Experts weigh in on the good, the bad and the ugly of Brazil’s sports betting regulation

On 25 July 2023, the Brazilian Government published the much-anticipated Provisional Measure (PM) 1,182/2023, regulating the commercialisation of fixed-odds sports betting in Brazil. In spite of the uncontested need for and importance of the regulation, experts argue that taxation may result in an expansion of illegal gambling and act as investment deterrent.

The good

As reported on SiGMA news, Wesley Cardia, Director General of the President of the National Association of Games and Lotteries (ANJL), the measures will serve to generate legal certainty for operators and players. Regulation will tackle match fixing and illegal gambling, prevention of minors from sports betting and will include measures to help gambling addiction.

The regulation in itself, serves to legitimise the gambling sector in Brazil and will enable job creation and tax collection. It is precisely when one considers taxation, with the addition of 2 % on the already taxing 16%, that things turn ugly.

The bad and the ugly

According to Magnho José, president of the Brazilian Legal Gaming Institute, the main problem is high taxation, which will cause operators to pay 18% of the revenue obtained from betting, once the Gross Gaming Revenue (GGR), has been deducted. “Adding taxes, taxation could reach 29% of the total in municipalities with an ISS rate of 2% and almost 32%, when the ISS is 5%,” he explains. Cardia agrees that the levels of taxation may lead to problems for both operators and the government.

Arthur Silva, from the Brazilian Institute of Responsible Gaming (IBJR), also considers the high tax burden as a disincentive to investment and an incentive to possibly driving companies to operate illegally. Silva mentions Portugal as an example where high taxation, according to him, resulted in less than half of the operators becoming regulated. He also refers to France where operators forfeited their licences due to high tax rates.

According to Silva, the impact will have a negative cascading effect on the industry, with the whole chain being impacted, such as the advertising and sponsorship sector.

The overall expert consensus is that the much-needed legislation should be modified to reflect a lower tax rate. This, it seems, is the way to ensure that the government’s strategy works and to safeguard the projected collection of BRL 12 billion (EUR 2.3 billion) for the state coffers.

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