Brazil Proposes Online Gaming Taxation to Balance Income Tax Burden with Betting Revenues
Brazil's national sports betting market, yet to go live, is moving a step closer with the nation's Finance Minister, Fernando Haddad, expressing plans to tax online sports betting and casino sectors to offset alterations in individual income tax rates.
President Luiz Inácio Lula da Silva unveiled a change in the country's Income Tax exemption limits in February, elevating them from BRL1,903.98 to BRL2,640 (US$368 to $509). This alteration means the government confronts a revenue loss.
Approximately 13.7 million taxpayers are predicted to cease income tax payments after the change, resulting in the government failing to gather around BRL3.2 billion (US$617.92 million) this year. By 2024, the impact could almost double, according to government projections.
To counterbalance this loss, the government is considering online gambling taxation. Haddad has unveiled a revised tax plan incorporating these provisions, which has the president's backing, as per the news outlet Agencia Brasil.
Haddad and the Ministry of Finance (MoF) have already submitted a proposal for online sports betting.
Although there have been no official announcements regarding when federal sports betting regulations will be implemented, individual states have been vigorously working towards launching their markets. Rio de Janeiro, Paraíba, and Minas Gerais are already on board.
Expansive Market, Scant Regulation
Haddad is still reviewing the feasibility of the new online gambling tax and refining revenue estimates. An anonymous Ministry of Finance insider confided in Agencia Brasil that it will generate between BRL2 billion to 6 billion (US$386.2 million to $1.16 billion) annually.
The current sports betting market in Brazil is colossal but poorly managed. Bookmakers sponsor all 20 soccer clubs in the first division of the Brazilian Championship, and there are approximately 450 active gaming sites in the nation. Nevertheless, none of these pay any taxes.
The government has previously claimed that it loses between BRL5 and 7 billion (US$965.5 million and $1.35 billion) annually in tax revenue.
Lapsed Deadlines
Former President Jair Bolsonaro failed to meet deadlines to regulate sports betting last year. Congress had already drafted the framework for approval but Bolsonaro missed the December 12 deadline to sign.
Despite having several years to introduce nationwide regulated sports betting, Bolsonaro and his administration allowed it to remain unreachable, denying the government – and Brazilians – potentially hundreds of millions of dollars in revenue earmarked for health programs.
The path forged by the Lula government seems to indicate a commitment to advance regulated gambling across various sectors but without drawing excessive notice. Changes are in motion. Brazil could soon join several other Latin American countries in offering well-regulated gaming markets.
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