The Brazil government is reportedly considering retrospectively taxing betting companies for their activities during the lengthy grey market period prior to regulation.
According to local news outlet Metrópoles, the working group between the Secretariat of Prizes and Bets (SPA) and the government’s Federal Revenue Service (RFB) is discussing the possibility of taxing companies active in the grey market.
This grey market period lasted much longer than expected, with former president Michel Temer first signing online legislation into law in December 2018, with five years passing before the Chamber of Deputies gave the final green light.
With full online regulation coming into force on 1 January this year, the working group, named the GTI-Bets, was announced the following week to ensure the betting sector in Brazil adheres to its tax requirements.
The creation of GTI-Bets seemingly alarmed a number of operators, especially among those who had invested heavily in jockeying for position to gain brand awareness ahead of regulation.
Robinson Barreirinhas, special secretary of the RFB, told the parliamentary inquiry commission on betting in March that the government should pursue the taxes that would have been paid in the grey market.
And it now appears the government will do exactly that, with Metrópoles reporting the retrospective taxes could raise up to BRL12.6 billion ($2.3 billion) for government coffers.
More tax pressure for operators in Brazil
Despite less than eight months having passed since regulation began in Brazil, it appears the gambling sector could soon be facing higher taxes, alongside any retrospective charges.
On 11 June, the government published a provisional measure increasing the tax rate on operators’ GGR from 12% to 18%, a 50% hike.
Initial attempts to generate tax revenue by increasing the rate on financial transaction taxes were scrapped due to political pressure. The government subsequently turned its attentions to the gambling sector to plug the financial gap.
The provisional measure came into effect immediately after its publication. However approval by both the Senate and the Chamber of Deputies is needed before the measure is made permanent.
The tax rise pushes the overall burden on operators to around 50%, with many industry stakeholders warning it’s an excessive rate that risks making licensed operations unviable.
This could aid the black market, with the Brazilian Institute of Responsible Gaming stating the market share of illegal operators could increase from 50% to 60%.
Even more uncertainty could be on the way for Brazil’s gambling sector, as the government weighs up taxing operators on their grey market activities.