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Sports betting regulation government must start thinking beyond taxes (1)

The regulation of sports betting has never been so close to happening in Brazil. With the current scenario favoring the segment’s operation in the country, we are seeing a wave of debates and meetings to define the future of the sector in the coming months and years.

The current Minister of Finance, Fernando Haddad, is struggling to establish fair, safe and profitable taxation. However, we cannot forget that regulation does not depend only on this issue and that many others must receive the same attention.

It is necessary to understand the social role that sports betting can play and think of tools to combat addiction. An article was published on UOL – in the Olhar Olímpico column by Demétrio Vecchioli – that reports this need and addresses some paths to follow.

Read the full news on the regulation of sports betting

The federal government must publish, within a month, or even sooner, the set of measures to regulate sports betting in the country. Since the subject began to be seriously discussed in the press and by public opinion, two points have guided the conversations: the need to combat match-fixing and how much money the government can raise. But the debate is much more complex, because it involves social costs — pathological and violent behaviors that derive from gambling addiction, for example.

A study by the Study and Research Center of the Senate Legislative Consultancy, published last week, sheds light on this. The document cites a survey by the state of Victoria, Australia, which found that, in the years 2014 and 2015, 1.6 billion Australian dollars were collected in taxes. But the social costs of gambling have been estimated at almost 7 billion. More than quadruple.

Anyone who has been to England knows how serious the problem of sports betting there is. There are physical bookmakers everywhere, as common as convenience stores, where people, mostly men, spend the day watching events on TV and betting non-stop.

In Japan, the experience of entering a bookmaker during the Tokyo Olympics was impressive. The punters sat in extremely comfortable seats, designed for maximum attention on the huge, individual screen, which showed horse racing. It was visibly possible to spend a whole day there, betting.

With the exception of a small group of gamblers who have perfected tactics to get away with it, the vast majority just lose money. With the regulation of sports betting, part of the loss of the bettor/citizen and the profit of the bank will return to the government in the form of a tax. But will the account pay off?

The Senate study cites that several academic studies indicate that, in the case of casinos, the impact on government revenue is short-term and is restricted to the entertainment and hospitality sectors. What does not happen when betting is online: after all, the bettor does not leave the computer and there is no gain in the economy – the relationship is direct with the site.

The conclusion of one of the studies mentioned is that “the economic impacts are negative, with a reduction in tax collection by local governments (substitution effect), use of credit cards for gambling and social problems, such as pathological behavior and disintegration of families”

Let’s think about the following example: a worker, after paying all his expenses, has R$ 200 left in his account. An extra budget he can spend on leisure – going to a concert or a football game, taking the family out to dinner or saving for a trip at the end of the year. Any of these options will make the wheel of economy turn: with the ticket, with food, with transportation.

But when that money goes to a betting site, the benefit is unique and exclusive to the owner of the site, an international corporation that, almost always, is headquartered in a tax haven. It is the “substitution effect”, mentioned above. The tax collected from betting is the tax that is not collected in another sector.

Another two points of the Senate study: “the effect of the diffusion of the sports betting market on the family budget, the ability to save and indebtedness, especially in low-income families, is still unknown”. And: “it is necessary to consider the substitution effect between betting modalities, with online sports betting tending to absorb old bettors and attract new ones.”

The study cites costs associated with health (new beds and physical and mental health professionals, due to the increase in cases of addiction), social security (increase in sick leave and disability retirement for possible dependents) and administrative costs (all regulations require to inspect). Not to mention the costs of educational campaigns.

Another interesting fact: in Germany, replacing 10% of offline games (such as traditional lotteries) with online games increases the possibility of someone developing problematic gambling behavior from 8.8% to 12.6%. The Mega bettor, or the Jogo do Bicho (which, it should be noted, is a criminal offence), knows that the draw takes place with a certain regularity and he can only bet from such to such a time. In online, there are options all the time. The option: “who will score the next point” in a tennis game, for example, is a continuous even or odd.

In the last 10 days alone, three associations representing the betting sector were created, which try to influence discussions in the government and, later, in Congress. Lobbying is already strong for regulation with minimal tradeoffs.

An example was a column published last week criticizing the license fee for each site, which can reach R$ 30 million for five years. The argument is that smaller companies would have to leave the country and, with that, withdraw their sponsorships from football clubs. But, given the penetration of these same clubs among the underage public, the country should be discussing whether it is worth having advertising for bookmakers on the chest of uniforms.

Finally, the study cites six issues that, I think, should serve as a recommendation:

  • Prohibit entry bonuses on betting platforms;
  • Banning the offer of credit and loans (so that no one becomes indebted because of gambling);
  • Prohibit the use of credit cards (idem);
  • prohibit disclosure of odds during sports broadcasts (to reduce impulse betting);
  • prohibit advertising directed at young people;
  • prohibit advertising directed at young people;

I do not believe that it is possible to go back on the authorization for sports betting and I am absolutely sure that it is necessary to regulate them. But it seems clear to me that the gaze of the public debate is biased towards the interests of the economy and football clubs. Olympic sports are barely considered, not least because they will have a very small slice of the cake, since they have a negligible participation in the betting market.