Colombia’s online gambling sector faces a significant downturn as new tax measures take effect, reshaping the industry landscape and raising concerns about future viability.
Key Takeaways:
- Online gross gaming revenue in Colombia has fallen 30% since VAT introduction
- Industry body warns of unsustainable operator strategies and potential market exit
- Fears grow over the rise of illegal gambling due to increased costs for players
VAT Impact on Colombian Online Gambling
The Colombian online gambling market is experiencing a substantial decline following the implementation of a 19% value-added tax (VAT) on betting deposits. According to the Colombian Federation of Gambling Entrepreneurs (Fecoljuegos), the sector has seen a 30% drop in gross gaming revenue (GGR) since the tax came into effect in February.
Fecoljuegos chief Evert Montero highlighted the severity of the situation in a recent interview with Portafolio. He explained, ‘This strategy has avoided an immediate loss of customers, but it represents an economic effort that cannot be sustained over time.’
Operator Responses and Market Challenges
Some operators, like Stake, have attempted to mitigate the impact by crediting players with VAT-equivalent bonuses. However, Montero warns that such strategies are not viable long-term solutions. The industry body reported that some platforms experienced declines of nearly 50% in key metrics such as deposits and average deposit amounts per player shortly after the VAT’s introduction.
The calculation process for the tax means that a $100 deposit leaves players with approximately $84 to wager. Montero noted, ‘This reduction immediately affected users’ gaming capacity, generating a significant drop in deposits.’
Potential Consequences for the Industry
Fecoljuegos has expressed concerns about the potential consequences of the new tax burden. These include:
1. Licensed operators potentially exiting the market
2. Increased attractiveness of illegal gambling operations
3. Negative impact on Colombia’s healthcare system, which benefits from gambling taxes
‘The implementation of VAT has made the gaming experience in the formal market more expensive, creating an incentive for players to seek unregulated alternatives, where no taxes or controls are applied,’ the organization stated.
Call for Informed Policy Decisions
Fecoljuegos is advocating for a more measured approach to taxation in the gambling sector. Montero emphasized, ‘At Fecoljuegos, we firmly call for any debate on tax matters to be based on technical criteria, with transparency, and within a framework of respect for productive sectors that comply with their obligations.’
As the Colombian online gambling industry grapples with these challenges, stakeholders are closely monitoring the situation to assess the long-term implications for the market and its participants.
