Posted on: August 10, 2022, 07:31h.

Last update on: August 10, 2022, 02:00 a.m.

The new Colombian president, Gustavo Petro Urrego, submits a proposal to reduce certain gambling taxes. He wants to raise taxes on the “ultra-rich” while reducing tax liabilities on “casual” gambling winnings.

Gustavo Petro Urrego
Gustavo Petro Urrego, Colombia’s new president, greets the crows after casting his vote in the recent elections. The new leader wants to make sweeping tax changes, including a reduction in tax requirements for certain gambling income. (Image: Getty Images)

Petro, a former economist, was sworn in as Colombian president on August 7 and has already announced his new tax reform policy.

His reform proposes an increase in income tax for wealthy Colombians. Under this policy, a 0.5% tax would apply to anyone with a net worth above COP 3 billion (USD 695,000). Above 5 billion COP (1.15 million USD), the rate is 1%.

The country’s Congress now has the tax reform bill, drawn up in collaboration with incoming finance minister José Antonio Ocampo. This is one of the first initiatives it received under the leadership of Petro. As such, any decision could be a statement of support – or rejection – of his authority.

Petro ran for president in 2018, but this year he ran on a platform of economic reform. He promised to add about $50 billion to the government over the next four years. The money, he said, would fund social programs against poverty and inequality in Colombia.

Reduce taxes on earnings

Petro’s proposal reduces the tax rate on winnings from dog and horse racing bets, as well as income from lotteries and some forms of gambling. Currently, winners give up 20% to the government through taxes.

According to the proposal, these are “unwarranted” taxes, and Congress would have to approve their removal. In addition, Petro is proposing to eliminate a tax on profits from the sale of shares listed on the Colombian Stock Exchange. This comes with a caveat, however: the savings would not apply if the earnings are greater than 10%.

Petro also promised to fight tax evasion, which costs the country about $11.5 million a year. His tax proposal will eliminate some exemptions for businesses while increasing taxes on coal, gold and oil exports.

He also proposed a healthy new tax that will raise the price of soft drinks and other sugary drinks, ultra-processed foods and single-use plastic.

The booming Colombian game

Earlier this month, the government reported that total gambling license collection recorded 14% annual growth in the first half of the year. This amounted to COP 384 billion ($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 ($26,272), or 30% of the total and a 32% year-over-year increase.

Petro’s proposal did not quantify the proposed gambling tax cuts that would take away some of that revenue. However, the loss would be offset by increases in income tax.

The Colombian Congress has not yet responded to the initiative. But finding approval will face some challenges. During his tenure, Ivan Duque, Petro’s predecessor, twice tried to introduce tax reforms that included higher tax rates.

On both occasions, the results were massive protests against the government across the country. Some taxes, such as the health tax, are already concerned about disproportionately targeting low-income segments. As a result, Petro and Congress may not be on the same page.