Concerns Rise Over Peru’s New Betting Tax and Its Impact on the Market
A mere month has elapsed since Peru imposed a 1% consumption tax on bets, prompting alarm among industry insiders about the sustainability of the regulated gambling market. Experts are raising flags that the future of licensed gambling in Peru could be under serious threat if this tax remains in effect.
Last year, the introduction of this selective consumption tax (ISC) jolted the emerging licensed gambling sector. Initially proposed but later removed from legislation in July 2021, the tax resurfaced in December and was officially enacted in January with a phased structure—an initial 0.3% tax rate that escalates to 1% by July 1.
Local legal authority Nicolás Samohod Rivarola, co-founder of Samohod Lawyers, describes the potential ramifications of this tax as “catastrophic.” He emphasizes that its continuation could jeopardize the very existence of the market.
Operators Caught in a Difficult Dilemma
Gonzalo Perez, CEO of the leading operator Apuesta Total, has expressed concerns that the new consumption tax, combined with an existing 12% tax on gross gaming revenue (GGR), is effectively doubling the tax burden on operators. In neighboring Colombia, similar tax increases have led operators to offer bonuses to players, but this strategy has considerably hampered profitability, resulting in companies like Codere Online drastically scaling back operations.
Peruvian operators now face a tough choice: either absorb the tax to maintain competitiveness or pass it on to customers, which risks pushing them toward unregulated alternatives. Rivarola warns that passing on costs could diminish player bet amounts, making the licensed options less attractive and creating a perilous scenario for the regulated market.
“If operators burden themselves with the tax, their profit margins will shrink, dissuading both investment and sustainable business models,” he elaborates.
Legal Challenges and Constitutional Concerns
The government’s aims for revenue generation could backfire due to this excessive tax, with experts like Rivarola asserting that only the illegal market stands to gain. He points to the potential unconstitutionality of the tax, arguing that it is excessively punitive and misaligned with the intentions of a legally operated market.
“Repeal of this misguided tax is essential for the survival of our industry,” Rivarola insists. He suggests that if the tax remains, its impact on net winnings and GGR should be carefully evaluated.
Setbacks to Peru’s Gambling Aspirations
A significant source of frustration for operators lies in the fact that prior to this tax, there was a sense of optimism about Peru’s regulated market, which had positioned itself favorably compared to other Latin American jurisdictions. Analysts believed it was on track to emerge as a regional leader.
However, this sense of potential has now been overshadowed by the weight of the new tax, which Rivarola believes could undermine years of progress towards establishing a regulated online gambling landscape.
He attributes the tax’s emergence to governmental policies while commending the Ministry of Foreign Trade and Tourism (Mincetur) for its efforts in developing the regulatory framework.
“Peru has one of the finest regulatory bodies in the world,” Rivarola notes, expressing that the licensed sector must continue to advocate against such hindrances to safeguard investments and jobs.
“Operators in this space are visionary entrepreneurs who strive for compliance and stability in a highly regulated environment. We must not squander their investments and disregard the employment of countless individuals,” he concludes.