Policy and taxation challenges in Latin America’s online gambling

Latin America’s online gambling market is ballooning. With progress comes challenges. Policy hurdles and taxation complexities can impede growth, but governments across the region are attempting to strike the balance between addressing societal concerns, ensuring great fiscal returns while fostering regulated markets. From Brazil’s labyrinthine tax structure to Argentina’s advertising regulations, Latin America provides a compelling case study on the challenges of constructing sustainable gambling policies.

This article, the second in a series of three, exploring the recent Vixio Regulatory Intelligence Latin America Online Gambling November 2024 Outlook analyses the intricate web of policy and taxation challenges facing the Latin American gambling industry, highlighting key markets and the ripple effects of their decisions.

Navigating revenue models is a taxing issue

At the heart of every regulated gambling market lies taxation. Latin America is no exception. Governments face a tricky task. They must balance the need to generate high enough revenue without driving players to the black market and the abyss of unregulated operators.

Brazil’s burden

Brazil is creating waves. Not just lapping up on the sun-kissed golden Copacabana beach, but with their upcoming licencing regime. It is ambitious with its layered tax approach, but should shape and influence Latin America’s approach. Besides it’s 12 percent gross gaming revenue (GGR) tax, operators will encounter new levies such as Goods and Services Tax (IBS) and as discussed in article one of this series, the so called “sin tax.” When calculated, these could add an astonishing 26.5 percent tax burden on operators. This holds the risk of making legal operators uncompetitive as compared to offshore platforms.

Moreover, upfront licencing fees of R$30 million (£3.9 mill /€4.7 mill /US$4.9 mill) and financial reserve requirements further complicate entry. These measures aim to establish a prosperous market, but they could inadvertently deter smaller operators, reduce competition and diminish market diversity. Read our recent article about how Brazil approved 71 online betting operators.

Peru’s problematic consumption tax

By introducing a 1 percent selective consumption tax, Peru has raised eyebrows. Critics argue this tax disproportionately affects licenced operators headquartered outside the country, thus creating an uneven playing field. Nonetheless, Peru’s licencing spree – 63 operators in less than a year-confirms its potent appeal, despite fiscal challenges.

Colombia’s VAT conundrum

Colombia adopted online gambling regulation early and has seen gradual growth. Recent proposals to impose a 19 percent VAT on gambling transactions, in addition to the existing 15 percent GGR tax, have sparked industry backlash. Operators point out that such measures may make the market “completely unviable,” thus pushing players to unregulated platforms.

Advertising must balance growth and responsibility

Taxation policies focus on revenue generation rightly. But advertising restrictions highlight another major challenge – to balance market expansion with social responsibility.

Argentina’s advertising ban

Driven by concerns over youth gambling and addiction, Argentina is taking firm steps to curb gambling advertising. A radical proposal to ban almost all online gambling advertising is currently under debate. This echoes similar restrictions seen in Europe. Such policies, while well intentioned, risk stifling legitimate operators. This also suppresses the operator’s ability to compete with unregulated platforms outside of these restrictions.

Brazil’s restrictive advertising framework

Brazil is also tightening its advertising rules as part of its new regulatory regime. Recent Supreme Court rulings have mandated advertising limits to prevent gambling from exploiting vulnerable groups, including welfare recipients. These measures are necessary without a doubt, but also add more complexity for operators entering this market.

Colombia’s spending caps

Colombia has taken a unique approach, capping advertising budgets at 20 percent of an operator’s net revenue or US$3.2 million annually (€3 million/£2.5 million). Whilst innovative, this policy aims to balance between responsible marketing and market visibility. Legall challenges have hampered its progress, highlighting difficulties in implementing such measures...[Read More]