Colombian Gambling Revenue Decline Sparks Concerns Over VAT Impact
The Colombian Federation of Gambling Entrepreneurs, known as Fecoljuegos, has recently revealed a worrying statistic: since the implementation of a new value-added tax (VAT), online gross gaming revenue in Colombia has plummeted by 30%.
This change came into effect in February when the Colombian government introduced a 19% VAT on online betting deposits. Fecoljuegos voiced its concerns at that time, labeling the tax as “unsustainable and unfeasible” for the gambling industry in Colombia.
Now, nearly two months post-implementation, the ramifications of this tax are becoming apparent, with revenues suffering a sharp decline. Operators are grappling with the immediate fallout, despite attempts to mitigate the impact by offering bonuses equivalent to the VAT amount. Companies like Stake have tried to cushion the blow by returning the 19% tax to their players, yet Fecoljuegos’ chief, Evert Montero, suggested that this tactic may not be viable for the long haul.
In a recent conversation with Portafolio, Montero remarked, “While this approach may have staved off significant customer losses in the short term, it imposes a financial strain that can’t last.” He further warned that if the current tax regime persists, the financial viability of operators will be jeopardized, potentially compromising their operations and the contributions they make to public health funding.
Shifts in Gambling Behavior Due to VAT
Fecoljuegos had previously estimated that an average gambler would spend between COP150,000 and COP250,000 monthly. However, following the VAT’s introduction, some gaming platforms have reported declines in user engagement metrics—drops of nearly 50% in areas like deposits and average player spending were noted within days of the tax being enacted. This is largely attributable to the tax structure, which effectively decreases the amount available for betting. To illustrate, a deposit of $100 would translate to only around $84 in betting funds due to the tax.
“The immediate consequence of this VAT is a notable reduction in players’ gaming power, leading to a marked decrease in deposits,” Montero stated. “Operators are compelled to react swiftly with loyalty initiatives, yet the looming threat of a heavy tax burden looms large over the industry’s stability and user engagement.”
Escalating Concerns About Illegal Gambling
Fecoljuegos has consistently expressed apprehension that the VAT could result in licensed operators withdrawing from the market, consequently making illegal gambling options more appealing. As they articulated in a press release upon the tax’s introduction, the increased costs associated with regulated gambling could drive players towards unregulated alternatives where oversight and taxation are absent.
Moreover, the federation has drawn attention to the adverse effects this VAT might have on Colombia’s healthcare system, which significantly benefits from gambling-related taxes, potentially amounting to COP990 billion in 2024. “At Fecoljuegos, we strongly urge that any tax discussions be grounded in technical expertise, transparency, and a commitment to respecting productive sectors complying with regulations,” Montero emphasized.
As the Colombian gambling landscape adjusts to these new realities, the long-term implications of the VAT policy will require careful consideration to ensure the sustainability of both licensed operators and the broader public systems that rely on their contributions.