Brazil: Operators propose retroactive tax deal to avoid 24% hike

Brazil’s betting companies are lobbying Congress for an alternative to the Government’s plan to double their tax rate from 12% to 24%, proposing instead to pay retroactive taxes on past operations. 

The measure, which is part of an effort by Finance Minister Fernando Haddad and the Government to boost the country’s fiscal revenues following the recent expansion of income tax exemptions for workers earning up to BR5,000 ($930) per month.

Operators are offering what they describe as a “one-off solution”: a retroactive tax payment covering the past five years of operations as a trade-off for a smaller long-term rate increase, reportedly capped at 15%. 

The proposal, now circulating in Government and congressional discussions, could generate an estimated BR12.5bn in immediate revenue, according to data compiled by a private analytics firm tracking legally operating betting companies.

While the Ministry of Finance has yet to comment, the idea of retroactive taxation has been on the Government’s radar for a while. 

This is not a recent topic as, earlier this year, Federal Revenue Secretary Robinson Barreirinhas argued that operators based in offshore jurisdictions but operating in Brazil before regulation still had taxable revenue and therefore owe taxes to the country.

“Because, in the past, if they had income in Brazil, had turnover, and were in fact operating here, they owe taxes to Brazil,” Barreirinhas said at the time.

Industry representatives also acknowledge that the measure would penalize long-established operators but view it as a preferable compromise to a permanent tax doubling. 

Mark Sullivan

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