Brazilian Fantasy Sports Association raises concerns of Tax Reform impact on the gaming sector

This equation was necessary so that, in theory, the current text does not generate an increase in the global tax burden. And this directly impacts the electronic games sector. Approved on July 7th by the Chamber of Deputies with support from the government, the proposed amendment to the Constitution (PEC) 45/2019 began to be processed in the Senate and has senator Eduardo Braga (MDB-AM) as its rapporteur.

The Association understands the need for debate to approve such an important PEC. According to the president of ABFS, Rafael Marcondes, considering the proposal currently being analyzed by the Federal Senate the maximum rate of Value Added Tax (VAT) would be 25%. With exceptions for several sectors included in the Chamber, the expectation, according to IPEA, is that this rate will reach 28%.

As the ISS charged by Municipalities has rates that vary from 2% to 5%, and PIS and COFINS have rates that, when added together, amount to 9.25%, their sum varies between 11.25% and 14.25% of the revenue. “In practice, this means that the sector's tax burden would practically double, impacting the generation of new jobs and the capacity for new investments in a promising market, which could grow by up to 120% over the next three years,” he explains.

"As it stands, the Reform goes against the Legal Framework for Gaming (Bill nº 2,796/2021), which is being processed in the same Senate, and which seeks to stimulate the growth of the sector and provide more transparency and legal security, thus attracting new investments. There's no point in having security in a sector suffocated by an exorbitant tax burden," he reinforces.

This scenario can be harmful for a sector made up of small companies, many of which have little working capital and depend on financing to ensure their own sustainability. The majority of these companies are created and staffed by young entrepreneurs, who need encouragement to establish themselves, establish themselves and develop.

The situation could worsen if games, which are not only entertainment tools but also education, staff training and support for health treatments, are not considered essential activities. In this case, the Selective Tax (IS) would also apply, making the segment largely unviable.

ABFS proposes other measures that can alleviate these impacts:

• A recalibration of rates for the service sector (games), especially electronic sports, through the inclusion of the category within the differentiated regime created for sports, and the recognition of the relevance (essentiality) of this market for all Brazilians;
   
• A process of relieving payroll taxes in the services sector, encouraging the hiring and attraction of qualified labor for an extremely dynamic and innovative market, dependent on research in Science and Technology;
   
• An Administrative Reform that makes the State more efficient and less bloated, qualifying public spending. In this way, the need to increase the tax burden is eliminated, giving momentum to the sustainable growth of the economy.

Source: GMB