Brazil’s burgeoning gaming market is facing the possibility of a significant tax hike.
As reported by SBC Noticias Brasil, the Brazilian Government’s financial team has “held discussions to raise the Gross Gaming Revenue (GGR) tax on betting operators from 12% to 18%”.
Discussions around the financial burden placed on Brazil’s Bets regime follow the shelving of plans to increase the Financial Transactions Tax (IOF), which is applied to financial services, from 0.38% to 3.5%.
Finance Minister Fernando Haddad backtracked on the IOF increase amid growing concerns from the Central Bank that the measure would harm investor confidence and, as a result, the gaming market is seen as a lucrative economic lever to pull.
According to BNLData, the Brazilian betting market generates an estimated R$2.8bn (£370.9m) in monthly turnover. Between February and April, tax from fixed-odds betting contributed R$755m. That represents around 9% of the total GGR estimated at R$8.38bn.
Although an attractive proposition for the Government, any potential tax hike would represent a significant blow for the gaming industry.
A coalition of trade associations, headed by the Instituto Brasileiro de Jogo Responsável (IBJR), has called for a revision of tax policy, noting that operators in Brazil already face a substantial tax burden.
The current framework includes a 12% gaming tax, 9.25% in PIS/COFINS (similar to UK VAT), up to 5% municipal services tax and 34% corporate profit tax. Adding a potential Selective Tax – a form of sin tax under discussion – the effective tax rate could be close to 50%.
A joint statement from the coalition described the proposed tax changes as “unjustifiable from any technical, economic or public policy perspective”.
The association warn that raising taxes could prompt operators to relinquish their licences, further emboldening Brazil’s black market, which is currently estimated to generate approximately R$6.5bn to R$7bn per month.
The topic is now set to be discussed by leaders of Brazil’s Chamber of Deputies and the Senate, along with the Government’s economic team.