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June 21, 2021

According to regulator's estimates, disagreed by Colombia's trade association Fecoljuegos

Colombia: new regulation plans could cut gaming tax revenue in half

Colombia: new regulation plans could cut gaming tax revenue in half
New regulation is currently being drafted and would take effect on January 1 2020, and gives regulator Coljuegos six months to set the conditions for all land based games that operate in the country.
Colombia | 11/11/2019

Coljuegos said the collection could stand between 44% and 50% less annually, with the impact felt mostly in the bingo, horse racing, virtual sports, and slots sectors. Fecoljuegos President said that the fall would be around 20%, with the new measures bringing in a large number of new operators. The changes imply operators will pay exclusively for operating rights of 12% on gross revenues as long as they meet the minimum connectivity and industry standards.

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ew plans in place could cut tax revenue by as much as half for the slot sector according to gaming industry regulator Coljuegos.

In April the Colombian Congress approved the National Development Plan put forward by Colombia’s President Ivan Duque, in which he sets out socio-economic spending for his administration. Parts of the plan could reduce revenues as rules governing the conditions of gambling companies that operate in the country will change. With the new adjustments, the revenue generated by gambling could fall by as much as up to 50 percent, according to estimates made by Coljuegos in a regulatory impact analysis, reported by G3 Newswire.

The impact will be felt most of all in the bingo, horse racing, virtual sports, and slots sectors, all of which help finance the Colombian health system. The regulator reported that the collection could stand between 44 per cent and 50 percent less annually, going from $345,000 million (USD 103,3 M) to a value that could range between $195,000 million (USD 58,4 M) and $172,000 million (USD 51,5 M) citing figures in a Ministry of Finance draft decree.

However, Evert Montero Cárdenas, President of the Colombian gaming industry trade body Fecoljuegos, said that he disagreed with the assessment put forward by the regulator as new measures will bring in a large number of new operators.

“We estimate that if it falls, it would be around 20 per cent – about $70,000 million (USD 21 M), but there are many alternative measures that could be taken so that it does not fall so much,” he told the local newspaper PortaFolio. Cárdenas added that “this measure will allow a large part of the sector to be formalised” and that businesses will be able to prosper due to the end of the high tax burden.

The change in gaming rules will do away with the presumptive income scheme rate which means that operators currently have to pay tax even if the machines do not generate sales. The changes to the National Development Plan implies that from now on operators will pay exclusively for operating rights of 12 percent on gross revenues as long as they meet the minimum connectivity and industry standards, which Coljuegos would have until mid-2020 to define. This takes into account that regulation is currently being drafted and would take effect on January 1, 2020 and gives the entity six months to set the conditions for all land based games that operate in the country.

Ultimately, the initiative seeks to “broaden the base of elements (of the sector), modernise the slot parlour sector, combat illegal operation and promote the professionalisation of the gaming industry,” according to the wording of the new project.

“This is the only chance that the industry will not die, because in Colombia the number of machines and contracts has been falling, and contributions have been reduced. Although the collection is reduced by this lower rate, the figures can be netted together, taking into account that the lower burden will increase investments, and the collection, through formalisation and regularisation,” said Montero.

The measure aims to curb a black gambling market that generates $ 1.5 billion every year. According to the most recent estimates there could be as many as 49,036 machines operating illegally in Colombia. About 40 percent of gambling in Colombia is illegal, meaning that the state loses between $700 billion and $800 billion – almost USD 250 million, according to Coljuegos.

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