Colombia: Petro Must Seek Congressional Approval for Gambling VAT

(AsiaGameHub) –   Colombia’s Constitutional Court has upheld its prior ruling, denying President Gustavo Petro and his administration the authority to enact “emergency tax decrees” without legislative approval from Congress.

This ruling effectively mandates that the Humana government must discontinue the 19% VAT on gambling transactions that has been enforced since March 2021.

The administration had originally introduced this tax via an emergency decree as part of a broader effort to increase levies on specific industries and their associated transactions.

The Court rejected the emergency decree, which aimed to impose new tax measures on online gambling, tobacco, alcohol, and fuel, reiterating that any fiscal adjustments require formal scrutiny and approval by Congress.

Following a review by constitutional judges, it was concluded that the “exceptional circumstances” invoked by President Petro did not satisfy the constitutional requirements of “exceptionality” and “unforeseeability.”

Consequently, Petro is once again prevented from using emergency powers to raise the VAT on alcohol from 5% to 19%, increase the tax burden on financial institutions by 15% (bringing the effective rate to 50%), or apply a 19% VAT to luxury items such as high-displacement motorcycles and yachts.

Online gambling revenue was also subject to the proposed 19% VAT. In total, the government sought to generate roughly COP 11trn (€2.5bn) to mitigate growing social and fiscal challenges.

While Petro informed Congress of his willingness to negotiate certain taxes, he maintained that he would not alter charges on gambling licenses, characterizing the industry as a sector that should be subject to “sin taxes.”

In its decision, the Court also suspended the legal validity of related measures, confirming that Legislative Decrees 1474 of 2025 and 044 of 2026 will remain inoperative pending further constitutional review. This ruling establishes clear boundaries on the executive branch’s authority to circumvent legislative procedures, emphasizing that budgetary reforms must be handled through Congress.

The focus now turns to lawmakers, as the taxation of gambling remains a priority on the political agenda. The National Congress of Colombia is currently evaluating alternative frameworks, specifically Decrees 0240 and 0241, which suggest a 16% levy on online gambling through two methods: one applied directly to operators and another charged at the point of customer deposit. These proposals also aim to broaden taxation to cover all payment methods, including cash, bank transfers, and potentially cryptocurrency, as part of a wider initiative to capture digital transaction flows.

This renewed legislative effort follows the Court’s previous invalidation of a 19% VAT on online gambling based on gross gaming revenue (GGR), which was a key component of Petro’s fiscal strategy. With emergency powers off the table, the government is now utilizing standard legislative channels to seek approval.

Fiscal strain continues to mount, with Colombia facing a budget deficit projected at up to COP 30trn, while tax collections have fallen short of expectations according to DIAN figures.

Policymakers are increasingly identifying online gambling as a viable tax base to fund public spending, though industry representatives caution that cumulative taxes—particularly those aimed at payment channels and deposits—could stifle sector growth and diminish long-term revenue contributions.

Congress is set to evaluate the technical execution of these proposals, including the determination of whether enforcement should be managed by the central government or Coljuegos, as well as how reporting and compliance requirements will be organized.

For the gambling industry, while the immediate risk of taxes imposed via emergency decree has been eliminated, the trajectory is evident: taxation is inevitable, but it will be processed through Congress.