Peru’s Betting Market Faces Uncertainty with Proposed 1% Consumption Tax

The Peruvian gambling industry, heralded as a potential leader in South America’s online betting market, is facing significant challenges with the proposed reintroduction of a 1% consumption tax. Industry leaders fear that the measure, outlined in Legislative Decree 1644, could stall growth, increase black market activity, and create regulatory hurdles.

A Promising Start for Online Gambling

Peru has made strides in regulating online sports betting and iGaming, with the amended Law No. 31557 coming into effect on 9 February 2023. The law introduced a 12% tax on gross gaming revenue (GGR) and eliminated an earlier 1% tax on the value of every bet. This favourable regulatory framework attracted major international operators, including Betsson, Rush Street Interactive, and Stake. By March, 145 licence applications were filed with Peru’s gambling regulator, the Ministry of Foreign Trade and Tourism (Mincetur).

Mincetur required all operators to certify their platforms by 15 November 2023. Despite the regulatory progress, the proposed consumption tax now looms as a potential stumbling block.

Industry Concerns Over Double Taxation

The proposed 1% tax on the value of each bet could significantly increase the financial burden on operators. Gonzalo Perez, CEO of Apuesta Total, expressed concerns over potential double taxation, suggesting that the new tax would effectively exceed the current 12% GGR tax. Additionally, the lack of clarity on whether the tax applies to local or only foreign operators has sparked debate.

Risks of Black Market Growth

Zoran Milosevic, CEO of Meridianbet, and other industry experts have raised alarms about the tax’s potential to drive operators and players toward illegal markets. Legal experts, such as Nicolás Samohod Rivarola, warned that the tax’s high costs could make the regulated market less attractive, undermining Peru’s reputation as a leader in gambling regulation.

Mincetur has acknowledged these risks but lacks the authority to influence tax legislation. Efforts to address concerns with the Ministry of Economy have so far yielded no resolution.

The Industry’s Next Steps

Some operators, including Meridianbet, view the tax as a necessary adjustment that could reduce competition and streamline the market. However, others worry about job losses and the difficulty of passing additional costs to consumers. Perez estimates that the first year of the tax’s implementation would have a significant financial impact on operators, potentially reshaping the industry’s landscape.

What Lies Ahead

While the tax’s implementation date remains uncertain, it is widely expected to come into force in 2024 or early 2025. As the industry prepares for this change, the government faces mounting pressure to clarify regulations and safeguard the legal market’s growth. The reintroduction of the consumption tax could mark a turning point for Peru’s gambling industry, determining whether it continues its ascent as a regional leader or struggles with challenges akin to those faced by other nations.