For licensed gambling operators in Colombia, the nearly year-long high tax rate "tightening spell" is expected to be lifted at the end of the year. Congress recently voted down the "Financing Bill" aimed at making the 19% gambling VAT permanent, meaning this temporary tax is likely to automatically expire after December 31, providing a breather for the local gambling market.
Congressional vote is decisive, government faces huge fiscal shortfall
This issue dates back to February this year, when the Colombian government temporarily levied a 19% VAT on player deposits to raise funds to quell riots in the Cartagena region. Unexpectedly, the Senate's Fourth Committee voted 9 to 4 to reject the "Financing Bill" that sought to make this tax permanent. This is not just a change in tax rates; the bill also planned to raise the capital gains tax rate for gambling and lotteries from 20% to 30%, all of which are now off the table. The Minister of Finance was not pleased, calling the decision "purely political manipulation, and detached from the country's financial and social reality." It is worth noting that the government had previously approved a budget of 546.9 trillion pesos (about 143.9 billion USD), and now with the Financing Bill rejected, it's like suddenly having a huge hole in the budget.
High tax rate side effects: An unexpected victory against illegal gambling
The industry has been jubilant about the voting results. As early as when the VAT was levied, the Colombian Gambling Entrepreneurs Association warned that a 19% tax rate was "unsustainable and unfeasible," and might force licensed companies out of the market, inadvertently giving illegal operators a loophole. Data from early April this year showed that the VAT caused a 30% drop in total online gambling revenue, with some companies' key figures, such as player deposits and average deposit amounts, nearly halved. Operators tried everything, such as offering extra bonuses to help players cope with the pressure. The Association also pointed out that gambling tax revenue is crucial for Colombia's healthcare system, with contributions expected to reach 990 billion pesos in 2024. From this perspective, canceling the high tax rate is also necessary to maintain a healthy legal market and squeeze out the black market. For more global regulatory and market balance cases, follow updates on the PASA official website.
Operator strategic divergence: Some retreat, some stand firm
Facing previous tax pressures, different operators reacted differently. Codere Online explicitly stated in a financial conference call that the Colombian market is no longer within its short-term strategy, with its CEO expressing withdrawal intentions as early as the second quarter. On the other hand, Rush Street Interactive's CEO Richard Schwartz seemed more confident, always expecting the tax to be abolished and believing that the company's strong operational performance in Colombia will lead to significant growth once taxes return to normal. He also added that he still believes Congress will not approve the tax proposals targeting online gambling in the president's proposed 2026 tax reform. It seems that this tax battle is far from over.
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