The Colombian Gaming and Betting Trade Association (Fecoljuegos) has harshly criticized the government for imposing a 19% Value Added Tax (VAT) on gambling, warning that this move could lead to operators exiting the market.
The Colombian government issued Decree No. 0175, temporarily removing the VAT exemption for online gambling operators under Article 420 of the national tax code.
Instead, a 19% VAT will be imposed on player deposits until December 31. Previously, the government declared a state of emergency to help fund its efforts to address ongoing unrest in the Catatumbo region. The insurgent violence has displaced about 30,000 Colombians from the area.
However, Fecoljuegos disagrees with the VAT and warns that it is "unsustainable and unfeasible" for the industry.
The agency has called on the Colombian government to reconsider this tax as it "jeopardizes the stability of the industry."
Lack of Transition Period for Colombian Operators
Operators have only five business days to adapt to the new tax law. During this period, operators must modify their gaming systems to collect taxes from player deposits. These modified systems then need to be recertified. Operators who fail to do so will face the risk of violating Colombian gambling laws.
The gambling regulatory body Coljuegos has only five accredited laboratories for certification, making the certification process particularly challenging. These laboratories also collaborate with other countries in the Latin American region, which could further delay certifications in Colombia.
This is a major concern for Fecoljuegos, as the company fears that the 16 operators currently licensed to provide online gambling services in Colombia might partially suspend their operations or even completely exit the market.
Fecoljuegos explained in a statement: "This decision was made without considering how the industry operates or the technical challenges involved."
"Without a transition period, operators will face significant difficulties in complying with the new requirements. The industry needs to adjust its collection, billing, and tax reporting systems, which requires investment and coordination with DIAN (National Directorate of Taxes and Customs)."
Impact on Black Market Activities
The potential exit of operators from Colombia could negatively impact the country's health sector, which benefits significantly from the financial contributions of the gambling industry.
Local lawyer Juan Camilo Carrasco from Asensi Abogados previously told iGB that this tax could drive players and operators into the black market, thereby harming the health sector.
"Players will use VPNs and then play many well-known brands on the black market," Carrasco said. "We thought the regulators would say, 'Hey, this endangers our revenue, which was intended for the healthcare system from gambling taxes.' But they have not made any statements yet."
Fecoljuegos also expressed similar concerns, warning that a large number of players would move to black market sites that "do not meet safety standards or contribute to the nation."
Fecoljuegos Calls for Balance
Fecoljuegos believes that the government must reconsider its stance and work with the industry to ensure regulatory balance and help maintain a competitive industry.
Fecoljuegos added: "A balance must be found between taxation and maintaining an industry that creates jobs, innovation, and vital resources for the country."
"We urge the government to consider a transition to ensure the stability of the industry and avoid negative economic impacts."
