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Peru’s president has partly vetoed a bill that would reduce the impact of a controversial consumption tax applied to online gambling.
President Dina Boluarte on Tuesday (July 15) signed a gambling reform bill that was approved by Congress in June, but only specific articles granting new enforcement powers to regulators over illegal gaming and not further provisions addressing the consumption tax.
Under a pair of recent decrees enacted by Peru’s Ministry of Economy, Peruvian online gambling operators are required to pay a consumption tax of 1 percent on the value of every bet, in addition to a separate tax of 12 percent of gross gaming revenue (GGR).
As approved by Congress, Bill 9645/2024 would apply the consumption tax to GGR for sports betting and online gaming, in line with how the tax is levied for land-based casinos.
In her veto message, Boluarte wrote that signing the bill would lower the effective rate of the consumption tax by 95 percent and deny the government flexibility to decide how it should be applied.
Citing statistics gathered by Peru’s Ministry of Health, she described online gambling as a “severe threat to public health, especially for young people” and said the consumption tax was specifically intended to “discourage participation in high-risk health activities by increasing their cost”.
“Taxing consumption through a sales tax is not only a prudent fiscal policy, but also a necessary health intervention to mitigate harm, finance care and protect the most vulnerable populations,” Boluarte wrote.
Peruvian operators that became licensed in the country last year have expressed dismay at the consumption tax, both due to its fiscal impact and the legal uncertainty it has created.
The bill was approved unanimously by Congress in June and lawmakers still have the option of overriding the President’s veto.
One Peruvian gaming lawyer questioned the reasoning of the President and called on Congress to enact the tax reform in order to avoid “fuelling the illegal market”.
“Instead of strengthening regulation and encouraging compliance, this veto sends a message that over-taxation is more important than sound policy,” Lima-based lawyer Carlos Fonseca Sarmiento wrote on LinkedIn.
Fonseca said the bill was also designed to address legal confusion as to whether the consumption tax applies exclusively to foreign-headquartered operators, or to all operators.
“A careful reading of the President’s veto message reveals how poorly informed decisions, made without rigorous research, can unintentionally produce the very outcomes they claim to prevent: a larger black market, greater exposure of players to unregulated sites and reduced tax revenues,” Fonseca said.
