The minister stated that the government will simultaneously present measures to reduce by 10% the tax benefits that are not enshrined in the Constitution (which would exclude, for example, Simples Nacional and the Manaus Free Trade Zone), in addition to proposals to cut primary expenses, which will be the subject of a new meeting.
“I would divide what we discussed into four interconnected themes. A Provisional Measure that will regulate revenue-related matters, which mainly targets the financial market. Additionally, a recalibration of the IOF (Tax on Financial Transactions) decree, measures on tax expenditures, and also on primary spending,” the minister said.
The Provisional Measure (MP) includes the taxation of currently exempt securities, such as Real Estate Credit Bills (LCI) and Agribusiness Credit Bills (LCA), with a tax rate of 5%; and an increase in the taxation on “bets,” which will rise from 12% to 18% of the gross betting revenue. Moreover, the CSLL (Social Contribution on Net Profit) will no longer have the standard rate of 9% and will operate only with the higher rates of 15% and 20%.
Haddad explained that the 18% rate on Gross Gaming Revenue (GGR) from ‘Bets’ was the original proposal from the Ministry of Finance when the sector’s regulation was submitted to Congress.
“GGR is the difference between the prize payouts and the betting revenues. The 18% was our original rate,” he said.
The minister said he informally shared with meeting participants the initial data on the size of the sports betting and online gaming market.
“We are going to present the first data from the regulation of bets — the size of this market, how it is structured,” said the minister, emphasizing that this is the first time such a survey is possible, as the sector's regulation was implemented by the current government.
However, the proposed increase in betting taxes is expected to face resistance in Congress, particularly in the Chamber of Deputies. Lawmakers fear that the tax hike could drive more players to the illegal market.
With the proposed increase of the GGR tax rate to 18%, the total tax burden could exceed 56.25%, which already raises serious concerns in a sector that has been meeting all the requirements for obtaining licenses.
Nevertheless, this potential excessive increase in the GGR rate and the possible approval of overly strict regulations on advertising change the rules of the game and directly impact return on investment projections.
Last week, amid the rumors, representatives of the sector had already anticipated highly negative consequences, such as growth of the illegal market, disinvestment in the sector, and a significant drop in new license requests for betting operations.
Source: GMB
