Colombia’s New President Debuts New Tax Reform, Aims to Reduce Gambling Taxes
Posted on: August 10, 2022, 07:31h.
Last updated on: August 10, 2022, 02:00h.
Colombia’s new president, Gustavo Petro Urrego is submitting a proposal to reduce certain gambling taxes. He wants to raise taxes on the “ultra-wealthy” while cutting tax obligations on “occasional” gambling winnings.
Petro, a former economist, was sworn in as Colombia’s president on Aug. 7 and has already deputed his new tax reform policy.
His reform proposes an income tax increase for wealthy Colombians. Under the policy, a 0.5% tax would apply to anyone whose net worth is above COP3 billion (US$695,000). Above COP5 billion (US$1.15 million), the rate is 1%.
The country’s Congress now has the tax reform bill, developed in conjunction with inbound Minister of Finance José Antonio Ocampo. It’s one of the first initiatives it received under Petro’s leadership. As such, any decision could be a statement of support – or rejection – of his authority.
Petro ran for president in 2018, but this year ran on a platform of economic reform. He promised to add around $50 billion to the government over the next four years. The money, he stated, would finance social programs against poverty and inequality in Colombia.
Cutting Taxes on Winnings
Petro’s proposal cust the tax rate on dog and horse race betting winnings, as well as income from lotteries and certain forms of gambling. Currently, winners give up 20% to the government through taxes.
According to the proposal, these are “unjustified” taxes, and Congress should approve their elimination. Additionally, Petro suggests eliminating a tax on profits from the sale of shares listed on the Colombian Stock Exchange. This comes with a caveat, though: the savings would not apply if the gains are more than 10%.
Petro has also promised to combat tax evasion, which costs the country around $11.5 million annually. His tax proposal will eliminate some exemptions for companies while increasing taxes on coal, gold, and oil exports.
He’s also proposed a new healthy tax that will increase the price of soft drinks and other sugary drinks, ultra-processed foods, and single-use plastic.
Colombian Gaming on the Rise
Earlier this month, the government reported that the total collection from licenses for games of chance registered year-on-year growth of 14% in the first half of the year. This amounted to COP384 billion (US$89.3 million), a 7% improvement over the gaming regulator’s expected results for the period.
Land-based gambling was worth COP151 billion (US$35.1 million), or 42% of the total. iGaming accounted for COP113 million (US$26,272), 30% of the total and a year-on-year increase of 32%.
Petro’s proposal didn’t quantify the proposed tax cuts on gambling would take away part of that revenue. However, offsetting the loss would be the income tax increases.
Colombia’s Congress has not yet responded to the initiative. But finding approval will face certain challenges. During his term, Ivan Duque, Petro’s predecessor, twice tried to introduce tax reforms that included higher tax rates.
On both occasions, the results were massive anti-government protests across the country. Certain taxes, such as the health tax, are already concerned about disproportionately targeting lower-income segments. As a result, Petro and Congress may not be on the same page.
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