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In Peru, the debate about charging taxes on online betting and iGaming has come to a critical point. More than a month has passed since the government said it would observe, or disapprove, the proposed law to address shortcomings in the levying of the Selective Consumption Tax (ISC) on online betting platforms. The decision has placed the industry in suspense and opened the door for possible litigation.
Experts think the current system, established by Legislative Decree 1644 and with the involvement of the Ministry of Economy and Finance (MEF), was poorly designed and is exposing the state to serious financial risks. As the Peruvian Congress discusses whether or not to approve the bill by insistence, operators can exploit this legal ambiguity to challenge the already paid taxes and seek refunds that amount to millions of soles.
Risk of Judicial Challenges
Carlos Mesía, a former president of Peru’s Constitutional Court (TC), has been vocal about the implications of this legislative gap. He notes that the government’s refusal to endorse the new law ultimately benefits online gambling operators, who remain legally empowered to appeal to the judiciary or the TC. In his analysis, the absence of a solid legal basis leaves the ISC vulnerable to being overturned in court.
Mesía warned that, should the courts side with the companies, the Peruvian state would be forced to reimburse substantial amounts already collected under the current regime. Such a scenario would not only weaken public finances but also undermine the credibility of the government’s fiscal policy.
Double Taxation Issues
Adding to the complexity, tax lawyer José Verona has pointed out that the structure of the regulation skews the use of the ISC. According to Verona, the ISC taxes on all bets placed, whereas it should be taxing the funds bet or lost. This leads the state to tax again when the user wins and redeems the same amount in a new bet.
In practice, the same money can be taxed on multiple occasions, creating an artificially higher burden. Verona claims that successive taxation could prove to be too expensive, potentially discouraging operators and players from accessing the regulated market.
Fiscal Impact and Legislative Outlook
The economic implications are huge. Online gambling is a major source of revenue for the Peruvian state, and any ruling that would require reimbursement would impact public finances. Additionally, the uncertainty discourages long-term foreign operator investment that calls for certainty and stability in the regulatory landscape before investing capital.
The intended legislation, when enacted, would integrate online gambling into the General Sales Tax (IGV) framework with a definitive demarcation of its confines within the ISC. These actions are meant to eliminate inconsistencies, set a sound legal framework for taxation, and render it more even in application and aligned with the realities of online gambling markets.
The Stakes Ahead
For Peru, the time is not merely a technicality of legislation; it is a challenge of how the country reacts to the quickly evolving reality of online gambling. While politicians weigh the political cost of fresh legislation, it is perhaps the courts that ultimately decide if the state retains millions in profits or is forced into costly refunds.
The coming months will challenge Peru to determine whether it can achieve the right equilibrium: protecting the public finances, encouraging a competitive gaming industry, and developing a transparent, long-term regulatory framework.
Source: YogoNet
