Peru’s Licensed Gambling Market at Risk as New Consumption Tax Sparks Industry Alarm

Over a month has passed since Peru began imposing a 1% selective consumption tax (ISC) on all bets, and industry stakeholders are warning that the future of the country’s regulated online gambling market could be in jeopardy if the measure is not repealed.

The tax, reintroduced last year after having been removed from proposed legislation in July 2021, was approved in mid-December. The government confirmed it would apply from January, starting at a 0.3% rate before increasing to the full 1% from 1 July onwards.

Nicolás Samohod Rivarola, founding partner of the Lima-based firm Samohod Lawyers, warns that the ISC’s impact on the licensed sector could be “catastrophic.”

“We are talking about the future, about the very permanence of the activity in the market,” Rivarola told iGB. “That is how apocalyptic the impact of the ISC would be on the Peruvian market if it remains as it is currently.”

According to Gonzalo Perez, CEO of market leader Apuesta Total, the new ISC — when combined with the existing 12% tax on gross gaming revenue (GGR) — will effectively double the overall tax burden on operators.

In Colombia, operators faced with a temporary 19% value-added tax (VAT) have tried to offset the blow by issuing player bonuses, a move that severely hit profitability. Codere Online, for example, scaled back its operations there “to the bare minimum.” Peru’s operators now face a similar dilemma — either absorb the cost themselves and risk unsustainable margins or pass it on to customers, potentially losing market share.

Rivarola warns that passing the tax burden to players will likely reduce bet amounts, making the proposition “unacceptable for the player” and increasing “the temptation for the end consumer to direct their gaze to unregulated gambling scenarios,” which he says is “very risky and highly contingent.”

On the other hand, if operators shoulder the cost directly, “the margin of the business will be so small that investment will be discouraged as well as the economic-financial planning of any business model.”

The consequences could extend beyond the industry’s bottom line. Rivarola argues the tax could undermine the government’s revenue objectives by driving activity toward the illegal market. “There is no other way or alternative to save our market than to repeal this disastrous tax,” he stated.

He also raises the possibility that the ISC may be unconstitutional. “In my opinion, the ISC for sports betting and/or remote gaming in Peru, as structured by the Congress of the Republic and by the Ministry of Economy and Finance, constitutes an unconstitutional tax because it is anti-technical and confiscatory,” Rivarola said. If the government insists on keeping the tax, he believes it should at least measure its impact based on operator net win or GGR.

Peru’s licensed gambling market, which came under regulation only last year, had been seen as a model for the region, boasting a robust framework compared to many neighboring Latin American markets. The country was expected to become a top-three player in the region, but the ISC has clouded that outlook.

Rivarola warns that the policy could “destroy” decades of work leading to the 2024 regulated online market. He places responsibility squarely on the government but praises the Ministry of Foreign Trade and Tourism (Mincetur) for its efforts in building the regulatory framework. “We have one of the best regulatory authorities in the world,” he said.

He believes the licensed sector must now “fight to survive, to protect its investments and companies, to preserve the jobs of its thousands of workers.” Calling operators “heroic businessmen (national and foreign)” who persist “despite obstacles and adversities” and thrive in a “highly regulated and supervised market,” Rivarola made an appeal to authorities: “Please do not abuse them, do not destroy their investments, do not leave their workers on the street without formal employment.”

By fLEXI tEAM