Brazil’s Government has been trying to fathom how to roll out regulated sports betting services in the country for quite some time, with a 5% tax rate on sportsbook operators’ gross gaming revenues (GGRs) initially expected. The tax rate, however, rose to 16%, and then at the time when local lawmakers recently approved the final regulations, an 18% tax rate was unveiled to the surprise of almost everyone.
A provisional measure aimed at regulating sports betting services in Brazil, whose primary author was Minister of Finance Fernando Haddad, got officially approved on July 24th. It will permanently change the federal gambling framework of the country in case it manages to get the green light from Congress.
According to the author of the original sports betting measure, the tax rate for the sector will create new investment prospects for Brazil. However, critics of the extremely high tax rate claim that the multiple amendments altering the bill would have the opposite effect.
The National Congress has received over 240 amendments from different legislators since President Inacio Lula da Silva put his signature under the proposed provisional measure. All of these changes are currently available to see on the Government’s website, with some of them suggested by lawmakers, while others seem to be made to reflect a serious wave of criticism by gambling industry trade groups.
The Brazilian Institute of Responsible Gaming Criticizes 18% Tax Rate as Too High
The aforementioned changes are not only targeting the sports betting tax rate. Local lawmakers have also made a move towards bringing reforms to the language that had been part of the original legislation, including calls for stricter control of gambling and sports betting advertising and enforcement actions for operators that offer their services in the country without a gambling operating permit.
Understandably, the 18% tax rate has received most of the gambling industry trade groups’ and legislative chambers’ attention, because the proposed rate is considered too harsh, and combined with some additional local and Social Security taxes will eventually push the effective tax rate to up to 30%.
Some lawmakers have proposed a maximum tax rate of up to 15%, saying that anything higher than that could boost the unregulated market, which, on the other hand, would offset any potential gains that are expected by the Government. Congressman Newton Cardoso has suggested a lower tax rate of 11%.
The Brazilian Institute of Responsible Gaming (IBJR) has opposed the 18% tax rate for the sports betting sector. The trade group which represents the country’s gambling industry believes that the tax would bring too much of a burden to the sector and would have a negative impact on its future growth. In some discussions, the trade body has called for Brazil’s Government to provide more details on its decision regarding the suggested tax rates and to justify the logic behind the introduction of such a high rate for an industry that is yet to start operating in the country.