Could a 1% Consumption Tax Derail Peru’s Gambling Market?

Peru’s booming gambling market faces a critical challenge as the government proposes a controversial 1% consumption tax.

With fears of double taxation and increased black market activity, stakeholders worry this move could disrupt the sector’s growth.

Industry leaders urge action, warning that the tax could deter operators, impact players, and destabilize the regulated gambling framework.

Explore the implications of this tax and what it means for Peru’s goal to become a top-three gambling market in LatAm.

Peru’s 1% Consumption Tax: A Threat to Its Growing Gambling Industry?

Key Points:

1. Double Taxation Risks: Operators fear the 1% consumption tax will increase costs, potentially exceeding the current 12% GGR tax.
2. Black Market Threat: Higher taxes may drive players and operators toward unregulated platforms, threatening Peru’s regulated framework.
3. Calls for Reform: Industry leaders urge the government to simplify regulations and ensure fair policies for local and international operators.

Peru’s Gambling Market at a Crossroads

Peru’s gambling industry has experienced remarkable growth in recent years, fueled by the implementation of Law No. 31557 in February 2023, which introduced a regulated framework for online sports betting and iGaming. The country quickly became a hotspot for major international operators like Betsson, Rush Street Interactive, and Stake, drawing over 145 licence applications by March.

However, a newly proposed 1% consumption tax now threatens to destabilize this promising trajectory. Introduced through Legislative Decree 1644 in September, the tax would impose a levy on the value of every bet placed, raising concerns among operators and experts alike.

Why the Tax Sparks Concern

The proposed consumption tax has raised significant fears within the industry. While the existing 12% gross gaming revenue (GGR) tax is considered operator-friendly, the additional 1% levy has drawn criticism for several reasons:

1. Double Taxation Risks:
   Operators like Apuesta Total CEO Gonzalo Perez argue that the tax would effectively double operators’ obligations, severely impacting profitability. Perez calls the proposed 1% turnover tax “crazy,” highlighting how it disproportionately increases the tax burden compared to the current GGR model.
2. Ambiguities in the Law:
   The law’s vague language creates uncertainty about whether the tax applies exclusively to foreign operators or both local and international entities. Perez emphasizes the need for clear and equal regulations, stating:

   “If foreign companies pay, local operators must also pay. We need the same rules for all.”

3. Risk of Black Market Growth:
   Industry leaders warn the tax could inadvertently push players and operators to unregulated platforms, undermining the country’s regulatory framework. Zoran Milosevic, CEO of Meridianbet, stresses that unchecked black market activity could lead to reduced tax revenue for Peru and increased risks for players.

Potential Impact on Peru’s Growth

The tax arrives at a critical juncture, as Peru aspires to become the third-largest gambling market in South America, behind Brazil and Colombia. With Brazil’s regulated betting market launching in January 2025, Peru has a narrow window to solidify its position as a leader in LatAm.

Operators have expressed concerns that the additional tax burden could deter investment, cut jobs, and reduce player engagement. Perez warns that companies may pass the costs onto consumers, further complicating market dynamics.

“In theory, a consumption tax is paid by consumers,” Perez says. “But commercially, it’s unclear if operators will pass the costs on.”

At the same time, Milosevic believes the tax could reduce competition by forcing smaller, non-compliant operators out of the market. While this could benefit established brands like Meridianbet, it underscores the need for Mincetur, Peru’s gambling regulator, to aggressively combat illegal operators.

What Needs to Change?

To address industry concerns, experts like Nicolás Samohod Rivarola, head of gambling law at Vidal Caceres, suggest making the framework more accommodating for international operators. He calls for:

• Simplified tax regulations for foreign companies.
• Increased efforts to shut down illegal operators, ensuring a level playing field for licensed entities.
• Collaboration between Mincetur and the government to align gambling policies with industry needs.

Despite these recommendations, Mincetur has limited jurisdiction over tax legislation, leaving the final decision in the hands of Peru’s executive branch.

Peru’s gambling industry stands at a pivotal moment. The 1% consumption tax, while intended to increase government revenue, risks undermining the sector’s rapid growth. With fears of double taxation and a potential surge in black market activity, the tax poses significant challenges to operators and regulators alike.

As Peru aims to cement its position as a top-tier gambling market in LatAm, the government must carefully balance fiscal goals with the need to maintain a thriving, regulated industry. Collaborative efforts between regulators, operators, and policymakers will be crucial in navigating these challenges and ensuring Peru’s continued success in the global gambling landscape.

Ultimately, the tax could either serve as a stumbling block or a defining moment, shaping the future of gambling in Peru. Whether it becomes a roadblock or an opportunity depends on how effectively stakeholders address the concerns it raises.