In July, Belo Horizonte’s mayor, Álvaro Damião (União Brasil), submitted a bill to the City Council proposing a reduction in the Service Tax (ISSQN) on betting companies from the current 5% to 2%.
The city government justified the measure by its potential to increase revenue and attract companies in the sector to set up operations in the municipality.
In the bill, the city administration reports having identified six requests made to the federal government by betting companies wishing to operate from Belo Horizonte.
The proposal also mentions that other cities in Brazil already apply a 2% tax rate, including São Paulo, Barueri, and Porto Alegre.
Among capital cities, the report found that Recife also adopted the 2% rate following a law passed in May. Meanwhile, in 2023, Rio de Janeiro’s city hall submitted a similar proposal without specifying a rate but later withdrew it from the legislative process.
For Belo Horizonte councilman Wagner Ferreira (PV), the proposal indirectly signals municipal support for the betting sector. “The social risk is very high. We don’t want BH to become the capital of Tigrinho,” he said, referring to a virtual casino-style game.
Ferreira, who usually votes with the mayor’s base, mentioned that he has spoken with colleagues who oppose the proposal, which is currently under review by the Committee on Legislation and Justice (CLJ).
The councilman also requested information from the city on the existence of awareness and support programs for people with gambling addiction (ludopathy).
When contacted, the Municipal Health Department stated that patients with compulsive gambling issues are treated through the SUS (Brazil’s public health system), under its mental health policy. However, it also said that it does not have specific data on the number of such cases.
The initiatives from various Brazilian capitals contrast with a federal executive order (MP) that aims to raise taxes on betting companies.
Currently, they are taxed at 12% of GGR (Gross Gaming Revenue – bets placed minus prize payouts). The MP, which has yet to be evaluated by Congress, proposes increasing this rate to 18%. The ISS, which is defined by municipal governments, is also levied on GGR, while other taxes are applied to profits and gross revenue.
Onofre Alves Batista Júnior, a professor of tax law at the Federal University of Minas Gerais (UFMG), states that municipalities are engaging in a kind of tax war due to the federal government's failure to regulate the issue.
“Article 146 of the Constitution states that it is the federal government’s role to resolve tax competence conflicts. The federal government should act and establish a minimum ISS rate for betting companies,” he said.
He added that, with the upcoming tax reform, municipalities will no longer be able to apply different tax rates to individual service items, as is currently the case.
When contacted, the Brazilian Institute for Responsible Gaming (IBJR), which represents about 75% of Brazil’s legal betting market, stated that it views the move by some cities to revise ISS rates as a natural effort to attract investment.
“What concerns the betting sector is the increase in the overall tax burden imposed by federal regulation that was implemented just six months ago. This creates regulatory instability and may discourage companies from establishing operations in the country,” said the institute.
The IBJR also warned that such measures could reduce the attractiveness of the legal market and encourage illegal operations, which are estimated to result in R$10 billion in lost annual tax revenue.
Source: Folha
