The electronic betting market on sports games has been gaining more and more space and notoriety with consumers and the media. The Minister of Finance, Fernando Haddad, has spoken in recent days about the taxation of the electronic betting market on sports games, which already happens in other countries. The measure would be taken as a way to offset the announced changes in the Income Tax table.
At the same time, the digital lottery game market is in talks with Congress to approve regulation for the sector. According to data released by the Association of Lottery Games Digital Intermediators (AIDIGLOT) in partnership with the projects division of the Getulio Vargas Foundation, with the regulation, lottery collection would grow 140% in Brazil.
The higher the collection, the greater the transfers from lotteries to social projects, which today corresponds to 45% in the country, reinforcing that a regulated market and tax collection go hand in hand, although the digital intermediaries that operate in Brazil are already taxed.
In early October 2022, Brazil experienced the biggest regular prize of the Mega Sena, R$ 317 million (US$ 63m), divided between two winners. Each week, we easily see the most popular lottery in the country accumulated in tens or hundreds of millions of reales. Very little if we compare with the American market that, in December 2022, presented in one of its most popular lotteries, the Mega Millions, the estimated prize of US$ 550 million. The national GDP of 2022 was around R$ 9.9 trillion (US$ 1.97tr) and the American one, something like R$ 131.47 trillion (US$ 26.15tr), that is, 13.3 times greater than the Brazilian one.
Still, it is difficult to accept or explain the difference in prizes paid between the two markets. Lotteries work in a very simple way: they pay part of what they collect. The remainder, in general, is destined to the government for public administration. In 2022, while Brazil paid its highest amount with the Mega Sena, Mega Millions paid the third largest prize in its history: US$ 1.3 billion in a single prize.
In 2022, AIDIGLOT was created, which aims to make this market more developed, seeking growth and improvements in the sector. Among the proposals are the opening of the lottery market in public-private initiatives and the permission for intermediation of bets on digital platforms for the expansion of points of sale, which can add a lot of value to the economy, increasing its contribution to the State, in a way that there is no need to increase the tax burden or create new taxes. This, however, is the starting point for the discussion, which must be done as soon as possible so that the national economy is benefited.
Law 6259-44 is obsolete and limits lottery distribution and services by third parties, guaranteeing the state monopoly to a single institution and its lottery network, with the current 13,500 lottery outlets, in addition to its own website and applications. To give you an idea, this is the number of points of sale in the state of Florida in the United States alone. The conclusion is simple: fewer points of sale equals less sales, lower revenue for the State and lower prizes for the gambler.
Regarding the low payouts for every 100 reales wagered, only 40% (which may vary by lottery) return in prizes to the player's pocket, featuring one of the lowest percentage prize values in the world, which makes the lottery less attractive. The other values are directed to the management of the public machine in taxes, administrative lottery operators or other public investments.
With less attractiveness, we have fewer bettors, lower stakes, lower nominal collection and lower prize amounts. The Ministry of Finance is still calculating how much it is possible to raise with this taxation, but suggests that it is billions of reales. The regulation of digital lotteries comes precisely with the idea of expanding the sector and guaranteeing a greater reach to the final public, decentralizing the direct sale of the lottery product, in a regulated way, from just one company.
Mirko Mayeroff
President of the Association of Digital Lottery Games Intermediaries (AIDIGLOT)
