Colombia Senate Rejects Permanent VAT on Online Gambling

Colombia’s attempt to permanently impose a 19% value-added tax on online gambling has failed after lawmakers rejected the government’s wider tax reform package. The decision halts a measure that would have reshaped the financial structure of the country’s regulated betting market and leaves operators facing greater certainty as they plan for 2026.

The proposal formed part of a broader financing bill promoted by President Gustavo Petro’s administration, which aimed to raise more than COP 16 trillion to fund the 2026 national budget. Its defeat represents a significant political setback for the executive branch and removes a tax burden that the gambling industry had warned could weaken the licensed market.

Committee vote ends reform effort

The decisive vote took place in the Senate’s Fourth Committee, where lawmakers rejected the financing bill by nine votes to four. That outcome immediately shelved the proposal and ended efforts to convert the temporary gambling VAT into a permanent levy.

The rejected reform package covered a wide range of fiscal measures. In addition to gambling-related taxes, it proposed higher VAT on petroleum products, increased taxes on coal and hydrocarbon extraction, and further levies on tobacco, alcohol, income, and wealth. Together, the measures were intended to close funding gaps ahead of the 2026 budget cycle.

Finance Minister Germán Ávila had positioned the reform as central to sustaining government programmes. However, committee opposition proved decisive, leaving the administration without the expected revenue stream and forcing it to consider budgetary adjustments instead.

Earlier government estimates suggested that a permanent VAT on online gambling deposits could generate up to COP 1.2 trillion annually. Industry representatives challenged that assessment and warned it relied on assumptions that did not reflect how gambling platforms operate.

Gambling sector warned of structural damage

Industry opposition to the VAT proposal had grown steadily since its introduction earlier in the year. In September, the Colombian Federation of Entrepreneurs of Games of Chance and Luck publicly criticised the measure, arguing it misunderstood the economic mechanics of online betting.

“The 19% VAT applied to deposits on online betting platforms is based on a fictitious foundation, not a real business variable. It is comparable to applying this tax on deposits made in the financial sector. The money enters the system, is reused several times, but does not constitute added value or patrimonial income for the financial intermediary,” Fecoljuegos said.

The federation also challenged official revenue projections, describing them as “misleading” and disconnected from the sector’s actual added value. Since the VAT’s temporary implementation in February, licensed operators reported sharp declines across key performance indicators, including deposits and gross gaming revenue.

Fecoljuegos later stated that online gross gaming revenue had fallen by around 30%, while some operators experienced drops of nearly 50% in deposits and average transaction values. The federation also warned that prolonged pressure on licensed companies could drive players toward unregulated platforms, undermining consumer protection and public revenues.

Budget gap and political reactions

With the financing bill rejected, the government must now address a shortfall of COP 16.3 trillion through alternative measures. Similar circumstances followed a failed tax reform in 2024, when budget cuts replaced new revenue streams.

Despite government efforts to defend the proposal, criticism from lawmakers intensified. One congressman welcomed the outcome, stating: “Colombia, rather than more taxes, needs a structural reform that reduces operating expenses, strengthens investment, streamlines public finances, and boosts citizens’ income and employment. President Gustavo Petro’s government only thinks about spending instead of solving the country’s problems.”

Economic analysts also questioned the scale of the proposed reform. “To put them in context, those COP 16.3 billion represent less than 3% of the National General Budget, which totals COP 547 billion. Therefore, it’s unsustainable to claim that a shortfall of this size would jeopardise fiscal stability or public spending sustainability,” Mejía stated, according to El País.

Some members of the Senate warned against extraordinary measures to revive the bill. Senator Angélica Lozano cautioned that constitutional limits restrict the use of emergency powers, stating: “The Constitutional Court has been categorical in reiterating that states of exception cannot be used to replace or correct the natural functioning of the branches of public power, nor to evade the political consequences of a democratic legislative procedure (rulings C-122 of 1997 and C-383 of 2023).”

For gambling operators, the decision removes immediate uncertainty. With the VAT set to expire at the end of December, companies can prepare for 2026 without the added pressure of a permanent levy, while the government reassesses its fiscal strategy following another failed reform attempt.

Source:

Colombian Senate rejects tax reform including VAT on online gambling, g3newswire.com, 15 December 2025