Panama to scrap the 5.5% tax on casino and betting winnings to lure back foreign tourists

Guest Contribution – Panama’s authorities have announced the scrapping of a 5.5% tax on winnings from table games and betting. The decision was announced on Monday and is aimed at attracting foreign players as well as boosting tourist arrivals, which have seen a steady decline in recent years.

The initiative didn’t come out of nowhere. The country’s tourism sector is going through a deep downturn, and revenue from the gambling business has been falling for the third year in a row. In essence, the government has decided to trade one revenue stream for broader knock-on economic effects.

A tax paid by the player

Manuel Sánchez, the committee’s secretary at the Gambling Control Committee under the Ministry of Economy and Finance, explained that the tax was introduced by the previous administration and was levied directly on players’ winnings. It applied to several segments of the industry:

• bingo halls,
• casinos,
• slot machines,
• sportsbooks.

This tax was created in 2015 with a specific social purpose: the funds were used to fund higher pension payments. However, in the view of the current authorities, the side effects proved too costly for the broader economy.

A focus on hotels and destination appeal

“Scrapping the tax will support the hotel and tourism sector because players will get better value when traveling to Panama,” Sánchez said in an official statement. According to him, the country must once again become a competitive destination for gambling enthusiasts.

A government source told the Efe news agency that the tax, which was effectively borne by the player, made Panama less attractive compared with Caribbean destinations and the United States. This competitiveness gap became the key argument in favor of scrapping it.

Land-based casinos vs. the digital shift

Such a move by the government is intended not only to attract tourists, but also to make traditional gambling more appealing overall amid the rapid growth of online gambling. 

According to industry analysts, the global online casino market is growing by 10–12% annually, and land-based venues are feeling this pressure everywhere. This is happening not only in Panama, but also in established gambling hubs such as Las Vegas or Macau. 

One reason for this trend is that digital platforms actively use marketing tools that land-based operators can’t match. Offers like no deposit bonuses casino, according to industry websites, attract millions of first-time players each year, who can try the game with less financial risk without leaving home. Competing with such an acquisition model while relying only on the atmosphere of a live gaming floor is becoming increasingly difficult. That is why tax relief in Panama looks not merely like a marketing move, but a necessary measure in the fight for players, who today have more choice than ever.

Economist Estrada: the incentive will work only if people hear about it

Panamanian professor and economist Olmedo Estrada told Efe that, from an economic standpoint, scrapping the tax could become an incentive for both international and local players. “When people travel, they are drawn by the opportunity to take part in gambling,” the expert stressed.

At the same time, Estrada pointed to an important nuance: the state needs to actively inform the market and tourists that withholding on winnings no longer applies. Without a well-executed communications campaign, the effect of the reform may be delayed.

Oversight tightened alongside tax relief

The Gambling Control Committee intends not only to lift restrictions, but also to bring order to the industry. Planned steps include:

• launching an integrated electronic system to monitor operators,
• increasing the number of auditors, since staff shortages have already reduced collection rates,
• placing greater emphasis on responsible gambling principles.

The figures that forced action

According to the Ministry of Economy, from January through August of this year, gambling revenue totaled $50.8 million, which is 33.2% less than in the same period in 2018. The drop was so significant that it could no longer be ignored.

A “critical” situation and a new president

The government of President Laurentino Cortizo, who took office in July for the 2019–2024 term, has openly acknowledged that the situation in the tourism sector is critical. Over the past two years, the industry has lost more than 40,000 jobs, and hotel occupancy has fallen below 45%.

Tourism is estimated to be capable of generating up to 10% of the country’s gross domestic product (GDP). However, Panama’s GDP growth in 2018 was just 3.7%, the weakest in the past decade. This economic backdrop makes any measures to stimulate tourist arrivals not merely desirable, but urgently necessary.

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