SPORTS BETTING
Brazil – Brazilian sports betting to be taxed on revenue not turnover with more delays expected
By Phil - 17 May 2021
One of the leading gambling specialists based in Brazil says that the new tax rate on sports betting will likely be based on GGR rather than turnover.
Speaking exclusively to G3, Founding and Managing Partner of Montgomery & Associados, Neil Montgomery, said: “COVID-19 has delayed the regulatory process and has shown how Brazil desperately needs to legalize and regulate all forms of games of chance. This also implies rolling out a tax structure based on GGR and not turnover that is sufficiently attractive to have as many operators as possible looking at Brazil as a land of opportunity, which has the potential of being within the three largest markets in the world. There are rumours that GGR-based tax legislation will be rolled out sooner than later.”
In September 2019, initial press reports suggested Brazil’s Ministry of Economy would set a one per cent turnover tax on sports betting. In December 2019, it was revealed that Brazil’s sports betting tax rate would remain at 3 per cent of turnover instead of one per cent after moves to change the headline rate failed to gain approval in Congress. The gross gambling revenue (GGR) taxation model is now generally accepted as the most beneficial approach to taxation for online gambling across most jurisdictions in Europe for both operators and governments alike.
In August 2019 The International Betting Integrity Association (IBIA) published its response to the Brazilian sports betting consultation suggesting taxation calculated on GGR. A couple of decisions issued by the Brazilian Supreme Court in 2020 also pointed to GGR as the form for calculating tax in so far as horse racing bets and poker are concerned.
Mr. Montgomery also said that the government was still in favour of the concession model.
“As far as the number of fixed odds sports betting licenses being made available by the federal government are concerned, initial rumours signalled potentially 30 licenses, but such number gradually increased, and speculation had it that the number could be between 50 and 100. However, such a number is still insufficient considering that studies have ascertained that currently about 450 to 500 online foreign sports books access the Brazilian market. This is why I have always been favourable and advised SECAP, in the contributions submitted by my firm to the public consultation rounds promoted by such a body, that the most appropriate business model for Brazil should be that of authorization (particularly for online licences), where the government is required to grant a license if the predetermined legal and financial requirements are satisfied by each operator seeking a license.”
Delays to the process also look likely according to Mr. Montgomery. In December 2020, Waldir Eustáquio Marques Jr from Undersecretary of Prizes and Draws of the Ministry of Economy said that regulation would be in place by July 2021. However, Mr. Montgomery said that the government is unlikely to meet this deadline as Requests for Proposals (RFPs) had not yet been sent out by The Brazilian Development Bank (BNDES) to applicants.
“With Requests for Proposals (RFPs) not yet having been sent by the BNDES to the 38 applicants that have been selected to continue in this bidding process, it is now probable, given such delay, that the former promise made by SECAP in that regulations would be passed by July 2021, is not going to be honoured.”
In August 2020, President Jair Bolsonaro signed Decree 10,467 ordering BNDES to work with the Ministry of the Economy to oversee the launch of sports betting. BNDES is a federal public company associated with the Ministry of Development, Industry, and Trade and the main financing agent for development in Brazil.
