The high tax rate contemplated by Brazilian President Luiz Inácio Lula da Silva’s (Lula) Provisional Measure 1182 (MP) to regulate sports betting could strangle that market in the crib and encourage illegal gambling, say some experts in the sector.
Lula sent the MP to the Chamber of Deputies for ratification July 25. It has 120 days for the legislature to ratify it before it becomes law. It could be sent back to the president for modification. There have already been more than 40 requests to amend it.
Minister of Finance Fernando Haddad has projected an initial collection of BRL 2 billion (about $420 million), which he says could eventually reach BRL 12 billion (about $2.5 billion).
The nascent sports betting market faces tough times according to economic experts interviewed by the newspaper Diário Do Comércio. They say the regulation is necessary but the 18 percent tax rate could discourage investment in the industry and fuel the black market.
Magnho José, president of the Brazilian Legal Gaming Institute and editor of BNL Data, told the newspaper that the 18 percent rate on revenue obtained from wagers, once things such as prizes and taxes are deducted, could make the total paid 29 percent or even higher.
National Association of Games and Lotteries (ANJL) President Wesley Cardia told the newspaper the pros and cons of the proposal. “By regulating, the government offers measures that prohibit the performance of illegal sites that have no commitment to honest and responsible gambling,” he said, but added that a total of taxes possibly exceeding 30 percent, “may generate undesired effects for both operators and the government.”
Brazilian Institute of Responsible Gaming (IBJR) executive Arthur Silva added, “Portugal, which practiced high rates, did not manage to bring even half of the companies operating there to the regulated market. France, which also operated at high rates, got to the point where operators gave up their licenses after the 10-year agreement because it wasn’t worth it. The illegal market ends up absorbing everything.”
Silva told Diário Do Comércio: “Never before have soccer team jersey sponsorships been so expensive in Brazil. But you have to remember that they are not paying taxes. Tomorrow the taxes that come in may impact.” He predicted that the government would not be able to collect the BRL 12 billion ($2.5 billion) it is projecting.
The majority of the amendments filed so far to MP 182 seek to control where the taxes raised will be spent, which currently allocates 10 percent for Social Security, 2.5 percent for public security, .82 percent for education, 3 percent for the Ministry of Sports, and 1.63 percent for the National Sports System, per Yogonet.
Meanwhile, the Provisional Measure is provoking opposition to a more comprehensive gambling bill now stalled in the Senate by the Evangelical party, Yogonet reported August 1.
That omnibus gambling bill includes online gaming, bingos and casinos, and has strong support from the government, as demonstrated when Vice-President Geraldo Alckmin and Minister of Tourism Celso Sabinomet had meetings with members of the sector.
Previous tourism ministers have urged passage of the bill because legalizing resorts and casinos would favor tourism. President of the Chamber, Arthur Lira, has also endorsed it.
However the evangelical party has 130 deputies and 12 senators. Sóstenes Cavalcante, vice president of the Evangelical Parliamentary Front (FPE), called the bill an “affront to the evangelical faith” and urged the government to “combat gambling.” Yogonet reports that the PFE seeks to enlist Catholic deputies and the National Conference of Bishops of Brazil (CNBB).
These groups claim legalized gambling will contribute to broken families by encouraging debt.
