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The recent action by Peru’s government to veto the amendment to the Selective Consumption Tax (ISC) bill covering online gambling has caused great alarm in the regulated gambling sector. According to the legal website Apuesta Legal, this move threatens to provoke capital flight, reinforce illegal gambling, and undermine the formal market.
Government Rationale and Industry Fears
The government’s justification for vetoing the bill, which Congress had earlier approved, is to preserve taxation revenues. The officials claimed that the proposed changes would decrease the state’s capacity to raise taxation and limit the Ministry of Economy and Finance (MEF )’s flexibility in adjusting rates.
In spite of that, industry experts disagree. Nicolás Samohod, gambling law legal specialist of Apuesta Legal Perú, reminded that the ISC structure under the current legislation, if unchanged, would generate what could be characterized as confiscatory imposition of taxes. Samohod stated that the Constitutional Tribunal had already warned against such tax overreach back in 2002, and the current scenario risks reinstating those constitutional appeals.
Economic and Legal Impacts
Apuesta Legal highlighted three direct and consequential risks emanating from the veto:
- Flight of Investments: Excessive taxation could discourage new players and existing operators from investing in Peru’s gaming sector. In an open global competitive market, high taxes erode the country’s appeal.
- Escalating Litigation: Legal ambiguity and a sense of unfairness in the tax policy can lead to a wave of legal shields (amparos), which will increase legal costs and regulatory uncertainty. This will make the environment more difficult for operators as well as the government.
- Informal Market Growth: When legitimate operators are driven to raise prices because of over-taxation, consumers tend to switch to unregulated sites that do not have the same cost structure. Not only does this undercut tax income, but it also puts consumer protection at risk.
The Need for Policy Coordination
Apuesta Legal is strongly in favor of joint policymaking, especially between the MEF, Congress, and the Ministry of Foreign Trade and Tourism (Mincetur). The gaming knowledge-regulated entity, Mincetur, should be the center of attention in crafting any taxation reform that affects the industry.
Samohod emphasized, “If the Congress or the MEF are going to legislate in such a technical matter, they must sit down with Mincetur so that there is an orderly and sustainable market.”
To facilitate such coordination, Apuesta Legal proposed the constitution of a tripartite working committee involving Congress, MEF, and Mincetur. Such a committee would engage in analyzing proposed ISC reforms, aligning strategic goals, and developing balanced solutions.
Toward a Balanced and Sustainable Framework
The collaborative effort should be looking towards a tax regime that keeps the revenues of the government without unfairly burdening the industry. This balance will keep investors interested in Peru, protect players, and improve the formal gaming sector.
Perhaps most importantly, a fair and stable tax regime provides legal certainty to users and operators alike. In the face of other Latin American markets progressing towards sophisticated gaming regulation, Peru’s success will depend on its ability to adapt, consult, and implement sensible reforms that encourage growth without undermining its industry.
As digital gambling expands, policy errors would cede the initiative to offshore and unlicensed operators. The ISC debate is not a matter of tax revenue; it is a matter of determining the future credibility, competitiveness, and viability of Peru’s gaming industry.
Source: YogoNet
