Sports betting was legalized by Law 13,756, enacted at the end of 2018, and since then there has been great expectation for the regulation of this sector, which expires in December this year. With an expressive dimension and potential, Brazil has increasingly attracted the attention of international operators of “bookmakers”, who anticipated the regulation and, over the last few years, began to promote their offers in Brazil in an increasingly explicit, but without leaving a cent to the government coffers.
The betting market in Brazil already exists, and it is billionaire. We are talking about an activity that, in the regulatory gap between the law passed in 2018 and the deadline for regulation, has developed vertiginously and already moves around R$ 160 million (US$ 31.4m) daily in the country, without any control or taxation.
Today, there are hundreds of brands offering sports betting and online games freely, without being accountable to society. With the regulation, the government would assume its responsibility: to protect, inspect and tax.
The sport has exploded, it is a reality and is part of the daily life of thousands of Brazilians. Brands are already part of the country's routine, whether in TV advertisements, on the jerseys of the main football teams or on news sites. Its existence is no longer in question. Having well-defined operating rules would contribute to the consolidation of the market and to the construction of a healthy relationship between society, bettors and operators.
A recent survey by the specialized portal BNLData points out that, by not regulating sports betting, between taxes, grants with licenses and income taxes on prizes, Brazil fails to collect approximately R$ 6.4 billion (US$ 1.25b) in 2022 alone.
BNLData detailed the estimate, considering that the tax burden of Law 13,756/18 is equivalent to 18.5% of revenue and that the online betting market moves around R$60 billion (US$ 11.8b). Discounting the prizes, operators have an estimated turnover of R$ 3.2 billion (US$ 630m). This taxed amount could generate around R$600 million (US$ 118m) in taxes for the government in 12 months. Adding the Income Tax on company profits, another R$ 200 million (US$ 39.2m) would be collected.
In addition, there is still the Income Tax on the award of the activity as provided for in the approved legislation. Considering that 20% of the premiums paid will be above the exemption limit (R$ 1,903.98 – US$ 374), taxed at the rate of 30% of the Income Tax on prizes, withholding at source would be equivalent to another R$ 3.4 billion (US$ 666m).
Finally, according to the text of the draft regulatory decree, each grant will have a cost of R$ 22.2 million (US$ 4.35m) for a period of five years. Assuming that at least 100 of the 600 current operators decide to acquire a license, this would generate another R$2.2 billion (US$ 4331m) immediately for public coffers.
Each day of delay in publishing the regulatory decree by the Presidency of the Republic, Civil House and Ministry of Economy, causes the country not to collect and leaves Brazilians without protection against potential abuses by operators. And there's more: if this regulation doesn't come out by the December deadline, we run the risk of seeing the market go to court, with operators internalizing their businesses based on legal protections. We've seen this movie before, and it didn't end well. In short, regulation is a matter of responsibility, a “win-win” for Brazil, given the reality.
Andre Gelfi
Managing Partner of Betsson in Brazil
