Operators Fear Over Taxation Will Be a Limit to Entry in Brazil, Says IBJR President

August 8, 2023
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With the path forward for sports-betting regulation in Brazil becoming increasingly uncertain, some operators are concerned about the viability of the Brazilian market when it finally does open, if the current tax rates hold.

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With the path forward for sports-betting regulation in Brazil becoming increasingly uncertain, large operators are extremely concerned about the viability of the Brazilian market when it finally does open, if the current tax rates hold.

Andre Gelfi, the managing partner for Betsson in Brazil and the president for the Institute of Responsible Gaming (IBJR) - which counts bet365, Rei do Pitaco, Entain, Flutter and others as members - does not think that Congress understands that they could be killing the industry before it launches with overhead taxes of around 29 percent that are too high, he says.

In addition to taxes, which are 18 percent of gross gambling revenue, plus 10 percent for social security — the still unofficial license fee will be R$30m (US$6.1m).

Gelfi said that members “are all on hold to see what this is going to look like, they're not very excited, it's very different from the local operators who do not have alternatives and this is new to them. They're making money right now. They think ‘Somehow we're going to sort this out’. Amongst the institute's members, we are not very optimistic.”

Brazilian commerce, Gelfi explained, tends to be well protected from foreign competition by the government, but sports betting as a digital market cannot be viewed similarly.

“This is a very protective and closed country. But this industry is super competitive and it's digital. It's very easy for Brazilians to find an alternative. It's not like auto parts manufacturing that Brazilians are very protective of; Congressmen are new to that somehow,” he explained.

He and other operators will spend this week trying to convince Congress of exactly that and lobbying for a lower tax rate. Gelfi says it would be advantageous for them to listen, as revenue from sports-betting taxation has long been touted by the Ministry of Finance as a part of the fix for the budget deficit.

The government has, according to Gelfi, said that they expect over 100 applicants for a licence, but “with this price and with these conditions, it’s foolish and unrealistic.”

Gelfi and members of the IBJR will be pushing to lower the tax rate to just 18 percent of gross gambling revenue (GGR), getting rid of the 10-11 percent of social security taxes that Gelfi says technically, according to the Brazilian constitution, are illegal.

“You cannot have two different taxes for the same concept. So it's unconstitutional at the end of the day, what they came up with.”

Luiz Felipe Maia, a gambling legal expert and partner at Maia Yoshiyasu in Sao Paulo, confirmed that the claim is arguable.

As for what comes next, Gelfi confirmed that it is likely that Congress will let the provisional measure expire, copying and pasting much of its text into the sports-betting bill.

There are rumours, he relayed, that some in Congress are lobbying to withdraw the urgency classification from the bill, meaning that there would no longer be a 45-day time limit for each chamber of Congress to consider it.

The reasoning is that they want to wait for the outcome of the parliamentary inquiry into match-fixing, which is due to conclude in September, but could be extended.

The effort is unlikely to be successful, given that it would put sports-betting regulation back on an interminable time loop.

“It's just the beginning of the effort at the end of the day. So let's see how it evolves,” said Gelfi.

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