Online GGR in Colombia falls 30% since gambling VAT introduction
The Colombian Federation of Gambling Entrepreneurs (Fecoljuegos) reports a significant decline in online gross gaming revenue (GGR) in Colombia, attributing a staggering 30% drop to the recent introduction of a value-added tax (VAT) specific to the gambling sector.
In February, the Colombian government enacted a 19% VAT on online betting deposits, a measure that Fecoljuegos vehemently criticized, labeling it “unsustainable and unfeasible” for the industry’s future viability.
Nearly two months following the tax implementation, Fecoljuegos has noted that revenues have plummeted by a third, underscoring the immediate and detrimental impact this new tax has had on gambling operators.
Despite proactive initiatives by some operators, such as Stake, which has attempted to mitigate customer attrition by offering players bonuses equivalent to the VAT, the overall outlook remains grim. Stake’s efforts demonstrate a commitment to retaining user engagement, but Fecoljuegos’ chief, Evert Montero, cautioned that this compensatory strategy is not a viable long-term solution.
“This approach has temporarily staved off a customer exodus, but it represents a financial strain that cannot be maintained indefinitely,” Montero stated in a recent interview with Portafolio. “If this tax policy persists, operators will face severe financial repercussions that jeopardize legitimate operations and resources earmarked for public health initiatives.”
Impact of VAT on Gambling Behavior in Colombia
Before the introduction of the VAT, estimates from Fecoljuegos indicated that the average Colombian gambler allocated between COP150,000 (£26.80/€31.25/$34.17) and COP250,000 to gambling activities each month.
However, the federation reported that some platforms experienced a shocking 50% drop in key performance metrics, including both deposits and average deposit amounts per player within just days of the VAT’s establishment.
The VAT calculation means that when a player deposits $100, the actual available amount for gambling is reduced to approximately $84 after tax considerations, fundamentally altering their budget and gaming capability.
“This immediate impact on user spending capacity has led to a substantial decline in deposits,” Montero explained. “Operators have been forced to adopt loyalty strategies quickly, yet this situation highlights the considerable risks the tax introduces to the overall industry dynamics.”
Rising Concerns Over Illegal Gambling
Upon the announcement of the VAT, Fecoljuegos issued a press release expressing apprehensions that licensed operators might exit the market, inadvertently increasing the allure of unregulated gambling entities. The federation remains steadfast in its view that this is a pressing concern, noting, “The implementation of VAT has rendered the formal gaming experience more costly, prompting players to explore unregulated options that lack taxes and oversight.”
Furthermore, Fecoljuegos emphasized the potential repercussions of the gambling VAT on Colombia’s healthcare system, which significantly benefits from taxation on gambling operations—providing an estimated COP990 billion in 2024.
“At Fecoljuegos, we firmly advocate for tax policy discussions to be grounded in technical analysis, characterized by transparency, and conducted within a framework that respects productive sectors fulfilling their obligations,” Montero asserted, underscoring the need for balanced and informed tax regulations that consider the industry’s unique challenges.
