Policy and Taxation Complexities Challenge Latin America’s Growing Online Gambling Market

Latin America’s online gambling market is experiencing rapid expansion, but the progress brings with it a host of challenges.

Issues surrounding policy development and taxation are emerging as significant hurdles that could hinder growth. Governments across the region are attempting to navigate these challenges by balancing societal concerns, fiscal goals, and the need for regulated markets.

From Brazil’s complex tax structure to Argentina’s stringent advertising proposals, Latin America offers a revealing case study in the complexities of constructing sustainable gambling policies.

The Struggles of Revenue Models

Taxation is a critical component of every regulated gambling market, and Latin America is no different. Governments face the challenge of generating adequate revenue without driving players to unregulated markets, often dominated by offshore operators.

Brazil’s Layered Tax Structure

Brazil is making headlines, not just for its iconic beaches but for its ambitious licensing regime. With a 12 percent gross gaming revenue (GGR) tax forming the foundation, operators will also face additional levies, including the Goods and Services Tax (IBS) and the “sin tax,” discussed in the first article of this series. Combined, these taxes could amount to an extraordinary 26.5 percent burden on operators.

Critics argue that this high tax rate risks rendering licensed operators uncompetitive compared to offshore platforms. Additionally, entry into the market is further complicated by hefty licensing fees of R$30 million (approximately £3.9 million, €4.7 million, or $4.9 million) and financial reserve requirements. While these measures are intended to establish a prosperous market, they could inadvertently stifle competition by deterring smaller operators.

Peru’s Selective Consumption Tax

In Peru, the introduction of a 1 percent selective consumption tax has sparked controversy. Critics contend that the tax unfairly impacts operators headquartered outside the country, creating an uneven playing field. Despite this challenge, Peru’s market remains attractive, as evidenced by the issuance of 63 licenses in less than a year.

Colombia’s VAT Proposal

Colombia, an early adopter of online gambling regulations, is now facing backlash over proposals to impose a 19 percent VAT on gambling transactions. This would be in addition to the existing 15 percent GGR tax. Industry voices warn that such measures could render the market “completely unviable,” potentially driving players toward unregulated operators.

Advertising Policies: Balancing Growth with Responsibility

While taxation policies primarily focus on revenue generation, advertising restrictions highlight a different challenge—promoting market growth while ensuring social responsibility.

Argentina’s Advertising Ban

In Argentina, a proposal to ban almost all forms of online gambling advertising has ignited debate. The measure, aimed at addressing youth gambling and addiction concerns, mirrors similar restrictions implemented in Europe. While well-intentioned, these policies risk undermining the competitiveness of legitimate operators, leaving them at a disadvantage compared to unregulated platforms.

Brazil’s Advertising Restrictions

Brazil’s new regulatory regime also includes stricter advertising rules. Recent Supreme Court rulings mandate limits on gambling advertising to prevent the exploitation of vulnerable groups, including welfare recipients. These necessary safeguards add another layer of complexity for operators seeking entry into the market.

Colombia’s Advertising Spending Caps

Colombia has taken a unique approach by capping advertising budgets at 20 percent of an operator’s net revenue or $3.2 million annually (€3 million or £2.5 million). While this innovative policy seeks to balance responsible marketing with market visibility, it has faced legal challenges, underscoring the difficulty of implementing such measures.

Regional Policy Ripple Effects

As the largest economy in Latin America, Brazil’s regulatory choices are likely to influence neighboring markets.

Chile’s Pending Legislation

Chile, which plans to implement its licensing system in 2025, is closely observing Brazil’s progress. The country could adopt elements of Brazil’s framework, particularly regarding responsible gambling and taxation.

Argentina’s Decentralized Approach

Argentina’s gambling regulation is managed on a provincial level, contrasting with Brazil’s federal approach. However, the economic potential of Brazil’s unified market may pressure Argentine provinces to adopt more cohesive policies to stay competitive.

Prospects for Regional Harmonization

Greater regulatory harmonization across Latin America could benefit operators significantly. Consistent rules on taxation and advertising, along with joint frameworks or cross-border agreements, could streamline operations and enhance compliance.

Responsible Gambling: Walking the Tightrope

The rapid expansion of gambling in Latin America necessitates robust responsible gambling policies.

Brazil has taken the lead in this area, introducing measures such as facial recognition for bettors and restrictions on using welfare funds for gambling. These progressive policies reflect the challenge of balancing accessibility with player protection.

Argentina and Colombia are also strengthening their efforts. Argentina’s proposed advertising ban is motivated by concerns over youth gambling, while Colombia’s promotional spending restrictions aim to prevent excessive marketing. However, the effectiveness of these policies will depend on enforcement and industry cooperation.

The Road Ahead

The challenges of taxation and policy are inevitable in any emerging market, but Latin America’s diversity adds an extra layer of complexity. From Brazil’s ambitious regulatory overhaul to Peru’s contentious consumption tax, the region reflects the growing pains of the global gambling industry.

For operators, adaptability will be the key to success. Navigating taxation, complying with advertising rules, and championing responsible gambling will be critical. Meanwhile, governments must strike a delicate balance—creating policies that protect players while fostering sustainable markets.

As Latin America progresses, its approach to these challenges will not only shape the region’s gambling industry but also define its reputation on the global stage. With the potential to become a $12 billion market by 2028, the opportunities are immense. Through harmonization, collaboration, and innovation, Latin America is charting a path toward a promising future for its gambling industry. 

By fLEXI tEAM