Colombia Proposes Tax Reform to Maintain 19% VAT on Online Gambling

Colombia’s government has proposed keeping a 19% VAT on online gambling as part of a new tax reform package, arguing that digital betting and gaming should face the same fiscal treatment as land-based gambling.

Colombia has proposed a new tax reform that would maintain a 19% value-added tax on online gambling, turning one of the country’s most controversial gaming-sector tax measures into a permanent part of the fiscal framework.

The proposal forms part of President Gustavo Petro’s latest tax reform package, which seeks to raise public revenue in 2027. According to government estimates cited in local media, the broader reform aims to collect around COP 21.8 trillion, while the online gambling VAT measure alone could generate close to COP 1.7 trillion next year.

The government’s argument is based on tax neutrality. Officials say that online games of chance should not receive preferential treatment compared with gambling activity carried out in physical establishments. By applying the general 19% VAT rate to internet-operated games, the government says it would reduce distortions between digital and land-based operators.

For Colombia’s gambling industry, the proposal is highly significant. The country is one of Latin America’s most mature regulated online gambling markets, with licensed operators active in sports betting and casino-style products under the supervision of Coljuegos. Any permanent VAT measure would therefore affect a market that is already formalised and commercially important.

The tax has a complicated recent history. A 19% VAT on online gambling was introduced as a temporary emergency measure connected to government revenue needs, and earlier versions created strong industry concern because of the way the tax base was calculated. Operators and trade bodies argued that taxing deposits did not reflect the real economics of online gambling.

The debate later shifted toward applying the VAT to gross gaming revenue, or GGR, which is closer to the actual revenue retained by operators after prizes are paid. This distinction is critical. A 19% tax on deposits can place pressure on liquidity and player balances, while a tax on GGR is more closely aligned with the business model of regulated gaming.

The new reform proposal therefore reopens a wider discussion: not only whether online gambling should pay VAT, but how the tax should be calculated, collected and balanced against existing gambling-specific contributions, concession fees and healthcare funding obligations.

The government argues that the economic impact of the measure would be limited because online gambling is not part of the basic household consumption basket. It also says the sector has continued to grow despite previous tax measures, suggesting that the industry can absorb a permanent fiscal burden.

Operators are likely to challenge that assumption. A regulated online gambling market depends on competitive odds, sustainable margins and the ability to keep players within licensed channels. If the total tax burden becomes too high, legal operators may face pressure from offshore or illegal platforms that do not pay VAT, licence fees or local gambling taxes.

That is the central policy risk. A higher tax burden can increase public revenue in the short term, but if it weakens licensed operators or pushes consumers toward unregulated sites, the state may lose control over player protection, responsible gambling, AML monitoring and long-term tax collection.

For Coljuegos and the regulated sector, the proposal also creates a compliance challenge. Operators may need to adapt accounting systems, reporting processes, customer communication and pricing models if the VAT becomes permanent. The final design of the tax base will determine how disruptive the measure becomes.

The reform is also politically uncertain. Petro’s previous tax initiatives have faced resistance in Congress, and this proposal comes late in his administration. Lawmakers will need to decide whether the revenue objective justifies making the online gambling VAT permanent, especially in a sector that already contributes to public finances through gambling-specific mechanisms.

From a regional perspective, Colombia’s debate will be watched closely. Latin American governments are increasingly looking at online gambling as a source of fiscal revenue, but they are also trying to avoid policies that damage regulated markets. Brazil, Peru, Chile and other countries are facing similar questions over how to tax digital gambling without strengthening the illegal market.

The key issue is balance. Colombia already has a licensed online gambling ecosystem, which is a regulatory advantage. The challenge is to raise revenue without making the legal market less competitive than unlicensed alternatives.

If approved, the reform would mark a major shift in Colombia’s online gambling tax policy. The 19% VAT would no longer be an emergency or temporary instrument, but a permanent fiscal feature of the market.

The coming congressional debate will determine whether the proposal survives, whether the tax base is adjusted, and how far the government is willing to go in treating online gambling as a high-revenue digital sector rather than only a regulated gaming activity.

For operators, the message is clear: Colombia remains one of Latin America’s most important online gambling markets, but its tax environment is becoming more demanding. The next stage of regulation will be defined not only by licensing and compliance, but by whether the fiscal model allows the legal market to remain sustainable.