Apuesta Total CEO Warns Against Reintroduction of Consumption Tax in Peru's Gambling Sector

Gonzalo Pérez, CEO of Apuesta Total, has cautioned the Peruvian government against reintroducing a consumption tax on gambling operators, warning that such a measure could severely damage the country's licensed gambling industry.

Pérez's comments come as the Peruvian Congress debates the potential reinstatement of the tax, although the exact rate has not yet been confirmed.

Law no. 31557, which regulates online gaming and sports betting in Peru, came into force on February 9, 2023. The legislation introduced a 12% tax on gross gaming revenue (GGR). However, it initially included a 1% tax on the value of every bet placed – a so-called consumption tax. This 1% consumption tax was later removed in July 2021, but Congress is now discussing its possible reintroduction.

“The consumption tax is, depending of course on the percentage they will apply and depending on the base fee, very harmful for us,” said Pérez. He expressed concern that the proposed tax would hinder the progress of Peru's rapidly growing gambling sector. “We are trying to reach the government to talk, to explain the possible impact,” Pérez continued, emphasizing the potential risks if the tax is implemented improperly. “The proposed 1% consumption tax discussed in Congress was crazy because it’s a pretty high percentage. So, we are trying to reach them and argue with them about how harmful that tax could be if it’s not correctly applied.”

Threat to Peru's Market Competitiveness

Pérez’s frustration over the tax stems from his belief that the current regulatory framework in Peru is more favorable compared to other Latin American markets. He praised the Ministry of Foreign Trade and Tourism (Mincetur), the body responsible for overseeing the gambling industry, for its effectiveness in regulating the market. According to Pérez, Mincetur has responded swiftly to industry queries and provided clarifications, which has helped the regulatory process move along quickly.

“The consumption tax would risk Peru losing ground in LatAm, which is currently one of the most exciting regions for gambling growth in the world,” Pérez stated. He believes that Peru has a unique opportunity to be competitive within the region. “I think that we in Peru have a good thing in that we can be very competitive in terms of the region. Because, for example, if you take into consideration the taxes that you have in Argentina or that you will have in Brazil or that they were discussing in Chile, which is a nightmare, we’re really good. They will say we’re very competitive.”

The CEO urged the government to leave the regulation as it currently stands, just as the laws governing land-based gambling in Peru have remained largely unchanged since brick-and-mortar casinos were legalized in 1979. “I think it’s very good, let’s not touch anything! If it’s working, let’s not move it, which is the strategy the land-based casinos have been applying for many, many years,” Pérez remarked.

Rising Popularity of Online Gambling

Apuesta Total has long been a major player in Peru’s legal land-based gambling market, with over 500 retail betting locations across the country. However, as online gambling is becoming more regulated, digital offerings are beginning to challenge the dominance of physical retail operations. Pérez believes the shift will lead to a 75%-25% split in favor of online gambling.

“We used to be 60% retail and 40% online before the pandemic,” Pérez explained. “Now it’s 25% retail and 75% online. Of course, retail has been changing for us. It’s a channel that is decreasing. Not too much, but it’s decreasing. But the online, it’s growing really, really fast. It’s crazy how fast it’s growing.”

Although Apuesta Total is witnessing a growing shift towards online gaming, Pérez emphasized that retail outlets will remain a crucial part of the company’s strategy. “It’s a very good channel of acquisition, it’s a very good channel of giving trust to the people, it’s a good channel for paying in cash as well, to top up your account for the withdrawals. So, it’s very good and relevant for our company.”

Concerns Over Offshore Operators

One of the major challenges in Peru’s newly regulated online gambling market is the presence of offshore operators, a concern shared by other countries in the region, such as Brazil. Law no. 31557 requires operators active in Peru to apply for authorization, with non-compliance resulting in fines of up to Sol 990,000 (€245,394/£212,401/$257,838) or criminal prosecution.

Pérez remains confident in Mincetur’s ability to combat illegal operators. “Mincetur said that they will start chasing [illegal operators] in October,” he noted. “As there is this window of time where everybody is applying and stuff like that, it means Mincetur is not so involved in that. But they told us that they will start chasing them in October. They know how important it is to chase them, so they will be in touch with the minister that is in charge of taking down the websites and I am really confident that they will do their job good.”

Potential Impact on Peru's Gambling Market

Despite his optimism about Mincetur’s regulatory efforts, Pérez remains deeply concerned about the impact the proposed consumption tax could have on the sector. While he praised the existing regulatory framework, he believes that adding another tax would harm the progress Peru has made and limit the potential of its gambling industry, which is poised to become the third-largest market in Latin America.

“The additional tax will only serve to harm the strong work carried out by Mincetur,” Pérez warned. Whether the tax will be passed by Congress remains uncertain, but Pérez’s warnings highlight the risks that could arise from such a measure.

By fLEXI tEAM