitutional tax from its very birth”.
“Unconstitutional because it is anti-technical and confiscatory, and with the aggravating circumstance that the law itself makes it discriminatory against the interests of non-domiciled foreign operators of sports betting and/or online gambling platforms,” said Samohod.
“As the MEF has designed, structured and drafted Legislative Decree No. 1644 … this regulation requires the customers of non-domiciled foreign operators to pay the tax directly; that is, the MEF is institutionalising an unconstitutional discrimination by not generating or producing the same obligation with respect to the customers or national operators, local and domiciled in the country.”
Carlos Fonseca Sarmiento, managing partner of Gaming Law SAC in Lima, echoed that the new decree contains “many errors” and noted how it follows a similar path to Peru’s initial 2022 online gambling law.
Before that legislation was later amended, a 12 percent tax on gross revenue would have been applied only to operators based in Peru and not to those headquartered outside the country who were equally eligible to apply for a licence.
“It appears as though the government wants to apply Murphy’s Law in its tax policy; it’s always easiest to do things in the most difficult way,” Fonseca told Latin American gambling industry news publication Yogonet.
Of the 60 licensed operators for sports betting and online gaming in Peru, Fonseca noted that only a handful have applied via international entities rather than through Peruvian companies or subsidiaries.
That suggests the “practical impact” of the new decree will be for those foreign-based operators to now incorporate themselves in Peru, to avoid a competitive disadvantage of their players being subject to the consumption tax.
Still, an association of Peruvian betting operators remains wary that the consumption tax may yet be applied to all operators and not only those headquartered outside Peru.
Although the legislative decree expressly applies the tax to the players of foreign-based licensees, the underlying consumption tax law still refers to online gambling and sports betting as activities that are subject to the tax in general, noted Gonzalo Rosell, president of industry association APADELA and CEO of La Tinka.
Rosell told Yogonet it was “essential” that the tax decree is rejected when it becomes subject to ratification by Peru’s Congress.
“They must correct the confiscatory nature of this new tax that is being applied to an industry already hit with a new specific tax of 12 percent on gross revenues after prize payouts,” Rosell told Yogonet.
The September 13 decree was published just as Peru is entering the home straight of implementing its licensing and regulatory regime for sports betting and online casino gaming in accordance with the 2022 legislation.
The chief gambling regulator within MINCETUR confirmed in mid-August that officials had concluded their process to review licence applications, starting a 90-day deadline for the 60 approved operators to formally identify their platform and game providers and receive technical approvals.
“The introduction of the new tax comes before the full entry into effect of the regulation when we can see the impact on the industry of the specific 12 percent tax and the overall tax contribution,” said Rosell. “It will only generate legal uncertainty, unsustainability for legal operators, and an incentive for the illegal market.”