Brazil Moves One Step Closer To Taxing Online Sports Betting and Gambling

The regulated sports betting market in Brazil isn’t yet live on a national level, but it appears to be a little closer to launch. The country’s finance minister, Fernando Haddad, said this week that he plans on taxing the online sports betting and casino segments to offset changes the government made to individual income tax rates.

Brazilian Finance Minister Fernando Haddad addresses the G20
Brazilian Finance Minister Fernando Haddad addresses the G20. He plans on introducing an online gambling tax that will help the segment move forward. (Image: Agencia Brasil)

Haddad and the Ministry of Finance (MoF) have been putting together the framework for online sports betting, which he reportedly already submitted to President Luiz Inácio Lula da Silva’s cabinet. He now presented Lula with his updated tax plan, which the president supports, according to media outlet Agencia Brasil.

While there hasn’t been any word on when federal sports betting regulations will be ready, individual states have been moving to launch their own markets. Rio de Janeiro, Paraíba and Minas Gerais are already on board.

Brazil Primed For Regulated Gambling

Lula announced in February a change in the country’s Income Tax exemption range, which rose from BRL1,903.98 to BRL2,640 (US$368 to $509). With this change, the government will incur a loss of revenue, and the taxation of online gambling will compensate for it.

The government estimates that 13.7 million taxpayers will stop paying income tax after the change in the table. As a result, the government will fail to collect around BRL3.2 billion (US$617.92 million) in 2023. As for 2024, the impact on the calculated amount, according to government projections, is almost twice that.

At the moment, Haddad is still studying the feasibility of the new online gambling tax and working on estimates to figure out how much the government will make from it. However, an MoF insider, who wanted to remain anonymous, told the media outlet that it will generate BRL2 billion to 6 billion (US$386.2 million to $1.16 billion) a year.

The sports betting market in Brazil is huge, but poorly regulated. All 20 soccer clubs in the first division of the Brazilian Championship are already sponsored by bookmakers, and there are around 450 active gaming sites in the country.

However, none of those pay any taxes, and the government has previously said that it loses between BRL5 and 7 billion (US$965.5 million and $1.35 billion) per year in tax revenue as a result.

Slow To React

Former President Jair Bolsonaro missed a deadline to regulate sports betting, which expired on December 12 of last year. Congress had already prepared the framework and only needed his signature, but he ignored it.

As the deadline expired, nothing has changed for the betting sites, which continue to operate as before, although based abroad. Despite having several years to introduce nationwide regulated sports betting, Bolsonaro and his administration allowed it to remain out of reach, depriving the government – and Brazilians – of potentially hundreds of millions of dollars in revenue for health programs.

The course the Lula government is on seems to reflect a desire to advance regulated gambling of virtually all verticals, but without drawing too much attention to it. Step by step, though, changes are coming. Brazil could soon join virtually all Latin American countries in offering robust regulated gaming markets.

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