Created in 1991, Bill 442/91 — which regulates gambling in Brazil — was approved in the Chamber of Deputies in February of this year, but is awaiting approval by the Senate. In recent days, the Bill returned to the agenda as a possibility to increase tax collection by the State.
“Bill 442/91 is the result of a long reflection by the Chamber on the legislation of approximately 20 countries,” explains lawyer Fabiano Jantalia, specialist in Gaming and Business Law, partner at Jantalia Advogados.
“This legislation brings together advances and successful experiences in the legislation of other countries that have a much longer tradition in the exploitation of gamblinmg than ours, as is the case of the United States, Portugal, France and Italy. We sought to incorporate these good practices into the Brazilian case, but, naturally, the National Congress sought to establish some particular rules — which seem to me more like an exercise in acclimatization and adaptation,” adds the specialist.
For Jantalia, the case is — more than just legalizing — “structuring a market, a new segment of economic activity. I believe that the legalization and structuring of this market would greatly benefit the country by creating jobs and economic development that could lead to various regions of Brazil,” says the lawyer, adding that the country would also benefit from greater tax collection from these activities.
“In other countries, the gambling sector is responsible for an important share of tax revenue. The approval of a law that makes it possible to exploit the activity in Brazil would fully serve the interests of the country and society, in addition to contributing to the realization of the constitutional principle of free enterprise,” he explains.
Lawyer Marcelo Mattoso Ferreira, an eSports specialist and partner at Barcellos Tucunduva Advogados, agrees: “This market moves billions of dollars a year. If the activity is implemented as a sport, with a leisure nature, containing awareness policies and forms of auditing to avoid fraud and possible loopholes for money laundering, I cannot find any disadvantages except for the hypothesis of ineffective and inefficient legislation.”
“Furthermore, it is an excellent target for taxation, but care must be taken with the way of taxation, otherwise, it may end up creating a bottleneck and discouraging the growth of the segment. Taxation has to happen, but in a way that makes it viable and attracts investments, not the other way around. This is the challenge,” adds Ferreira.
CONTROVERSIES
The issue of taxation of the sector was, in fact, among the most controversial points of the vote in the Chamber. Fabiano Jantalia explains: “The controversy was based on two aspects: first, whether gambling should observe a tax regime that is identical, similar or different from other activities. A part of the parliamentarians understood that it should receive favored treatment, as this is a new activity in Brazil, to be stimulated, which needs investments. On the other hand, there were parliamentarians who understood that the activity, as it was potentially harmful — in their view — to society, should contribute to a slightly higher taxation. This is a cross-party debate. What it seems to me, however, is that, as it is an economic activity similar to other entertainment activities, it makes no sense to attribute a very different taxation to it.”
Another controversy, according to the lawyer, concerned the Contribution for Intervention in the Economic Domain (Cide). “There was a lot of discussion about the Cide percentage; up to 35% was considered. Cide is a very interesting tax system, because it proposes to face the so-called extrafiscality: it does not have a purely tax collection purpose, it often aims at allocating these resources to the cost of negative externalities, or possible harm to that activity. If it is a fact that Cide seems adequate in the case of the gaming industry, it is also a fact that it cannot have a large percentage, so as not to make economic activity unfeasible.”
EQUAL OR DIFFERENT
Another controversy is the fact that the single legislation of Bill442/1991 refers to very different gambling verticals such as casinos, bingos, jogo do bicho and sports betting. Do they all deserve the same legislation? For Jantalia, yes:
“I believe that, as the Brazilian state decides to look into the issue, the decision to be taken must be one: there is no reason to release one or the other modality and not the other. Either the sector is released or not released. To a greater or lesser extent, all types of games face the same challenges and give rise to the same opportunities,” he explains.
“The industry needs to be considered in its entirety. The discriminatory treatment between game modalities is not justified from a technical point of view, because they all involve the same elements of luck. The distinction that was sought to establish was more related to a greater proximity of this or that modality to criminal activity, but this type of reflection has no parallel in world legislation,” adds the lawyer.
Marcelo Mattoso also argues that, although each modality has its own particularities, “you can treat all of them in a single legislation, as long as there is differentiation where necessary.” “The legislation needs to be efficient so that the integrity of the market as a whole is maintained,” he concludes.
Source: GMB
