Based on the queue of roughly 289 license applications currently pending with the Secretariat, the National Association of Gaming and Lotteries (ANJL) projects a R$2.4 billion (US$ 430m) shortfall in license fees that would otherwise be paid by these operators—funds that could vanish if companies abandon the process over fears of further tax increases.
Additionally, the association foresees further losses of up to R$400 million (US$72m) from deposits that would have been made in the form of federal public bonds as part of the licensing requirements for these companies.
According to ANJL, the total amount of R$2.8 billion (US$ 503m) exceeds the additional tax revenue expected from raising the tax burden on already licensed operators. This figure is equivalent to the sector’s total revenue between January and May of this year.
In June, the Lula administration proposed, via a provisional measure, a series of compensations for rolling back the IOF increase. Among them was a 50% hike in the betting tax rate—from 12% to 18%.
However, the industry argues that this increase creates legal uncertainty, since the 12% rate was established under the law that formally regulated Brazil’s betting market, which has been in force since early this year.
Plínio Lemos Jorge, president of ANJL, believes the government should focus on increasing revenue by encouraging illegal Bets to become regulated. He warns that raising taxes on companies that are already licensed will backfire, discouraging renewals in the future.
ANJL and the Brazilian Institute of Responsible Gaming (IBJR) estimate that 60% to 70% of all activity in the sector currently takes place through unlicensed platforms.
“There comes a point when the illegal market starts to gain competitive advantages. At that point, we simply can’t raise taxes, because we’ll start losing market share. Companies planning to enter Brazil will back out. Companies already regulated might stop operating,” says Lemos Jorge.
Last week, Minister Fernando Haddad defended raising taxes on betting companies, arguing that they “make a fortune in Brazil, generate very few jobs, and send the money collected here abroad,” offering little benefit to the country.
Asked about this statement, Plínio Lemos Jorge of ANJL said he believes Haddad was referring to illegal Bets, which pay no taxes and bring no advantages to Brazil.
“When the minister talks about companies ‘out there,’ he means those that don’t hold licenses in Brazil.”
Source: Painel S.A – Folha
