The so-called "financing law," strongly resisted by the gaming sector, could flounder in Congress after President Gustavo Petro asked for the resignation of the Minister of Finance, Ricardo Bonilla.
Colombia.- The gaming sector closely follows the scandal unleashed in the Colombian government after President Gustavo Petro asked for the resignation of Minister of Finance, Ricardo Bonilla for his role in the apparent vote-buying scheme in the Congress of the Republic.
The departure of the senior official could complicate the approval of the tax reform or financing law project, driven by the Executive through the Ministry of Finance, which seeks, among other points, to increase taxes on betting houses.
The departure of Minister Bonilla has only deepened the crisis that the reform is going through. The lack of consensus in Congress is delaying the approval of the financing law that the president wants to sign before the end of the year. The issue is that the ordinary sessions of the Congress of the Republic end on December 16; but in case a good term is not reached, the Executive would have to convene extraordinary sessions, especially, due to the lack of unanimity among the economic committees of the Senate and the Chamber, according to an analysis published by the specialized newspaper La República.
The lack of consensus is the main reason why the financing law might not become a decree. Fundamentally, there is a noticeable lack of clear agreement among the proponents of the tax reform, and that is why it has not been filed.
Moreover, President Gustavo Petro has been critical of the lack of progress with the Financing Law. The same head of state wrote on social networks that: "Paying debt with revenues and reducing it now implies the Financing Law. The parliamentarians who follow Cepeda are leading us straight to a cessation of payments," and he referred to the opposition of the president of the Senate to the reform. The initiative seeks to raise COP12 billion (USD2.000m).
It is worth remembering that one of the novelties of the bill that alerted the gaming sector was the proposal to raise taxes on online gambling platforms.
The project proposes a 19 percent VAT for games of chance and gambling operated exclusively online. Today, these platforms do not pay this tax and would be on the same level as localized games (casinos).
In the justifications of the project, the government says: "Gambling can be considered luxury goods", and adds: "The current VAT exclusion for online gambling creates a distortion in the market. This is because these digital services enjoy preferential treatment compared to physical establishments that offer gambling and are already taxed with this tax. This difference in tax burden can lead to unfair competition and market distortions, where consumers might opt for online platforms to avoid paying taxes, negatively affecting physical operators who comply with their fiscal obligations."
Furthermore, the document explains that "by applying VAT to online platforms market conditions are equalized, promoting fair and balanced competition among all operators, regardless of the channel through which they offer their services."
According to the exposition of reasons of the Ministry of Finance, "taxing online gambling would generate tax revenues of the order of COP2.1 billion in 2025 and would not have inflationary impacts on the economy."
Another article of the document presented by the Ministry of Finance on September 10, would modify article 317 of the Tax Statute, which regulates occasional gains from lotteries, raffles, bets, and similar.
In that sense, it seeks to set "a 25 percent rate of tax on occasional gains from lotteries, raffles, bets, and similar". According to the current Tax Statute, this tax is set at 20 percent.
Recently, the now former Minister Bonilla, had lashed out at the gaming sector that opposes the reform. "It is illogical that the platforms for games of chance and gambling, which have grown exponentially, are not paying taxes like physical bets. Only in 2024, by the month of August, they had already invoiced COP25 billion and could close the year at COP45 billion. This is a real and significant business," he argued.
According to Bonilla, online betting houses only pay income tax. "They do not pay VAT, they are collectors. The discussion is whether the bettors who use platforms should pay VAT, just as it happens with physical bets. One must ask: what lobby are these houses doing in Congress to avoid this tax being charged?" he questioned.
Asojuegos and Fecoljuegos, unions that group the main companies of the gaming sector in Colombia, categorically rejected the insinuations made by Bonilla about alleged pressures on the Congress of the Republic during the discussion of the financing law project.
"Our purpose has been to inform transparently and substantively about the serious economic and social impacts that these measures would generate in a formal and regulated industry. If this is considered pressure, then we are seeing our right to participate democratically and to expose the disastrous consequences that this change of rules would bring, not only for our sector but also for the contributions to the health of Colombians," affirmed Juan Carlos Restrepo, president of Asojuegos.
For his part, Evert Montero, president of Fecoljuegos, highlighted the efforts made by the unions to clarify the functioning of the activity: "We have carried out a series of actions before the National Government, including meetings with the DIAN and with the Third Committee of the Chamber of Representatives, to explain in detail the mathematical and economic model of the sector. Our goal has been to correct erroneous figures that do not reflect the reality of the industry and contribute to informed decision-making."
For Restrepo and Montero, the lack of openness and understanding by some government entities is concerning and regrettable. "Despite our efforts, there is an evident lack of knowledge about the activity, which has prevented the establishment of working tables where we can demonstrate, in greater depth, the impact that these tax burdens would have on the sector," Montero stated.
According to the representatives of these two unions, there are three concerns about the reform being proposed. The first is about the tax on the online gaming sector with VAT, the second is the increase in the presumptive VAT rate in localized games, and the differential rate of occasional gain of 25 percent.
"The proposal to apply VAT to the online gaming segment would severely affect its competitiveness against platforms operating outside the Colombian jurisdiction. While globally players receive a return between 90 and 96 percent, in the country this range would decrease to levels between 72 and 78 percent, encouraging migration to foreign platforms. This segment, regulated since 2016, has contributed more than COP 1.2bn (USD 272m) to the health system and has energized industries such as sports and media," Evert Montero pointed out.
He also highlighted that doubling the presumptive VAT rate from 20 UVT to 40 UVT would represent a setback in the formalization of the sector. "In the last five years, about 40,000 machines that operated illegally have been legalized. This tax change would jeopardize these achievements."
