Brazil to Impose 16% Tax on Sports Betting

The article aims to discuss the proposed tax changes in the Brazilian gambling industry. In particular, it focuses on the Gross Gaming Revenue (GGR) as a key indicator in the gambling business.

GGR refers to the earnings a company generates by accepting bets on various events, calculated by subtracting the total payouts to winners from the total bets made by players. For instance, if a bookmaker receives a total of €1000 in the form of bets on a football match and pays out a total of €900 in winnings, its GGR would be €100.

The Brazilian authorities are considering a tax model similar to that of the United Kingdom, which defines GGR as “gross income minus customer prize payouts“. The goal is to create a regulated betting market and reach a 90% legal market share.

The Proposed Tax Model

In April, President Lula of Brazil presented a bill that requires betting companies to contribute 16% of their GGR to the state.

This joint proposal by the country’s president and finance minister is currently under consideration by the National Treasury Management at the Office of the Attorney General (PGFN). The Brazilian Ministry of Finance believes that adopting the British tax model will facilitate the achievement of the target goal of a 90% legal market.

Additionally, the tax proposal suggests a fee of 30 million Brazilian reals for individual licenses for bookmaking companies, valid for five years.

The proposed tax model also specifies how the 16% GGR tax will be allocated among various public and social institutions. For instance, 2.55% of the tax will go to the National Fund for Public Security, strengthening efforts to combat match-fixing, money laundering, and other betting-related crimes. Brazilian education will receive a 0.82% share, while sports clubs will benefit from a 1.63% allocation. The remaining funds will support public welfare and social projects.

Impact on Brazilian Football Clubs

The proposed tax changes also have implications for the top Brazilian football clubs, as many of them have bookmakers as sponsors and may be affected by the new regulations. In the coming days, a closed hearing is scheduled to address the proposed changes for the “Big Four“ clubs from Rio de Janeiro (Flamengo, Fluminense, Botafogo, and Vasco da Gama) and São Paulo (Corinthians, Palmeiras, São Paulo, and Santos). To clarify, the current bookmaker sponsors of the Serie A clubs, which is the top league in Brazil, are listed.

The Brazilian Football Confederation’s Requirements

The Brazilian Football Confederation (CBF), the governing body of Brazilian football, has also presented its tax requirements.

They propose a “guaranteed allocation of 4% of gross revenues to be distributed among football leagues“, nearly double the previous rate of 1.63% set by the previous law in 2018.

The Serie A clubs seek clarification on how the government will introduce a substantial licensing fee and recommend installment payments to avoid hindering bookmakers from sponsoring football clubs. It is crucial to maintain bookmaker sponsorships since all Serie A teams participating in the Brazilian championship have existing partnership agreements with bookmaking companies, except for “Cuiabá“.

Conflicting Views and Promised Resolutions

However, a conflict is already emerging as the majority of Brazilian Serie A clubs oppose the CBF’s requirement for the Confederation to serve as the “centralized collector and distributor of betting fees for Brazilian football“. The government has assured that it will work with the affected clubs and the CBF to resolve the disputed situations concerning betting fees.

Conclusion

If the tax proposal is approved by the financial prosecutor’s office and the interested parties, Brazil’s long-awaited new gambling law will be passed within two weeks, fulfilling the country’s commitment to legalize the industry in 2023. Earlier reports have discussed the potential revenues Brazil could generate by legalizing bookmakers.