Brazil set for 16% GGR tax rate as sports betting regulation edges closer
Much-anticipated regulatory launch expected soon but 30% tax on player winnings above £340 likely to harm channelling
The Brazilian government is proposing that online sports betting operators pay 16% on gross gambling revenue (GGR) as part of plans to regulate one of the industry’s largest and most well-established grey markets.
Lawmakers are in the process of finalising the regulation around sports betting in South America’s most populous nation and have released a provisional measure detailing the upcoming legislation.
The 16% tax rate will be welcomed by operators as the Brazilian government has seemingly adopted a pro-industry approach in its tax rate.
The money collected will be used to fund public safety, basic education, sports clubs and social support throughout Brazil.
Of the 16%, 10% will be used for social security, 1% will go to the Ministry of Sports, 1.63% to sports clubs and 0.82% for education.
The remaining 2.55% will be directed to the National Fund for Public Security, which will work with stakeholders to combat match-fixing and money laundering.
Despite the favourable tax rate on GGR, which is only slightly higher than the UK’s 15%, operators will be less enthralled by the government taking a hefty cut of bigger wins, as is done with all lotteries in Brazil.
Under the proposals, player winnings above BRL2,112 (£342) will be taxed at a rate of 30%, leading to fears higher-spending gamblers will opt to bet with unlicensed operators instead.
Last month, Regulus Partners said in a note that a 30% winnings tax presents a “serious channelling trap” and that the 10% of customers who will likely trigger the tax would probably account for 70% of total revenue.
In an effort to prevent bettors turning to the unregulated market for sports betting and igaming, unlicensed operators will be barred from advertising in the country, with the threat of hefty fines for taking bets off Brazilians to act as a deterrent.
In terms of marketing, licensed operators must develop information campaigns to raise awareness of gambling-related harm in an attempt to pre-empt a spike in problem gambling.
The government, which first authorised sports betting in 2018, is also working with the National Council for Advertising Self-Regulation to develop a marketing code.
Elsewhere, the regulation proposes the creation of a secretariat within the Ministry of Finance, to act as an industry regulator.
The regulator will be responsible for approving licence applications and monitoring the market. It is unclear at this stage how much operating licences will cost.
The provisional measure has been sent to various departments within the Brazilian government for review, and will then be passed to president Luiz Inácio ‘Lula’ da Silva to sign into law.