Legal experts are raising alarms about Peru’s recently implemented 1% consumption tax on every bet placed. They argue that the tax threatens the sustainability of the country’s licensed gambling market, potentially driving players toward unregulated platforms.
Breaking Down the New 1% Consumption Tax
Starting July 2025, Peru’s updated tax structure imposes a 1% tax on all bets made, regardless of their outcome. This tax is layered on top of existing tax obligations, including:
- General Sales Tax (IGV/VAT): Applies to both resident and non-resident digital service providers.
- 30% withholding tax: Targets non-residents earning Peruvian-source income from digital services.
- Other taxes: Includes business income taxes and selective consumption taxes applicable to certain goods.
While these existing frameworks already require significant compliance efforts, the additional consumption tax adds an unprecedented load on licensed operators.
Why This Tax Structure Has Sparked Controversy
The primary criticism surrounding the new tax is its application on turnover rather than Gross Gaming Revenue (GGR). Here’s why this approach is problematic:
- Unsustainable Business Model: Operators must pay the tax on every bet staked, regardless of whether they profit.
- Reduced Competitiveness: Licensed platforms may struggle to provide attractive odds and payouts, forcing players to opt for unregulated alternatives with no such tax burdens.
- Revenue Loss Risk: As players shift to the black market, the government risks losing tax revenue, while consumer protections diminish without regulatory oversight.
A Global Perspective on Consumption Tax Models
Internationally, few countries adopt consumption taxes on individual bets. Most mature gambling markets favor taxation on GGR, which represents an operator’s earnings after payouts. This model ensures fair taxation without placing operators at financial risk.
By contrast, taxing turnover has a disproportionately negative impact on operators, particularly in low-margin industries like gambling. Legal experts argue that Peru’s decision to adopt this unconventional model could deter market participation from both domestic and international operators.
Industry Concerns Over Regulatory Instability
The consumption tax comes at a time when Peru’s gambling market is undergoing significant regulatory shifts, including:
- Expanded VAT obligations on digital service providers.
- Greater compliance requirements for non-resident operators.
Adding yet another layer of complexity risks creating an unpredictable environment for businesses, potentially discouraging market entry and continuity.
Conclusion: Can Peru’s Licensed Market Survive?
Peru’s new 1% consumption tax on gambling is seen by many as a “catastrophic” decision for the licensed market. By creating unsustainable operating conditions, it risks pushing players to unregulated platforms, which could ultimately undermine both government revenue and consumer protections. Legal experts and industry stakeholders are calling for urgent reforms to ensure the ongoing viability of Peru’s licensed gambling sector.
