Senators in Brazil have approved a plan to impose to a 15 per cent tax on online gambling deposits, further weakening the regulated market.
The approval of the 15 per cent deposit tax is seen as a major win for the thousands of unlicensed gambling websites that serve players in Brazil without a local license, prompting an outcry from the country’s licensed operators.
Brazil’s National Association of Games and Lotteries (ANJL) described the new tax, which is part of Brazil’s Legal Framework to Combat Organised Crime, as a serious contradiction.
“By overtaxing the regulated market, it creates direct incentives for the migration of users to illegal platforms, many of them operated by criminal organisations with transnational operations. In practice, the effect tends to be the opposite of the stated objective of the proposal,” said the ANJL.
“By weakening legal operators, who comply with strict requirements of compliance, prevention of money laundering, consumer protection and cooperation with authorities, the State reduces formal collection, weakens inspection and expands the economic space of the clandestine market, which does not pay taxes or follow rules.”
The proposed tax comes less than a year after the launch of Brazil’s regulated market and remains subject to approval by the Chamber of Deputies.
Brazilian online gaming industry association IBJR commented: “Under the pretext of financing public security, the text makes a historic mistake: it hands over to clandestine platforms — many financed by criminal factions — the greatest competitive advantage the market has ever seen.
“By taxing the bettor’s deposit at 15 per cent, the State decrees that R$100 is worth only R$85 in companies that follow the law. In the clandestine market, the same R$100 is worth its full value. It is a direct incentive to migrate underground.”
The IBJR cited figures which suggest that 51 per cent of gambling platforms in Brazil operate illegally, transacting R$78 billion annually.
The association also questioned the arithmetic behind the proposed tax.
“The measure is based on a non-existent financial premise,” said the IBJR. “There is talk of raising R$30 billion annually from a regulated market that today earns about R$36 billion. It is therefore projected to charge in taxes almost the equivalent of the entire revenue of the regulated sector, which is mathematically impossible and makes formal economic activity unfeasible.”
Brazil’s nascent regulated gambling market faces further jeopardy from a proposal to apply a retroactive tax on licensed online gambling operators, covering the five years prior to market regulation.
The complete disarray in the Brazilian gambling market during its first year of regulation has left many licensed operators questioning their investment.