Everyone who pays attention to the theme of games of chance in Brazil is sure of one thing, the game will be legal in Brazil. The question is complicated, however, when we are asked when it is time for this to happen. Using a delicious expression widely used by my Brazilian friends, I add that the legislator just needs to use the “pulo do gato” (magic bullet).
The recent changes in the legislative scenario in Brasília and the deep crisis caused by a pandemic that has been very harassing for the Brazilian people, may indicate that the moment of the so-called legalization of games of chance, may be closer than ever. And if we believe, as I do, that we are close, it will not be entirely inappropriate to think about what the challenges that the legalization of an activity like this may present for a country like Brazil may be.
i) Legal Basis
One of the first challenges to be considered by the legislator will be the legal framework to be given to the model of exploitation of the various types of games of chance. In an attempt to simplify the very diverse operational models that exist around the world, we would say that the Brazilian legislator could effectively consider two different models of legal framework. We refer specifically to the concession model used for land-based operations in countries with a similar legal system to Brazil, such as Portugal and Macau; and the license model used in countries such as the United States, United Kingdom and Singapore for land based casinos and in countries like Portugal, Spain and other European countries, for online operations.
Since this is not a legal text, I will not discuss the legal theory of each model at length. I therefore leave only a few notes on the matter.
The concessions are normally awarded for situations of exploration of activities that would initially be destined to the states (telecommunications, transport, energy, etc.) and in which the capital invested to develop the infrastructures necessary for the implementation and exploration of that same activity is very significant. This is, for example, one of the reasons why concessions have very long terms – 20 or more years. Afterwards, the exploitation of the concession for a certain activity is often preceded by the payment of a premium for the attribution of the concession, which is then completed either by the payment of an annual reinforcement, or by the payment of another amount defined between the contracting parties, which, in the case of the exploitation of games of chance, may for example be the payment of a tax on the gross revenue from operations and the payment of other types of financial consideration. Another characteristic of the concession is that at the end of the concession term, the objects and properties attached to the concession, revert to the state.
In the case of licenses, they are intended to authorize a particular individual to explore an activity that would be prohibited, were it not for the issuance of that license. By the way the license is designed, it would apply to activities that, for example, would not require such a significant investment, which is why they are naturally granted for much shorter periods of time (one or five years). In the case of licenses, an amount will be paid for issuing that license and then an amount to be paid, for example as a tax. In this situation, the assets do not revert to the state, maintaining their ownership in the legal sphere of the licensed entity.
Having made this distinction of a legal nature, we would say for example that, for land-based casinos, namely those that fit into integrated resorts, the legal framework to follow could be that of the concession as this type of infrastructure will involve significant investments that will certainly take several years until they are effectively amortized. At the end of the concession, both the properties built and the remaining assets allocated to the concession would revert to the state.
On the other hand, both territorial-based operations, of smaller dimensions such as Bingos, engine rooms or sports betting, or all online operations, as they do not involve such significant financial investments or other types of additional obligations, would certainly take less time to be amortized so that the term of the respective licenses could also be much shorter.
ii) Taxation Model
As far as we are aware, Brazil has an extremely complex fiscal reality. This complexity can be confused with a lack of clarity or transparency in the tax system and act as a blocking force on international investment. It is therefore important to define a fiscal model that stands out for the simplicity of the formula for calculating the tax base and also for the reasonableness of the percentage to be applied as a tax due for the exploitation of games of chance. A high and difficult-to-define rate will discourage, for example, operators who currently operate in the so-called “black market” to legalize their operation.
On the other hand, the essential focus of the legislator should be, to bring to legality, all those who until today operate in the so-called “black market” making it possible to collect taxes for this operation.
Hence, the central point to be considered should always be the gross revenue raised by the operators of the most varied types of gambling, after which a tax rate will be applied on that amount. This taxation format is perfectly transparent, clear and easy to calculate, both for operators and for the future regulator. In addition, fees may be charged for the installation of tables and gaming machines, as well as an additional annual fee that could vary depending on the amount of revenue for each operator. Furthermore, in the concession model, there may also be a system of counterparts for investment in public equipment such as road access, construction of support equipment and or subsidies for culture, sports and religious activities, for example.
The ultimate goal is that the taxation regime is simple, fair and attractive to all entities that wish to operate in the Brazilian market. It is therefore prudent for the legislator to realize the importance of creating a tax regime that complies with these requirements and does not act as an obstacle to the legalization of the industry.
iii) Types of Game to Legalize
This is one of the most complex topics in the discussion of games of chance in Brazil. On the one hand, part of the supporters of legalization is in favor of a regime that legalizes all forms of gambling known and or existing in Brazil. From animal games to online sports betting, casinos and bingos, the goal is to bring to lawfulness the diverse type of operators that are already operating in the country today.
On the other hand, there are those who believe that the legalization of one or some forms or modalities of gambling, such as that of integrated resorts, will be the fastest and most effective way to move towards the legalization of the industry.
This being a text of opinion, I cannot fail to say that although I understand that a country like Brazil, where the game industry has a diversity that cannot be ignored by anyone who has the power to decide, it is necessary to face the problem of legalizing games of chance with some pragmatism. In other words, if the ultimate goal will always be to legalize all forms of gambling, leaving none in a situation of clandestinity, it is also important to reflect, which or which of the game modalities will be more impacting for Brazilian society and then be considered a priority from the point of view. view of the legalization process, which is by nature quite complex and demonstrably slow.
That is, what type of operation will be able to attract greater national and / or foreign investment that would justify being legalized separately and in advance compared to the others? Which operation will create more new jobs? Which operation will raise the most revenue for public coffers? And which will have the greatest impact on the tourism and entertainment sector?
In my opinion, they are called integrated resorts. This type of enterprise will bring to Brazil the main global players, bringing with it not only the billions of dollars to be invested but also all the know-how of exploiting successful properties. On the other hand, both casinos, hotels, restaurants, shopping malls, entertainment arenas, exhibition centers and other facilities existing in that type of development will employ tens of thousands of citizens and will be points of attraction for local and foreign tourists. foreigners. As for the revenue generated, it is also expected that a large undertaking will be able to raise significant amounts for the state and naturally for the respective operators.
In short, Brazil will always have to legalize all existing forms of gambling, but it cannot remain hostage to the argument that either all forms of gambling are legalized or none are legalized. Imagining that it will be easier to legalize a model with proven results in several countries around the world and that it could bring great investment to the country, as well as create thousands of jobs, the solution would be to no longer delay the legalization of at least one type of exploitation – that of integrated resorts.
If, by any chance, the process of legalizing all modalities can be closed quickly and does not continue to be delayed as it has been up to now, then advance the legislator with the generalized regulation of any and all forms of gambling, for the benefit of all.
These are just three of the main challenges that the Brazilian legislator will have to face in the process of legalizing games of chance. The task is not easy but in addition to highly qualified professionals, Brazil can profit from the fact that it is one of the few jurisdictions in the democratic world where it is not possible to play legally. There are, therefore, dozens of examples that can be analyzed in an attempt to choose those that are the best practices in the industry and those that best adapt to the particular Brazilian reality. But we need the “pulo do gato” (magic bullet).