Lawmakers in Brazil Sound Alarm Over Sports Betting Tax Rate

Posted on: August 3, 2023, 08:28h. 

Last updated on: August 3, 2023, 11:59h.

For the longest time, as Brazil was trying to figure out how to introduce regulated sports betting, the idea was to charge operators a 5% tax on their gross gaming revenue, which then became 16%. When the final regulations were approved recently, the 18% rate caught more than a few people by surprise, and some lawmakers aren’t happy.

A man holds a tattered Brazilian flag
A man holds a tattered Brazilian flag. The country’s attempt to add an 18% tax rate to sports betting is causing controversy. (Image: FreePik)

On July 24, a provisional measure to regulate sports betting in Brazil crossed the finish line. If it survives scrutiny by Congress, it will permanently amend the country’s federal gambling framework.

Minister of Finance Fernando Haddad was the primary author of the provisional measure. He asserts that the tax rate will “generate investment prospects” for the country. The hundreds of amendments presented to alter the bill seem to tell a different story.

Betting Regs Need More Work

Since President Inacio Lula da Silva signed the betting provisional measure, the National Congress has received more than 240 amendments from various lawmakers. All are listed on the government’s website, with some of these crafted by the legislators and others appearing following a backlash by industry trade groups.

The changes don’t just address the tax rate. There’s also a push to reform some of the language that had initially been part of the legislation. There are calls for stricter advertising controls, reinforced blackout periods for any operator currently available in Brazil without a license, and more.

The tax rate is getting the most attention in legislative chambers, industry trade group meetings, and more. They all have a singular theme – the 18% rate is too harsh, and additional local and Social Security taxes will push the effective tax rate up to 30%.

Deputy João Bacelar believes the tax rate should be 15%. Anything higher could give the unregulated market a boost. That would offset any possible gains the government expects the 18% rate to provide.

Congressman Newton Cardoso has presented an amendment that would lower the rate to 11%. He rejects the government’s position that it based the rate on the UK gaming market and calls it farcical, since the rate there is 15%.

Gaming Operators Speak Up

The Brazilian Institute of Responsible Gaming (IBJR, for its Portuguese acronym) has already voiced its opposition to the rate. The newly-formed industry trade group, which includes Flutter, Entain, and other operators, sees the tax as a burden to the growth of regulated gaming, as well as innovation.

In further discussions, the trade group wants Brazil’s government to explain how it arrived at its suggested rates. It also wants the government to justify the logic behind demanding a high rate for a new industry that is trying to attract, not repel, operators.

The tax rate Brazil is looking for could be “at least 350% higher than the UK’s System, considering additional tax obligations,” according to the IBJR. In addition, in dispelling the assertion that Brazil followed the UK’s model, it points out that the license cost is five times higher.

IBJR President Andre Gelfi warns that Brazil is digging itself into a hole with the tax rate. He asserts, “The Brazilian tax burden will be at least 350% higher than the English one in the manner presented.”

The good news is that, with 120 days available to discuss the provisional measure, Brazil’s lawmakers might find a way to temper the betting environment.