The rapporteur of Provisional Measure (MP) 1,303, Congressman Carlos Zarattini presented the report of the MP – which became known as the MP of alternatives to the IOF (Tax on Financial Transactions) – on Wednesday (24). Among other measures, the report confirmed the increase in the tax rate from 12% to 18% on gambling and other types of lotteries, including sportsbooks.
The report was presented during the Special Joint Committee established to analyze the provisional measure. During the text’s review, a collective review was granted, allowing more time for analysis.
Among the alternatives to the IOF (Tax on Financial Transactions), the Ministry of Finance has determined an increase in the tax rate for bookmakers. This increases the tax on revenue from fixed-odds bets (sportsbooks) from 12% to 18%.
The tax rate applies to the Gross Gaming Revenue (GGR) paid by companies. In this case, it’s the difference between the total wagered amount and the total paid in prizes and other taxes.
Repercussion of the decision
Experts and institutions working in the betting and lottery industry in Brazil had already expressed their views on the consequences of this increase. The main one is the possible growth of the illegal market in the country.
This is because, today, the underground betting market represents 51% of the sector, and, with the increase in taxation on regulated companies, the illegal market tends to have more resources to offer more facilities to the bettor, as it is not obliged to adapt to the new taxation.
According to the Brazilian Institute of Responsible Gaming (IBJR), the informality of part of the betting sector represents an annual loss of revenue of around R$7.2 billion and R$10.8 billion.
Furthermore, the entity indicates that after the advent of the tax reform and with the increase in the burden provided for in this Provisional Measure, the tax burden of the sector will increase to around 41%.
Therefore, in addition to pushing the betting market into informality, experts believe that the solution would be to combat illegality, consolidating the regulated market, collecting revenue, and protecting consumers.
Finally, experts make it clear that abruptly changing taxation, with the increase in the contribution rate on gross revenue from 12% to 18% just nine months after the regulation began, creates legal uncertainty, undermining the confidence of companies that have invested in the country.
This instability threatens not only the continuity of operations, but also the credibility of the business environment in Brazil.
