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Brazil’s Chamber of Deputies has reneged on a proposal for gambling operators to be subject to a retrospective 10-year tax, after Congress blocked the bill.
The update came on Wednesday (October 8), after an amended version of PM 1303 was passed by the Chamber, which aimed to address various economic policies in the South American nation.
If adopted, the retrospective tax (for up to 10 years before regulation) would have replaced earlier plans for a permanent gambling tax increase. That would have seen taxes rise from 12% to 18% of gross gaming revenue (GGR).
GGR is the total amount of money received from bettors, once all winnings have been paid out.
It appeared that the tax increase would be introduced after PM 1303 was approved by a congressional joint committee on Tuesday (13-12), but the wider proposal will now be scrapped after Congress did not give its backing to the bill.
Brazil’s gambling tax could end up ‘affecting public finances’
Senator Rehan Calheiros, a proponent of PM 1303 and the chair of the joint committee that assessed the legislation, said the bill’s failure could result in a detrimental impact on finances.
The amended bill, inclusive of other economic measures, was due to raise up to BRL17 billion ($3.2 billion) in additional revenue through to the end of next year.
“This is very bad. It ends up affecting public finances. I think it’s regrettable,” stated Calheiros.
What’s next for retrospective gambling taxes in Brazil?
While PM 1303 will not progress any further, it is unlikely to be the end of retrospective taxes, with an expectation that the issue will rise again, sooner rather than later.
The government will not want to give up on the BRL 5 billion ($932 million) that can be collected from this source, and the gambling industry is expecting a further attempt, even if the timing is unclear at present.
A working group, with representatives from the Secretariat of Prizes and Bets and the Federal Revenue Service (RFB), was initiated in January to ensure the licensed betting sector is adhering to all tax requirements.
As part of its remit, the group is also pushing to recover taxes unpaid by the grey market, with an overlap into enforcement and revenue raising for licensed operators.
Within the Brazilian Institute for Responsible Gambling (IBJR), the approved sector told Congress in August to focus on $6.4 billion gambling revenue losses to the black market, but regulators and lawmakers are continuing to maximize tax returns across the board.
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