Codere Online CEO: Colombian VAT decree will lead to black market growth

Codere Online CEO Aviv Sher has said the 19% VAT on deposits in Colombia will drive consumers to the black market as he hit out at the emergency decree.

Speaking on the operator’s Q4 analyst call yesterday, 20 February, Sher took the opportunity to hit out at President Gustavo Petro’s decision to implement the policy.

Codere Online made reference to the new tax in its quarterly report, with the Nasdaq-listed business stating it would assess its strategy from both a “legal and operator perspective”.

Colombia is around 5% to 6% of total Codere Online NGR according to CFO Oscar Iglesias.

Based on Q4 group revenue of €52.6m (£43.5m), that would equate to Colombia posting NGR of between €2.6m and €3.2m for the last three months of 2024.

Despite the relatively small portion of group NGR, Sher described the 19% VAT as a “huge, huge, huge tax” as he slammed the decision.

The CEO said: “I think it will become very hard to operate. The black market will flourish.

“I hope the regulator will realise it fast enough because, basically, it is pushing players to play in the non-regulated environment instead of encouraging them to play in a regulated environment.

“I think companies at some stage will impose those taxes onto the players and eventually they will have less money to play with.”

Iglesias added that while Colombia was one of Codere Online’s smaller markets, the introduction of the new VAT was a “significant issue”.

The finance chief said: “Even if we are investing at lower levels, I think we’re going to have to see how this all plays out and then take a decision.

“I think we have to be conservative and assume that this isn’t necessarily going to be a temporary tax [and] that this might have a more durable staying power.

“We are definitely being a little bit conservative on that front, even if Colombia is a small part of our overall business.”

Codere Online has joined Rush Street Interactive in informing the market of its concerns over the new tax.

This week, the US operator said it would potentially cut operating expenditure and marketing spend to curtail the tax’s impact.

Fecoljuegos, the Colombian trade body, has also hit out at the move this week.

As per local press, the group said: “A decision has been made without considering [how the sector functions] or the technical challenges that its implementation implies.

“Without a transition period, operators will face serious difficulties in complying with the new requirements.

“It is essential to find a balance between tax collection and the maintenance of an industry that generates employment, innovation and essential resources for the state.”