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Peru – Higher taxation still on the cards for Peru’s gaming industry

By - 12 December 2018

A confused picture is emerging in Peru over the future of Legislative Decree 1419, which proposes additional taxes on the gambling industry. Even though the decree was rejected last week in committee stage the new taxes, albeit in another form, are still on the table.

The decree modifies the General Sales Tax Law ISC meaning that casinos and slots will be subject to a specific system of money payable for each table and slot.

However, last week The Constitution Commission of the Congress of Peru approved by eight votes in favour, five against with one abstention, the repeal of the government approved decree, which had applied The Selective Consumption Tax (ISC) on casinos and slot parlours for the first time. Congressman Miguel Torres, coordinator of the Working Group in charge of the constitutional control over legislative decrees issued by the Executive branch, put the annulment for debate before the Congressional Committee on the Constitution.

The Congressman argued that the government had created a new tax with the measure, so it would be a distortion of current rules. The decree he said would lead to “an avalanche of court appeals.” The report of the working group indicated that the Executive branch had gone beyond its remit and exceeded the powers conferred by Congress to legislate through special rules on tax matters and other issues. As such, it decided not to approve the new decree.

However, this week the congressman presented an initiative to raise the tax on gambling and told congress that he and other lawmakers were proposing that the tax on casino and slots games be increased by two per cent and that the tax should also be applied on online gambling as well. The proposal would increase tax on gaming in Peru from 12 per cent to 14 per cent. Torres said that, the new way of imposing the new taxes would meet constitutional requirements, while fulfilling the expectations of the decree outlined via the Executive Power. In addition, he explained that while the Constitution Committee recommended the repeal of the decree, the legislative session is already finished for the year, therefore it is still valid. He said that the new initiative in Congress corrects the defective bill put forward by the Executive when it comes to tax collection and will avoid legal appeals when it comes to taxation by operators.

The move to increase taxes on the industry had already met with fierce opposition amongst a number of lawmakers as well as The Peruvian Association of Entertainment and Gaming (APEJA), which has announced that it plans to fight the imposition of the new tax in the courts. Gaming tax revenue is already on the increase. In 2017, the collection of taxes stood at 300 million soles and, according to Foreign Trade and Tourism Ministry (MINCETUR) this year it will stand at around 320 million soles.

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