Tax Authority in Brazil Calls for Stricter Gambling Taxation to Deter Betting

In Brazil, the Parliamentary Inquiry Commission (CPI) on Bets heard from the Special Secretary of the Federal Revenue Service (RFB) last week.

Robinson Sakyama Barreirinhas used his time to advocate for stricter tax treatment of bettors and offered an opinion on the retrospective taxation of companies that generated profits during Brazil’s grey-market phase.

Should Bettors in Brazil Pay Income Tax? Federal Revenue Makes Its Case

National Congress in Brazil rejected a posited taxation on consumers of gambling winnings last year. Barreirinhas argues that this should be resumed: “My position is that bettors should indeed pay income tax. In this case, the tax does not serve a revenue-raising purpose but rather a deterrent function, to avoid encouraging gambling.”

“That is how it works worldwide. We are treating gamblers better than companies taxed under Brazil’s real profit system. That’s absurd,” he continued.

He conceded that the law technically provides for taxation of winnings but considers them a “net prize” after deducting losses. The Secretary, therefore, argued that this serves as an overall tax exemption.

Lost Billions? Brazil’s Lawmakers Examine Grey Market Gambling Impact

In discussion, the President of the Committee claimed that online betting companies have “proliferated indiscriminately” across Brazil, and the presence of the grey market has led to a huge tax revenue loss. Citing a study by the Senate Consultancy, he suggested tax revenue from betting could amount to approximately R$50 billion between 2019 and 2030.

He also lamented exuberant displays of wealth by influencers and grey-market betting company owners: “The displays of wealth by both betting company owners and influencers create a perception in society and among young people that gambling is a way to get rich.”

Sen. Soraya Thronicke pushed revised tax legislation, suggesting that taxes should reflect the danger they pose to the population. Soraya outlined that cigarettes are subject to a 250 percent tax rate and alcohol up to 61 percent: “The more harmful a product, the higher its taxation should be. I am shocked that gambling activities are only taxed at 12 percent.”

The Committee questioned the Federal Revenue as it wanted to understand the department’s role in identifying lost tax revenue between 2019 and 2023 and the mechanisms implemented to monitor and block payments to offshore operators or those operating without a license.

The Pix system does not capture digital currencies. Therefore, large crypto casinos and sportsbooks will likely still be able to operate without the stark risk of detection through the Pix system.

Barreirinhas claimed that Pix was monitored and managed by Brazil’s Central Bank and that his department had only just begun to receive annual data from betting companies.

“We previously had an unclear regulatory environment. Now we have legislation. I have 80 companies operating legally and dozens operating illegally. I must treat them differently. I cannot discourage those that have complied with the law,” he stated.

Regarding retrospective taxation, Barreirinhas asserted that he supported it but acknowledged its challenges.

“It is not impossible to overcome, but it might require legislative changes,” he suggested.

“There is a Federal Revenue understanding that Brazil can only tax an operation if there is a material presence in the country. If a company was genuinely based abroad, without any presence in Brazil, there would be uncertainty about whether taxation would be possible.”