Mexico has become the latest market to consider a gambling tax hike, much to the industry’s discontent. This proposal follows a broader trend that has seen other countries and several US states consider or implement similar measures.
Mexico Eyes a Higher GGR Tax
In Mexico, finance minister Édgar Amador has proposed significantly increasing the taxes on casinos and online gaming. Under his proposal, the Special Tax on Production and Services (IEPS) will be amended, increasing the gross gaming revenue tax to a staggering 50%.
IEPS, for context, is a tax that applies to a variety of products, such as carbonated drinks and tobacco products. It currently taxes operators at 30% of their GGR, which means that Amador’s measure would almost double what operators have to pay.
In addition to that, the proposed IEPS changes could introduce an 8% tax on video games that contain content that is not suitable for children or have in-game purchases.
Amador has argued that the changes would generate much-needed funds, helping the government tackle its deficit. Forecasts outline total revenue of $467 billion if the proposed changes pass.
Amador’s Proposal Would Put Additional Burdens on Gaming
Amador’s proposal has sent shockwaves across the industry, which is already paying a 30% corporate income tax on the 30% IEPS tax. To top it all off, some Mexican jurisdictions sport additional taxes.
While operators can deduct up to 20% of their IEPS payments for local and regional taxes they’ve paid, increasing the IEPS levy to 50% would significantly increase the financial burden on operators.
This comes amid Mexico’s continued struggles to reform its gaming sector and align its regulatory framework to the modern age. Despite the aging laws, however, the country’s gaming industry has continued to experience rapid growth, with online gaming quickly gaining traction.
Many Governments Have Been Eyeing Higher Gaming Taxes
As mentioned, Mexico isn’t the only market to consider raising its gambling tax. In fact, Amador’s proposal comes amid a broader trend that has seen multiple jurisdictions adopt similar measures.
Several US states have already introduced similar measures. The sweeping changes in Illinois, for example, forced multiple operators to introduce a surcharge, despite the unpopularity of such measures.
In January, the Netherlands also increased its gambling tax, hoping to generate more tax revenue. However, the measure ended up having an adverse effect and hurt the industry, according to the local regulator.
In the meantime, the UK horseracing industry has firmly rejected proposals to align all online gaming taxes, arguing that it would have a disproportionate effect.