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The Brazilian discussion regarding taxes for the growing sports betting market is now at a critical point. The senator acting as rapporteur for the commonly referred-to Anti-Match-Fixing Bill (PL Antifacção), Alessandro Vieira, has already rejected a suggestion offered by bookmakers for new taxes to be based on gross revenues. Senator Vieira is promoting direct taxation of sports bets placed by punters, as this, according to him, ensures transparency, predictability, and control by the public authorities.
This conversation illustrates the challenges and contestations emerging between the regulatory body and the sports betting platforms in the context of Brazil’s regulation process to balance the growth of the market and fiscal responsibility.
Why the Senate Rejected the Gross Revenue Model
According to Senator Vieira, there are structural problems in taxing the gross revenues of betting companies. This is because, as the senator stated, the concept of “gross revenue” is not standard in the industry. Every betting site has different business models, and these models influence the manner in which the gross revenues are derived.
Vieira pointed out that when determining the gross revenue, many factors are involved, including bonuses, promotional credits, void bets, cash-back bets, and internal expense allocations. To him, the aforementioned complexities give room for companies to be able to manipulate or reinterpret data to contribute to a lower taxable base despite positively coming from gambling.
This flexibility, according to the senator, may jeopardize the predictability of tax revenues and thus the effectiveness of the tax. From the public finance perspective, making the assessment dependent on corporate data would impair the ease of regulation and the government’s ability to accurately forecast revenues.
A Shift Toward Direct Taxation on Bets
To respond to such concerns, Vieira suggested taking taxes from actual wagers placed by users instead of from revenue indicators set by companies. In his opinion, this would make a more objective and auditable basis because bets may be more easily monitored by authorities.
According to the senator, taxation from betting operators in this proposed taxation framework is expected to mainly go towards funding public security projects. It appears that through this framework, a direct linkage has been made between taxation and betting, so as to ensure even more stringent controls are in place.
The Introduction of Cide-Bets
Among the most important additions brought forward with the bill is that of a new contribution that is known as Cide–Bets. This is actually a 15% fee that is charged on bets that are placed online, and it is estimated that about R$30 billion of additional revenues are projected every year.
Vieira explained that Cide–Bets is actually meant to serve a temporary purpose. It will only apply until the implementation of the Selective Tax in Brazil, which will be a part of the tax reform that is currently in development. From this perspective, the contribution will ensure the continuity of funds during the period of transformation for the new tax system.
The senator has also justified the increased tax rate imposed on the betting industry by referring to similar products such as tobacco and alcohol. These products remain widely consumed despite being heavily taxed, which is assumed to be unnecessary because their use can be pronounced even after taxation. Vieira assumed that betting, which is prone to addiction, can sustain high taxes without being economically unviable.
Next Steps in the Legislative Process
After its approval by the Senate, the Anti-Faction Bill has been returned to the Chamber of Deputies for evaluation before being submitted to President Luiz Inácio Lula da Silva for signing into law or for a potential veto. Deputies in the lower house of parliament are also free to propose modifications before that.
However, the Chamber has pushed back discussion to next year, given that the current legislative session ends on December 19th. Consequently, it appears that the ultimate structure for Brazilian betting taxes has yet to be determined, with full implications being considered for all involved parties.
Source: iGaming Brasil
