Argentina’s Gambling Tax Raises ‘Zero’ Revenue

From a European perspective, it can often feel as if liberal gambling laws are universal. In reality, many countries worldwide still operate under a highly regulated, restricted environment.

Over the last twelve months, countries across South America in particular, where gambling laws tend still to be on the restrictive side, have progressed measures to introduce legal, regulated online gambling for the first time, in a bid to boost government coffers as well as modernise social policy.

However, the type of approach adopted by the various newly founded regulatory bodies has come in for some criticism, not least that implemented by authorities in Argentina. Now, according to reports in local press, the government’s controversial gambling levy has introduced precisely zero – not a single peso in the thirteen months since its implementation.

The damning reports are thought to be embarrassing for lawmakers, who vociferously argued the case for their levy proposals in spite of representations from operators, industry bodies and other stakeholders highlighting flaws in the scheme.

The national regulations came into force officially in January 2017, and apply at a national level across Argentina. The proposals were designed to attach a 2% tax to transactions through credit and debit cards at online casinos and betting sites, regardless of where the operator is based.

The measures were enforced by card issuers at source, in a bid to shore up protections against avoidance. However, the tax has in fact been successfully avoided by both international and local Argentinian online operators, resulting in the embarrassing tax take since the measures became law.

In response to the measures, operators simply push customers to deposit through alternative payment methods, thus avoiding the tax at source and depriving the government of the revenue they were expecting. According to pre-implementation forecasts, the government hoped the tax would raise around 51.0 million.

The developments are the latest spot of political trouble for governments getting involved in regulating online gambling. Countless examples in recent years have demonstrated the difficulties national governments have in regulating an international industry, from the Argentinian tax to the disastrous domain-level blocking attempts of several regulators across the world.

While governments understandably want to support legal gambling industries, and expect a share of the money in return, their heavy-handed attempts at legislating over the top of large international operators is unlikely to succeed.

More effective models of regulation do exist, as examples from countries like the UK demonstrate. For countries developing their legal frameworks for the first time, it remains a challenge to strike the right balance.

In a model not dissimilar from regulation in the United States, gambling laws in Argentina are devolved to regional authorities, with each adopting their own practical approach to gambling markets. In some territories, state authorities operate monopolies, while others allow only local land-based casinos to operate online.

In its present form, the Argentinian model remains a long way from the optimum open, liberal gambling market, especially for online operators. This has downsides for consumers and authorities alike, and suppresses the potential tax take – sometimes spectacularly, as in this case.

To their credit, Argentinian regulators have been stepping up enforcement action on local casino operators stretching beyond the terms of their licenses, including offering services to players over state boundaries.

Miljugadas.com was even shut down by regulators for crossing too many lines, with those controlling the company ordered not to leave the country while prosecutors figure out what to do with them.

While some might consider the Argentinian approach to be counterproductive, it is a matter for individual regulators to develop the optimum set of regulations and parameters that provide the necessary regulation, without strangling gambling tax revenue.