Brazil’s Fifteen Percent on Winning Can Be Detrimental to the Growth of its Gambling Industry
High taxation rates may discourage both players and operators, potentially limiting market expansion and reducing overall revenue.
Image Credits: Linkedin
The much-anticipated Brazil regulated sports betting industry commenced with the signing into Law No. 14,790/2023 by President Luis da Silva in December 2023.
Brazil is the leading economy in South America and second in the Americas as a result of its high GDP, which is eighth in the world, huge population of over 200 million, internet penetration of 86.6 percent and technological advancement.
With the new regulatory framework, over 140 operators are exploring the market by setting up operations in the country with some appointing regional managers in a country that has BRL 30 million ($6million) license fee for five years with a proviso that such an operator can run three brands.
Image Credit: Medium
What triggers betting in Brazil?
Football is the dominant sports in the country and their senior national football team, the Selecao, has won the FIFA World Cup five times. That is a testament to why football is been wagered on the most.
Sports is part of the people's everyday life, and they are excelling in other sports as well and not just football.
More reason why punters stake on other sports like volleyball, basketball, MMA and tennis just to mention a few. Research has that between 50 and 60 percent of Brazil’s betting population stake on online sports betting and 12 percent rely on it as a source of income.
Tax on winnings is a double edge sword.
Sanchez
Bone of Contention
Licensed operators in Brazil will pay 12 percent as Corporate Income Tax (IRPJ) and the contentious 15 percent Personal Income
Tax is levied on winnings more than BRL 2,824 ($550.12). However, this has not gone down well with stakeholders in the industry who opines that such a move can be detrimental to the growth of the nascent sports betting market in Brazil.
Emiliano Sanchez, The Chief Commercial Officer of Czech based iGaming supplier Mancala Gaming, believes this move could lead to an increase in the grey market.
"Mature jurisdictions who possess the means to track and secure their regulated market can opt for this. If the state is not ready to make some guarantees to the industry, this could lead to increase traffic to rogue operators. In my opinion, the tax should be on GGR first and once there is maturity, you can think of winnings,” Sanchez told betting news site, SportsBoom.com.
Furthermore, this could reduce revenue for existing operators and discourage potentials investors from entering the Brazilian iGaming market.
Benefits for the Country
Sports betting is becoming a huge source of revenue for the country. According to Statista: the Gross Gaming Revenue (GGR) for sports betting activities in Brazil in 2021 was amounted to almost two billion Brazilian reals.
Also, it is projected that it can surpass 5 billion Brazilian reals by 2026. Brazilian football club sides are huge benefactors since the arrival of Sports betting in the country. 15 of the 20 teams in the top league (Campeonato Brasileiro Serie A) has Sports betting brands as their main sponsor. Among the 60 teams in the three major leagues (Serie A, B and C) 39 of them has sports betting sites as their lead sponsors.
Conclusively, in order to curb black market or reduce it to the barest minimum, relevant authorities should ensure necessary changes are made in such tax measures. The percentage should be on GGR for a start. This will ensure growth in the industry and also benefit both operators and players.
Adeleye Awakan is a season gaming consultant and author of several articles in Africa with over 9 years of experience in the gaming ecosystem. He has a BSc degree in Public Administration and has attended several gaming conferences, as a guest speaker in Sports Betting West Africa, SBC virtual conference, and SiGMA Africa as a speaker and brand ambassador.