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Brazil’s turbulent journey towards online gambling regulation was further evidenced on Thursday (May 9) as Congress restored far more favourable tax provisions for player winnings, barely 48 hours after the federal government’s alternative approach caused alarm across the industry.
In a joint session of Congress, Brazil’s Chamber of Deputies and Senate voted overwhelmingly to override the decision of President Luiz Inacio Lula da Silva to veto three specific sections of legislation to regulate online betting and casino games that was otherwise enacted in December.
The move by Congress means a 15 percent winnings tax will now be applied to each player’s annual net winnings above Brazil’s general income tax threshold of R$2,259.20, or approximately US$445.
Until this week, it had been unclear how exactly the winnings tax would be assessed and the stakes of Congress’ potential veto override were raised considerably by an interpretive rule published on Tuesday’s by the Ministry of Finance’s tax department.
Without Congress restoring its original language, the finance ministry’s rule would instead have required licensed operators to collect the 15 percent tax from every winning sports bet or the net winnings from every online gaming session when winnings were above the US$445 threshold.
In a statement released ahead of Congress’ scheduled vote to consider overriding the presidential veto, Brazilian betting industry association IBJR warned that applying the tax to every winning wager or gaming session would encourage Brazilians to gamble with unlicensed, offshore sites where the winnings tax would not be applied at all.
The move by Congress to restore the initial language of the law and allow for losses to be offset against winnings on an annual basis “reduces the impact of the tax burden on the bettor and brings Brazil back in line with international best practices”, Rafael Marchetti Marcondes, IBJR’s legal director, told Vixio GamblingCompliance.
“The measure strengthens the iGaming market in the country and is expected to increase the interest of companies in exploring the sector, potentially leading to increased revenue for the government itself,” he said.
As previously highlighted by Vixio, how the winnings tax would be applied was one of several key policy issues hanging over the pending introduction of a federal licensing regime for sports betting and online gaming in Brazil.
Among other things, prospective licence applicants are also seeking clarity over player bonuses, a statutory requirement for each operator to be at least 20 percent owned by a Brazilian, and how certain forms of online casino games will fit within legal definitions enshrined in December’s Law 14.790.
Senate Hearing On Casino Expansion
The override vote was not the only action taken in Brazil’s Congress related to gambling on Thursday.
Elsewhere, the powerful Senate committee on constitutional, citizenry and judicial affairs also held a three-hour public hearing on a closely watched bill to authorize land-based casino gaming and bingo operations across Brazil.
As pending before the Senate committee, Bill 2234/2022 would expressly allow one to three casino-resorts in each of Brazil’s 26 states plus many hundreds of bingo halls featuring video-bingo machines in cities across the country.
The legislation was approved by the Chamber of Deputies in February 2022 but has since made slow progress in Congress’ upper chamber, with Wednesday’s hearing the first public debate to be held on the legislation in the Senate.
During the hearing, a representative of the Ministry of Tourism testified that legalisation of casino-resorts could help the ministry achieve its goal of growing international tourist visits to Brazil, as well as increasing the number of jobs in Brazil’s tourism industry by up to 20 percent.
Also testifying in favour of the measure was Alex Pariente, vice president of casino operations for Hard Rock International.
The benefits of casino expansion were disputed, however, by several anti-gambling senators, as well as the state public prosecutor of Minas Gerais who warned it would lead to an increase in organised crime.
Meanwhile, a representative of the Brazilian Resort Association also criticised Bill 2234/2022 for authorising casinos strictly in newly developed integrated resorts.
“Those companies that have already made investments and have employees in the country, which have significant infrastructure and services available to tourists, they should be a part of the licensing and distribution process for casinos in Brazil,” said Thiago Borges, the association’s vice president.
