5 Leaders – 1 Question: Taxes in LatAm and the challenge of the illegal gambling markets
Five leading voices in LatAm’s igaming industry share their views on whether recent tax increases are strengthening the regulated market or pushing players back to the grey market, and where the right fiscal balance lies for the region.
Special report.- In recent years, driven by digitalisation and the wider use of mobile devices, the gambling industry has grown strongly worldwide. Latin America has not been left out of this expansion, and alongside the sector’s growth have come new regulations, higher tax burdens and a debate across the industry: how far can gambling be taxed without pushing players towards the illegal market?
Faced with this dilemma, Focus Gaming News brought together five leading figures from the LatAm gaming industry for this latest edition of “5 Leaders – 1 Question” and asked them a key question: Are the recent increases in gambling taxes in LatAm strengthening the regulated market or pushing players back to the black market? What tax rate represents the right balance in Latin America – enough for public revenue without making regulated operators uncompetitive against offshore sites?
The participants are: Carlos Fonseca Sarmiento, CEO of Gaming LatAm; Miguel Ángel Ochoa Sánchez, president of the Asociación de Permisionarios y Proveedores de la Industria del Entertenimiento y Juegos de Apuesta en México (AIEJA); Cecilia Valdés, president of the Asociación Chilena de Casinos de Juego (ACCJ); Tatiana María Vásquez, a lawyer specialising in gambling regulation and partner at Vásquez & Asociados; and Ramiro Atucha, founder of Atucha Advisory.
Fiscal pressure and market distortion
For Carlos Fonseca Sarmiento, CEO of Gaming LatAm, excessive increases in gambling taxes often produce the opposite of the intended effect: they strengthen the black market rather than the regulated market. “This is not ideology, it is basic economics. One of the textbook rules for expanding the illegal market is to impose unreasonable taxes,” he says.
According to Fonseca Sarmiento, the State’s taxing power is neither absolute nor unlimited, and he argues that its abuses and excesses are controlled by constitutional principles such as statutory reservation, tax equality and the prohibition of confiscation. “In Latin America, unfortunately, the latter two are often breached. Lawmakers frequently do not understand the technical nature of online gambling and end up creating absurd tax schemes: they tax activities with the same nature differently or design taxes that make it impossible to compete with offshore sites,” he says.
“The problem is that online gambling is global digital commerce. If a country demands taxes that are too high from the operator — or even from the player — operators move to the black market, and players follow them with one click.”
“That is why smart regulation understands something very simple: it is necessary to regulate only what is strictly required in order to attract operators to the formal market. When taxes become excessive, the regulator ends up pushing the industry out of the system it created itself.”
“In my view, gambling tax should have a compensatory logic, not a confiscatory one. It is reasonable for the State to cover the additional supervision costs generated by this new activity. But turning gambling into a kind of ‘fiscal Santa Claus’, expected to finance everything the State fails to raise through ordinary taxes, usually ends badly.”
“The right balance is easy to explain: a rate that is moderate enough for operating legally to be more attractive than operating in the black market. When that is understood, the State wins, the industry wins, and market transparency wins.”
In a similar way, Miguel Ángel Ochoa Sánchez, president of AIEJA, adds: “Suffocating our sector with more taxes paradoxically leads to lower revenue, encouraging a migration of players who contribute to national and state coffers towards unregulated platforms.”
The president of AIEJA believes this situation not only strengthens the black market, with all the risks that implies, but also further weakens companies operating legally, imposing unfair competition on them. “The Mexican Constitution is clear: tax must be proportional and equitable. The fiscal authorities must find the right balance in order to sustain an economic activity that is beneficial for everyone,” he says.
Stability and predictability
For Cecilia Valdés, president of the ACCJ, it is still too early to say whether tax increases are strengthening the regulated market or pushing players towards the black market. In her view, markets are still looking for their point of equilibrium.
“Even in Europe, with years of experience, the balance between tax revenue and the competitiveness of the legal market continues to evolve. Latin America is a few steps behind. Today it is essential to observe how countries such as Colombia, Peru and Brazil are being shaped, as they are setting the pace in the region in terms of regulation and taxation,” she says.
Regarding Chile, which is in the midst of regulating online gambling, the ACCJ president believes it will be especially important to follow that regional experience closely and understand how the balance is being defined. “But just as important as the rate itself is stability: rules must be clear and predictable. If a tax is set, it must remain in place over time and not change according to the priorities or political colour of the government of the day. In the end, what matters most is creating certainty around market conditions, so that both operators and the State know what to expect in a dynamic, attractive and highly competitive industry,” she adds.
The right fiscal model
Tatiana María Vásquez, a lawyer specialising in gambling regulation, explains that recent increases in the tax burden in LatAm, far from strengthening the regulated market, are “widening the gap with the illegal market”. Vásquez says: “When taxes are structured on inappropriate taxable bases, the business model is distorted and legal operation becomes artificially more expensive, encouraging players to migrate to offshore platforms.”
For her, the right balance is not about a specific rate, but about proper technical design: “taxing the operator’s real income (GGR), with reasonable, stable and predictable burdens. Only in this way can competitiveness, market channelisation and, ultimately, sustainable public revenue be guaranteed.”
Meanwhile, Ramiro Atucha, founder of Atucha Advisory, says: “When the regulator raises taxes and controls, it is not attacking the black market, it is subsidising it. Every additional point of burden on the licensed operator widens the competitiveness gap, and the player migrates. Brazil is showing this in real time: the legal market went from 55 per cent to 45 per cent in three months, and today more than half of online bets take place outside the regulated framework.”
For Atucha, offshore operators pay no taxes, verify no identity and offer odds that no licensed operator can match. He concludes: “The correct rate is not a universal number, and certainly not the nominal GGR that governments use to appear competitive. What matters is the total effective burden, which in Brazil already exceeds 40 per cent when social contributions, player tax, inspection fees and compliance costs are added together. That is the number offshore does not pay, and the only one the player ends up feeling in the odds.”
