Concerns raised over Brazilian sportsbook tax rate
On 12 April, Brazil’s Ministry of Finance held a public audience in Brasilia announcing that that it would be imposing a 15% tax on sports betting gross gambling revenue.
The public meeting took place between the ministry and industry stakeholders to discuss the proposed contents of the Provisional Measure (PM), which will outline the framework for Brazil’s regulatory regime.
According to founder and managing partner of Brazilian law firm Montgomery & Associados, Neil Montgomery, the PM is close to finished. It seems highly likely that President Lula will issue the measure upon his return from the Peoples Republic of China, where he is currently on a state visit.
Montgomery said Brazil’s sports betting tax rate is based on the UK model. However, it is still unclear whether the proposed 15% would be the total amount expected from operators who claim it would be on top of existing federal social contributions and municipal service tax which would drive up the total aggregate rate to 26.25%.
“If the latter is ultimately confirmed, then Brazil would be quite distant from the UK model of 15%,” said Montgomery.
“This is why the industry was quite outraged with such an announcement and is lobbying that this be corrected in the legislation to be enacted.”
Congressional process
Attending the meeting was a variety of organisations representing the interests of the gaming industry in Brazil. The main Brazilian football clubs were there, fresh off issuing a joint deceleration urging the ministry to include them in the ongoing discussions.
Among the other organisations represented at the meeting were a number of recently formed trade bodies representing Brazilian sportsbooks and foreign operators.
“All these players can still influence the Ministry of Finance and other public bodies in shaping the Provisional Measure to be issued by President Lula,” said Montgomery.
“It must also be noted that even after being issued, the Provisional Measure – which becomes effective immediately upon publication in the Official Gazette and enjoys the same status of a federal ordinary law – can still suffer adjustments while it is being reviewed by Congress.”
According to Montgomery, Congress will have a 120-day period to convert the PM into federal ordinary law. If it is not able to do so, the PM is scrapped.
Relaunch of scratchcard lottery
There has also been rumours the PM dealing with fixed-odds sports betting – or a separate PM issued simultaneously – will address the relaunch of LOTEX, the scratchcard instant lottery that the government attempted to privatise in 2019.
“[The lottery] flopped the following year when the winning consortium, formed by IGT and Scientific Games, refused to sign the contract,” said Montgomery.
This was due – among other reasons – to a 2020 Supreme Federal Court decision which broke the Federal Union’s monopoly on the operation of lotteries in Brazil.
“There is speculation that the federal government plans to let CAIXA, the Federal Savings Bank that currently exploits the federal lotteries, to also operate LOTEX, even if temporarily,” added Montgomery.