Colombia lawmakers reject new tax on online gambling

The Colombian government’s plans to introduce a 19% VAT on online gambling platforms have been cast into uncertainty following the rejection of the broader budget financing proposal by Congress.

The tax reform was a key element of the country’s proposed 2025 General Budget, which aimed to raise COP9.8tn (around $2bn) in order to bridge fiscal gaps while addressing perceived inequities in the taxation of physical and digital betting activities.

The change sought to eliminate an existing VAT exemption for online gambling and betting platforms. The Ministry of Finance argued that this would “level the playing field” between online and physical gambling operations, which are currently subject to VAT.

Former Finance Minister Ricardo Bonilla underscored the rapid growth of the online gambling sector, which saw turnover increase from COP13bn to COP32bn in just three years.

Bonilla criticised the disparity in tax obligations, pointing out that while casinos and physical betting shops pay VAT, online platforms do not. He argued that taxing online betting would generate an estimated COP2bn annually, a crucial revenue stream for the government.

Advocates for the measure contended that the tax would not burden household budgets, as it targeted leisure activities typically undertaken by those with disposable income.

The proposed tax reform was effectively derailed when congress rejected the broader budget bill during a contentious session on 11 December.

Media outlet El Colombiano reported that lawmakers questioned the need for additional revenue generation, given the existence of unexecuted funds amounting to COP92bn.

The decision to shelve the tax reform leaves the government’s fiscal strategy in limbo. Finance Minister Diego Guevara had defended the proposal, emphasising its potential to fund regional investments and address Colombia’s growing budgetary needs.

Concerns raised about industry impact

Despite the projected revenue, the proposed tax faced significant opposition during legislative debates. Critics, including some congressmen, warned that imposing VAT on online betting could drive consumers toward illegal platforms, undermining legitimate operators.

Concerns were also raised about the competitive pressures it might place on online platforms compared to their physical counterparts.

While online betting accounts for 47% of the industry’s tax revenue, it currently remains exempt from VAT, unlike physical casinos and bingo halls, which contribute 33%.

Opponents of the measure argued that taxing bettors could disrupt this balance and harm an industry that has shown significant growth and economic contributions.

Critics also objected to elements of the reform unrelated to gambling, such as the proposed elimination of the simple taxation regime, which they viewed as detrimental to business formalisation.

However, with the reform now off the table, the government must explore alternative revenue mechanisms or risk widening the fiscal deficit.

The rejection of the budget and its associated tax reform creates uncertainty for Colombia’s online gambling industry. While the absence of a VAT on online betting provides short-term relief, the issue is likely to resurface as the government seeks other ways to balance its budget.

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