Brazil’s Mulled Tax Hike Doesn’t Sit Well with IBJR

A year after Brazil initiated a new era of regulated betting, lawmakers are considering tax hikes, mirroring similar talks across many regulated markets. In the light of these discussions, the Brazilian Institute of Responsible Gaming (IBJR) warned that a huge tax hike could deal a huge blow to the legal gaming sector.

Brazil Could Double Its GGR Tax

For reference, Brazil currently requires operators to pay an initial license fee of BRL 30 million ($5.6 million) to enter the market. In addition to that, operators have to pay a 12% GGR tax, as well as other taxes and fees. According to the IBJR all this together means that operators pay almost a quarter of the revenue as tax.

At the same time, lawmakers are considering raising the main GGR tax from 12% to 24%. This mulled move mirrors similar measures in other regulated markets that have, for one reason or another, raised their tax rates.

The IBJR estimated that the 24% GGR tax would be equal to a tax burden increase of roughly 45.4%, significantly raising legal operators’ burdens.  The institute firmly opposed the measure, arguing that it would bring more harm than good.

Tax Hike Would Hurt Legal Gaming, Experts Say

The IBJR, which has previously voiced concerns over lawmaker’s discussions about potential tax hikes, has reiterated some of its points on the matter. According to its experts, the tax hike could alienate some operators, causing them to exit the regulated framework.

In addition to that, increasing the tax burden on operators would likely mean that many will reduce the bonuses and player incentives they offer, making them less competitive. The IBJR argued that this would empower the black market, making it even more dangerous than it is today.

For context, recent studies suggest that, even though Brazil now has regulated gaming, 51% of the online betting is still being done with unlicensed companies. Estimations say that Brazilians are betting BRL 38 billion ($7 billion) with black market operators a year. This causes Brazil to lose roughly BRL 10.8 billion ($2 billion) in public revenue annually.

The IBJR emphasized that hurting the legal market would univocally benefit the black market. Even a 5% decrease in legal gaming could result in another billion Brazilian reals leaking into the black market.

The IBJR asserted that lawmakers should instead focus on making legal gamin more appealing, ensuring that fewer Brazilian citizens are losing money to dangerous unlicensed operators.