On 14 February, the Colombian government issued Decree No 0175, temporarily eliminating the VAT exemption on online gambling operators in Article 420 of the country’s tax code.

Instead a 19% VAT will be placed on player deposits will be in place until 31 December. This follows the government declaring a state of emergency to help fund its actions against ongoing disturbances in the Catatumbo region. Rebel violence has driven out approximately 30,000 Colombians form the region.

However, Fecoljuegos has today (19 February) said it disapproves of the VAT, warning it is “unsustainable and unfeasible” for the sector.

The body is calling on the Colombian government to reconsider the tax as it “puts the stability of the sector at risk”.

Lack of transition period for Colombian operators

Operators have been given just five business days to adapt to the new tax. During this time operators must modify their gaming systems to enable them collect the tax from player deposits. Those adapted systems then need to be recertified. Operators that fail to do so are at risk of breaching Colombia’s gambling laws.

This is made especially difficult by gambling regulator Coljuegos having only five accredited laboratories to conduct certifications. These also work across other countries in the LatAm region, which could cause further delays in Colombia.

This is a primary concern for Fecoljuegos, which fears the 16 operators currently licensed to offer online gambling in Colombia could partially suspend their activities, or pull out of the market altogether.

“A decision has been made without considering [how the sector functions] or the technical challenges that its implementation implies,” Fecoljuegos explained in a statement.

“Without a transition period, operators will face serious difficulties in complying with the new requirements. The industry requires adjustments in the collection, billing and tax reporting systems, which demands investment and coordination with the DIAN [National Directorate of Taxes and Customs].”

Impact on black market activity

Operator withdrawal from Colombia would likely have a negative impact on Colombia’s health sector, which benefits hugely from financial contributions made by the gambling sector.

Local lawyer Juan Camilo Carrasco of Asensi Abogados previously told iGB the tax could lead to both players and operators being driven towards the black market, with the health sector harmed as a result.

“Players will use VPNs and then play in many of those very well-known brands of the black market,” Carrasco said. 

“We were expecting the regulator to say, ‘Hey, this will jeopardise our income, it will jeopardise the expected collection of gaming duties that are aiming to go to the health system.’ But they have not made any statement.” 

Fecoljuegos echoed these concerns, warning of a significant migration of players to black market sites that “do not meet security requirements or generate contributions to the state”.

Fecoljuegos calls for balance

In Fecoljuegos’ view, the government must reconsider its stance and work alongside the industry to ensure the regulation is balanced and help maintain the competitive sector.

“It is essential to find a balance between tax collection and the maintenance of an industry that generates employment, innovation and essential resources for the state,” Fecoljuegos added.

“We urge the government to consider a transition that guarantees the stability of the sector and avoids negative impacts on the economy.”