Colombian President Imposes 19% VAT on Player Deposits Amid State of Emergency
On 14 February 2025, Colombian President Gustavo Petro unilaterally imposed a 19% Value Added Tax (VAT) on player deposits, bypassing the legislature by invoking a state of emergency decree. This measure, introduced under Decree No. 0175, is set to last until 31 December 2025, pending constitutional review. The government justified the move by citing the need for additional resources to address ongoing violence in the Catatumbo region, which has displaced approximately 30,000 people.
Industry Impact and Operator Reactions
Rush Street Interactive, a major player in Colombia’s gambling market, saw its stock drop by 5% to $15.90 following the announcement. In an SEC filing, the company expressed concerns that the tax could reduce customer demand for regulated gambling, potentially affecting its revenue, as Colombia accounts for 13.3% of its total earnings. While the long-term impact remains uncertain, Rush Street is actively considering cost-cutting measures, including reductions in operational and marketing expenses, to mitigate potential losses.
JMP Securities analysts emphasized that the tax directly affects players by deducting funds from deposits. They highlighted uncertainty over player behavior, noting that in some markets, players frequently deposit and withdraw funds, affecting payment processing costs. While this pattern is less pronounced in Colombia, the overall impact on market growth remains unclear.
Concerns from the Gambling Sector
The Colombian Federation of Gambling Entrepreneurs (Fecoljuegos) strongly opposed the tax, calling it “unsustainable and unfeasible” for the industry. The body warned that the lack of a transition period for compliance could lead to operators suspending services or exiting the market. Operators were given only five business days to update their gaming systems to comply with the tax requirements, necessitating system modifications and recertification by one of only five accredited laboratories in the region. Failing to comply with these new requirements risks breaching Colombian gambling laws.
Fecoljuegos further cautioned that the tax could push both operators and players toward the black market, undermining regulatory oversight and reducing contributions to Colombia’s healthcare system, which benefits from gambling tax revenue. Local gaming lawyer Juan Camilo Carrasco echoed these concerns, predicting that players might turn to offshore operators via VPNs, exacerbating unregulated gambling.
Regulatory and Legal Challenges
Under Decree No. 0175, operators are responsible for filing and paying the VAT, with non-compliance punishable by prison sentences ranging from 48 to 108 months, along with administrative sanctions. The decree grants gambling regulator Coljuegos the authority to request that internet service providers block unauthorized gaming sites, reinforcing efforts to curb illegal gambling.
Despite the government’s assertion that the tax is temporary, legal experts remain skeptical. Carrasco noted that taxes introduced under emergency measures often become permanent, suggesting that future tax reforms could extend or solidify the VAT beyond December 2025.
Call for Government Reconsideration
Fecoljuegos urged the government to reconsider the tax’s implementation, advocating for a balanced approach that ensures both industry stability and tax collection. They emphasized the importance of maintaining a competitive gambling sector that contributes to employment, innovation, and state revenue.
“The government must work alongside the industry to establish a transition period and ensure the sustainability of the sector,” Fecoljuegos stated. “Without this, we risk severe economic consequences, including job losses and reduced funding for public services.”
As the constitutional review progresses, the fate of the tax remains uncertain. If deemed unconstitutional, it will be revoked; however, if upheld, the industry will need to adapt swiftly to the new fiscal landscape.