Brazil plans to raise US$ 1.16bn a year after regulating online sports betting

With an eye on a potential billionaire in revenue and in the wake of scandals of manipulation of sports results, the Luiz Inácio Lula da Silva (PT) government is finalizing the procedures for the soon submission of a Provisional Measure regulating the online sports betting segment.

With the rules that will be mandatory for those who want to operate and advertise in Brazil, the government, in a conservative estimate, believes that it can collect around R$ 6 billion a year (US$ 1.16bn), according to JOTA.

The text prepared by the Ministry of Finance is already at the Planalto Palace, as reported by Folha de Sao Paulo and confirmed by JOTA. There, the last merit analyzes and the best political moment for submission will be made.

The idea of the folder is to come out later this month, although in Planalto there are still sources that point out that the debate is evolving, but it has not yet reached a “definitive physiognomy”.

In terms of merit, according to what JOTA found out, the idea is that whoever does not register and formally settle in Brazil will no longer be able to advertise, a huge niche for the sector.

Today, according to the government’s analysis, of the 40 teams in the A and B series of the Brazilian championship, 38 have some kind of sponsorship on their shirts coming from a sports betting site, not to mention the volume of advertising on television, radio, internet and even sporting events themselves.

With the MP, companies will have six months to formalize their situation in the country. Since 2018, the law allows this segment to operate, but determined that the regulation be made by the end of last year, which did not happen, although the previous administration also had a ready text.

In order to be able to operate in the country, the PM will determine a grant payment between R$ 25 and R$ 30 million (US$ 4.85 – US$ 5.8m) – more likely to be the latter number. With the regularization, they will have to pay 10% Income Tax on prizes, in addition to the normal rates of tax on company profits, according to the regime in which they are installed – actual or presumed profit. The previous law already provided, and this should continue, an inspection fee, to be charged in relation to billing.

The payment of the grant will be made in a single installment and will serve to promote the installation of a supervisory area for the sector.

The PM must also provide for rules to apply sanctions in case of manipulation. It must foresee five levels (1 to 5), and from level 3 onwards, when it changes from “suspect” to “evidence” of manipulation, the competition in which the crime occurred will be removed from the betting list. Ordinance to be edited after the PM will complement the regulation.

Both the sanction rules and the collection of taxes and fees demanded, in the Treasury’s legal assessment, the issue of an PM for the subject, instead of a decree, as required by the previous law, which was not complied with by the previous government.

The PM must also provide for companies to follow rules on promoting responsible gambling, with warnings about the health risks of poorly managed practice. It should also make clear the restriction on minors, among other rules, including money laundering prevention.

In this sense, the idea is for the Treasury to work in partnership, for example with the Central Bank, to monitor the sector and mitigate the risk of committing crimes.

Fabio Graner
Economic analyst at JOTA in Brasilia. He was a reporter and economics columnist at Valor Econômico and also worked at Estadão, DCI and Gazeta Mercantil, with more than 20 years of experience, including the public sector.