Colombian gambling trade body criticises new VAT
The Colombian Federation of Gambling Entrepreneurs (Fecoljuegos) has expressed grave concerns over the recent imposition of a 19% value-added tax (VAT) on betting, cautioning that this fiscal policy could incentivize operators to exit the market entirely.
On February 14, 2023, the Colombian government issued Decree No. 0175, effectively revoking the VAT exemption that online gambling operators previously enjoyed under Article 420 of the country’s tax code. The new regulation mandates that a 19% VAT will apply to player deposits, a change that will remain in effect until December 31. This action follows the government’s declaration of a state of emergency aimed at funding initiatives to address ongoing socio-political unrest in the Catatumbo region, which has forcibly displaced approximately 30,000 Colombians.
In response to this taxing overhaul, Fecoljuegos stated on February 19 that the VAT implementation is “unsustainable and unfeasible” for the gambling sector, which is dependent on a stable regulatory environment.
Insufficient Transition Period for Online Gambling Operators
Operators have been allocated a mere five business days to adapt their operational infrastructure to collect the newly imposed tax on player deposits. This short timeline necessitates significant adjustments to their gaming systems, followed by a recertification process. Failure to comply exposes operators to potential violations of Colombian gambling laws, creating a precarious situation for their continued operations.
Compounding the challenges is the fact that Colombia’s gambling regulator, Coljuegos, has only five accredited laboratories available to conduct these required certifications. These laboratories also provide services to other jurisdictions across Latin America, potentially exacerbating delays within Colombia’s regulatory framework.
Fecoljuegos has underscored that the current landscape could force the 16 licensed operators to curtail their online gambling activities or withdraw from the Colombian market altogether. The organization issued a statement asserting, “A decision has been made without considering the operational realities of the sector or the technical challenges associated with implementing such a tax.”
“Without a transition period, operators will struggle to meet new requirements, as significant investments and coordination with the DIAN (National Directorate of Taxes and Customs) are essential for effective implementation of adjusted collection, billing, and tax reporting systems,” the federation warned.
Potential Surge in Black Market Activity
The exit of licensed operators from the Colombian market could have detrimental effects on the public health sector, which relies heavily on the financial contributions made by the regulated gambling industry.
Juan Camilo Carrasco, a local attorney from Asensi Abogados, previously highlighted to iGB that the tax policy might inadvertently drive both players and operators toward unregulated black market alternatives, jeopardizing health sector funding. “Players may resort to using VPNs to access numerous prominent black market brands,” Carrasco noted.
“We expected the regulatory body to address how this move could jeopardize revenue generation and the anticipated tax income that supports the health system, yet no such acknowledgment has been made,” he commented.
Supporting these concerns, Fecoljuegos warned of a likely exodus of players to unregulated platforms, which not only disregard security protocols but also fail to contribute to state revenue.
Fecoljuegos Advocates for Industry Collaboration
Fecoljuegos is calling for a reassessment of the government’s approach, urging collaboration with industry stakeholders to create a regulatory framework that preserves the competitive integrity of the sector.
“It is crucial to strike a balance between tax collection efforts and the maintenance of an industry that creates jobs, fosters innovation, and generates vital resources for the state,” Fecoljuegos emphasized.
The federation concluded by urging the government to consider a transitional period that ensures sector stability, ultimately mitigating potential negative repercussions on the broader economy.
