Could a 1% excise tax topple Peru’s betting industry?

Rajashree Seal November 25, 2024

SiGMA news

Peru’s online gambling market has seen steady growth, and experts believe it could become the third-largest betting market in South America. This growth is due to the new Law No. 31557, which regulates online sports betting and igaming. The law, which came into effect in February 2024, has attracted top operators like Betsson, Rush Street Interactive and Stake.

By March, 145 license applications had been received, and the market seemed promising with a 12% tax on gambling revenue. However, a new 1% excise tax on each bet placed could hurt the industry.

The new 1% excise tax

In September, the Peruvian government brought back 1% excise tax through Legislative Decree 1644. This applies to every bet placed in Peru. Although the government plans to collect around Sol110 million ($26.2 billion USD) yearly from this tax, there’s no official date yet for when it will be enforced. , believes this could be as early as the end of 2024, but Gonzalo Perez, CEO of Apuesta Total, thinks it will take longer, maybe until early 2025, as operators need time to adjust their systems.

Concerns about the tax

Perez is worried that the new tax could double the cost for operators. He called the 1% tax on bets “crazy” and believes it will make running a business in Peru more expensive. He also pointed out that it is unclear whether the tax will apply to both foreign and local operators, which could create more problems.

The tax has made many operators hesitant, and that it could lead to job cuts or higher costs for customers. This could slow down the growth of Peru’s gambling market.

Market’s growth risk

If the 1% tax is enforced, it could slow down Peru’s progress as a leading betting market. The country’s gambling laws have been praised as some of the strongest in Latin America, but the tax might lead to a rise in illegal gambling, which could undo much of the progress.

Without strong enforcement against illegal gambling, this new tax could drive people back to unregulated platforms, harming the legal market.

What’s next for Peru’s betting industry?

The full effect of the excise tax is still unclear. Perez said it may take some time for operators to adjust and recover the extra costs. He also mentioned that some operators might increase prices for customers to make up for the tax, but this could hurt the industry in the short term.

The future of Peru’s betting market depends on how the tax is implemented and how operators handle it. It could either strengthen Peru’s position in Latin America or cause a setback, potentially bringing back illegal betting.