Chilean Legislators Determine Tax Rate for Online Gambling

However, it’s important to note that the effective tax rate will be significantly higher, approximately 38 percent of GGR, as it excludes the value-added tax (VAT) that will also be applied under the impending legislation, much to the chagrin of online operators.

Breaking down the tax structure as outlined in the revised Article 46 of the bill, it includes a 19 percent VAT applied to GGR. The remaining 81 percent of the revenue will be subject to an additional 20 percent tax, with an extra 1 percent allocated for responsible gambling initiatives and an additional 2 percent earmarked for sports betting.

The Economy Commission is currently in the process of reviewing and approving the final text of the bill, which it has initially passed on an article-by-article basis. This decision on the tax rate comes after receiving further input from Vivien Villagrán, the head of Chile’s Casino Gaming Superintendence.

The next step in the legislative process is for the bill to proceed to the Chilean Senate.

Villagrán had previously stated in an interview with Diario Financiero that the proposed tax rates in the pending bill are relatively high, but they were established this way to address various negative externalities that need mitigation. She emphasized that the attractiveness of an industry depends on multiple factors beyond just the tax rate and requires a comprehensive perspective.

Carlos Baeza, a gambling lawyer representing Chile-facing offshore operators like Latamwin, Coolbet, Betsson, and Betano, who has also provided testimony to the commission, disagrees with the notion that the industry can thrive under such a high tax rate. He pointed out that the inclusion of VAT adds a significant burden to the tax load, which tends to result in low channeling rates. The relationship between tax burdens and channeling is inversely proportional, meaning higher taxes can discourage operators from entering the regulated market, ultimately leading to reduced tax revenue and less protection for users who remain outside the regulated space.

Baeza indicated that operators are prepared to challenge the proposed tax rate when the bill advances to the Senate.

In a parallel situation, Brazilian operators are voicing similar concerns in their own lobbying efforts related to sports betting regulation, where the overall tax rate could approach 30 percent. They, too, are highlighting channelization rates as a primary concern.

In unrelated news, much like Brazil, Chile has recently initiated its own inquiry into potential match-fixing. The Chilean public ministry will investigate allegations of fraud made by athletes such as Cobreloa footballer David Escalante, who claimed before the Economy Commission that his teammates were involved in betting and that it had an impact on match outcomes.