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Colombia has officially declared a state of internal commotion and economic emergency in the Catatumbo region, responding to a severe humanitarian and security crisis. This declaration comes amid escalating violence from clashes between dissident factions of FARC and the ELN, which have intensified over recent months.
As part of its response, the Ministry of Finance has introduced new tax measures intended to generate essential resources to combat the region’s pressing issues. These measures reflect the government’s commitment to stabilise the area and provide much-needed support to its residents during this challenging time. The focus is on mobilising financial resources that can be directed toward security and humanitarian efforts in Catatumbo, where the situation has become increasingly critical.
Implementing a Value Added Tax (VAT) on online gambling is among the most notable changes. According to Deputy Minister of Finance Juanita Villaveces, the government aims to raise approximately 1.063 trillion pesos (approximately €243.2 million) over the 90 days of the declared state of emergency, with around 519 billion pesos ( around €116 million) expected to come from the newly imposed tax on gambling.
Minister of Finance Diego Guevara highlighted that this measure is intended to quickly generate tax revenue that can be directed specifically towards addressing the urgent needs of the region. The VAT will apply exclusively to online gambling activities—those offered by licensed platforms on their websites, including sports betting and online casinos.
This new tax, set at 19%, will likely increase the cost for consumers engaging in online betting. For instance, a player betting 20,000 pesos would incur an additional charge of approximately 3,800 pesos due to the VAT. While some may view this tax favourably, it has drawn criticism from established legal betting companies in Colombia, who warn that the increase could push bettors toward illegal services.
The Federation of Colombian Gambling Entrepreneurs (Fecoljuegos) has voiced significant concerns regarding the potential impact of the VAT on the online gambling sector. They assert that such a tax would disrupt the economic equilibrium of existing concession contracts and pose a threat to the stability of the industry. “The measure would not only jeopardise the financial stability of a key sector for the digital economy but would also disrupt the contractual balance between currently authorised companies and the State,” stated Fecoljuegos, emphasising the importance of maintaining the integrity of the existing framework.
Currently, the online gambling sector operates under stringent regulations set forth by Coljuegos, which outlines the technical, legal, and financial requirements for operation. Fecoljuegos emphasises that the online gambling industry is crucial not only for economic growth but also for generating revenue that supports Colombia’s healthcare system. In the third quarter of 2024 alone, online gambling contributed 231.343 billion pesos to health funding, creating approximately 150,000 formal jobs and solidifying its role as a key player in the country’s digital transformation.
Fecoljuegos further warns that the introduction of a VAT could hinder the sustainability of the online gambling sector by affecting operational margins and increasing the risk of incentivizing illegal platforms. This could lead players to turn to unregulated options that do not meet regulatory standards and expose them to significant risks.
The current model operates with tight margins, as approximately 97% of the amounts wagered are returned to players as winnings. With additional taxation, licensed operators would face heightened challenges in maintaining profitability and meeting their operational costs, thereby affecting state revenues as well.
In addition to the VAT on online gambling, the government has proposed two other tax measures in response to the state of emergency:
The introduction of the VAT on online gambling in Colombia, while intended to quickly address the financial needs arising from the crisis in Catatumbo, presents significant challenges for the industry. The long-term implications could alter the landscape of online betting in Colombia, particularly concerning the balance between regulated and unregulated markets. As the situation develops, the impact of these tax measures on both consumers and the industry will require careful monitoring to ensure the stability and sustainability of this vital economic sector.