São Paulo took the lead in the race. In December 2022, the capital of São Paulo state approved a reduction - from 5% to 2% - of the ISS (Tax on Services of Any Nature) for entertainment activities. Lotteries, sports betting houses, bingos and fantasy games are contemplated in the law. Rio de Janeiro intends to approve the same reduction in the coming weeks, extending it to measure for all online sports betting operation services.
Bill No. 1822/2023 was created by councilor Pedro Duarte (NOVO) with the aim of making Rio a more competitive city for the sector. In addition to generating new jobs and investments, the establishment of bookmakers in the Rio de Janeiro capital would prevent the massive flight of qualified professionals to São Paulo.
“From an economic point of view, there are several benefits for the city. The first is the collection of the entire operation in Brazil. According to federal legislation, the company will collect taxes (ISS) for the entire operation in Brazil at its headquarters. The second major benefit is job creation. Businesses need marketing, technology, customer service. Naturally, a good part of these jobs are generated in the place where the company sets up its headquarters. And the third point is the development of this sports betting ecosystem, which means more sporting events in the city being sponsored, for example,” said Pedro Duarte.
The potential tax collection justifies behind-the-scenes moves. According to minister Fernando Haddad, the regulation of online sports betting should generate a total collection of between R$ 2 billion (US$ 380m) and R$ 6 billion (US$ 1.15b). Values may still vary according to the new rules imposed by the Government.
“Talking about values in this market is very complicated, as there are still many variables. If federal regulation is bad, the amount in dispute will be less. If it is good, it will be bigger,” explained Udo Seckelmann, head of the Web3 & Gaming department at Bichara e Motta.
Next steps to beat the competition
If the City Council approves Bill Nº 1822/2023, Rio de Janeiro would be equal to São Paulo in terms of taxation. The next steps in the battle to attract bookmakers include the training of professionals and the presentation of other differentials in the capital of Rio de Janeiro.
“We already had meetings at City Hall, between players from the betting sector and the Public Power, exactly to take the next steps and become even more competitive. For example, companies pointed out that the workforce is specialized in this field. The City Hall talks with the actors thinking about models to train professionals specifically for this area. That would be another huge differentiator. And there is also the identification of Rio de Janeiro with the creative economy, with entertainment and sports. It is a natural vocation of the city, and we are working to show these companies that Rio is ahead of São Paulo in these areas,”commented Pedro Duarte.
The vision is shared by Chicão Bulhões, municipal secretary of Economic Development, Innovation and Simplification of Rio. He also highlighted the City Hall's project to make the city of Rio de Janeiro the technology hub of Latin America.
“The ISS is the main trump card that municipalities have to attract online sports game companies. But the City Hall, and we at SMDEIS, are working every day to offer a better city for companies: with transportation, qualified labor, in addition to the attractions that Rio already offers.”
“We can only do this with good projects, chasing results. At the secretariat, for example, we have the ‘Programadores Cariocas’ project, which should train 5,000 young people by next year. We are also investing in technology and innovation projects. The objective is to leave the transformation of the city of Rio into the technology hub of Latin America as a legacy for the population,” said Bulhões.
CEO of Galera.bet, Marcos Sabiá explains that, before choosing the host city, bookmakers need to consider a series of variables under the marketing aspect.
“In addition to tax issues, such as ISS and other taxes, the bookmaker must define the headquarters in Brazil taking into account the strategic market. If it will be a business with national or regional pretensions, if it will have the expectation of using existing talent in the region, if there will be ease of technology, supplies and services. The definition of the host city will necessarily go through these discussions. Like any other business, these variables must be considered for the final decision,” explained Sabiá.
Current scenario of sports betting in Brazil
A law passed in 2018 authorized the operation of sports venues in Brazil. It was determined that the regulation of this market should be published within a period of up to four years, which was not done. Therefore, companies continue to operate in the country with headquarters abroad and the Brazilian government is unable to tax them.
It is worth noting that, in recent years, companies in the sector have grown in popularity in Brazil. Estimates indicate that more than 400 companies operate in the Brazilian market and that around R$ 12 billion (US$ 2.3b) will be moved in 2023. There was even an explosion of bookmakers within the sports sponsorship market. Of the 20 clubs in Série A of the Brasileirão, only Cuiabá does not have any type of commercial partnership with companies in the sector.
After meetings between the Ministry of Finance and representatives of the ANJL (National Association of Games and Lotteries) in the last week, the expectation is that the regulation of games will be formalized by the government, possibly in early April, through a provisional measure. The new rules will come into force 90 days after the publication of the PM.
Source: Lance!
