Gambling in Brazil – Licenses, Income Taxes and Control Acts

The influence of the mafia on gambling in Brazil – the government’s and gamers’ attitude

The ban on the gambling in Brazil is expected to be lifted in 2017. The Brazilian mafia declares today its desire to emerge from the shadows and to pay taxes

Gambling business in Brazil

The gambling in Brazil, banned since 1946, could once again become legal. The ban, which lasted exactly 70 years, is bursting at the seams under the pressure of difficulties experienced by the Brazilian economy. In search of new sources of filling the budget, the government turned its eyes to the possibility of legalizing casinos and betting.

Now in the country is allowed:

  • The lottery (only public)
  • The betting on horse racing
  • The poker.

In the last two activities, the Brazilian legislators perceive the elements of high-level skills, so do not consider it as gambling. In Brazil, as well as throughout the world, even are held the regular tournaments of poker, there work the online poker rooms in the country.

There are prohibited:

  • Land-based casinos (including slot machine halls)
  • Online casino
  • Poker game on gadgets in public places (since 2015).

However, on our site are the licensed versions of the slot machines permitted in Brazil. The game is just “for fun”; cash contributions are not necessary and are not possible. These versions of machines do not break the law and are provided for informational purposes only, so these slot machines are allowed. The game may not run if it is contrary to the current legislation of the country or the service provider found that provided automatic versions contain gambling. The access to the game machine can be closed without explanation.

The history of gambling

The gambling was declared outlawed in Brazil in 1941. Five years later, in 1946, the president Eurico Dutra issued a decree to close all the casinos of the country (as well as in Russia in 2009, between the announcement of the gambling business as illegal and the closure of the casino itself took some time). There remained legally only:

  • The state Lottery
  • The poker
  • The betting on horse racing (but not in other sports).

In the 90 years the authorities legalized the private lotteries; with the revenues from the taxes on them, the government planned to finance the development of the sport. In 2007, the Supreme Court banned again the lottery, as they were used for money laundering. At the same time, the bingo game was banned (the analog of lotto in Russian)

The ban on gambling led to what he usually leads:

  1. The budget received fewer taxes
  2. The blooming of the illegal gambling business, on which the mafia laid their hands.

Law and order

Today, looking for ways to supplement the budget, the Brazilian government launched the process of reviewing the decision taken 70 years ago. The draft law on the legalization of gambling takes place all the procedures provided by the law. Since the beginning of 2017 is expected that the gambling in Brazil will be permitted within certain limits, not from January 1 but somewhere in the beginning of the year.

The first version of the bill was proposed in the past, 2015, but then it was rejected, and before that, there were made a large number of amendments; they were offered by 16 senators. The current bill has been proposed by a special commission of the National Development of the Federal Senate (the upper house of Congress) of the countries.

The Brazilian parliament – the Congress – in each of the two Chambers discusses:

  • How the foreign casino operators will be obliged to cooperate with local companies
  • The number of gambling establishments that one company can open in Brazil
  • What kinds of gambling will be allowed.

On the latter question is assumed that the rates through the Internet could still remain inaccessible to the Brazilians. The authorities fear that the ease, with which you can deposit money into the account of a virtual casino online, can make the people addicted to games.

After the document will be discussed by the houses of Congress alone, it will be submitted to the plenary session.

It is planned that the bill:

  1. Will regulate the existing and the fairly large illegal gambling market in Brazil
  2. Will create a new country in the sphere of entertainment on the image and likeness of the developed countries in this respect
  3. Will provide new tax revenues.

After the changes in the legislation will be approved by the Congress, they will go to the signature by the President Michel Temer. And, because the idea is discussed for a long time, and the budget deficit in Brazil is growing, it is unlikely to expect a bill veto or delay is quite the contrary. However, the president may accelerate if the government will not succeed to find other sources of financing the budget deficit.

The main controversy is revolved around the gambling business, which will be allowed. The initial list was supplemented, and now it includes:

  • Video lottery
  • Bingo
  • Betting on the outcome of sporting events (not only racing) online
  • Online casino.

Exactly the online casino is the stumbling block. Although the game on the Internet is not only for money, and even for free, for informational purposes only – the current global trend, some lawmakers fear the game addiction in a large number of Brazilians.

The other part, on the contrary, welcomes the emergence of any kind of the casino, especially the land based. These members have made claim to the bill that at least 40% of land-based casinos will be build in the Central, Northeast and North regions. The deputies believe that the construction of the casino and the gambling in Rio de janeiro Brazil – is a great tool for the regional development and attraction of the foreign investments to the place.

The already existing Brazilian legal gambling market participant – the national operator of lotteries Caixa Economica Federal do not miss its part. It wants to get exclusive rights for the provision of online services in the field of sports betting.

Financial forecasts

The world’s largest operators of gambling have the most optimistic hopes in the casino gambling in Brazil, which will be opened. It is clear that this market will become one of the largest national markets in the world. The British bookmaker William Hill said that the appearance of the gambling market in Brazil may be one of the most significant events in the life of gambling.

In addition to William Hill, the interest in the Brazilian market of gambling, according to the newspaper Financial Times, have companies such as:

  • Ladbrokes
  • MGM Resorts International (both – United Kingdom)
  • Betsson
  • NetEnt (both – Sweden).

At the same time there is enough room for everyone: if NetEnt specializes in video slots and platforms for online casino, Ladbrokes is hoping to profit from the betting on the outcome of football matches, because football is very popular in Brazil.

As calculated the specially created Institute for the legalization of gambling business in Brazil (IJL), if the gambling business is usually about 1% GDP of the country, for Brazil the volume of this market can be predicted in the amount of 55 billion Reals (ie $17 billion). The president IJL Magno Jose Santos de Sousa said that the country now receives less than 6 billion reals ($ 1.8 billion) taxes each year; the money would go to the Treasury, if the numerous underground casinos were legal. The turnover of this business is about 20 billion. Reals ($ 6 billion.) estimated de Souza.

Therefore, it is possible to easily understand the positive expectations of the Government of Brazil. It is vital to find new sources of replenishment of the budget, because the deficit has reached enormous size, greater than 10%. The government hopes to:

  • Inflow of investments
  • Creation of new jobs
  • Growth of tax revenues
  • Decriminalization of gambling.

According to the forecasts of the analysts, the gambling market in Brazil in the field of casinos will be divided between foreign world-wide operators, but in the field of sports betting will compete and very tough the local companies, as they already have and experience, and infrastructure, and a loyal customer audience. By the way, these local companies have even managed to join in a professional association: it has already been two national congresses of the representatives of the gambling industry.

The mafia and the gambling business

In the meantime, the mafia has all profits from the illegal gambling as the gambling is not legalized in Brazil. And it has penetrated to the very top: recently was revealed that even one of the Brazilian senators had income from the illegal gambling business. He not only sold the illegal casino licenses for other activities, but also traded construction platform to build underground gambling centers.

It is clear that the senator is not alone: the earnings of the illegal casinos are received not only for their direct owners, but the government officials closing their eyes on them. Just as in Cuba, such officials associated with illegal gambling, are many in Brazil. However, the authorities do nothing. More specifically, in Brazil, of course, there is a special office to monitor the legality of the online casino operators, that is obliged to monitor the violations in this area, but it is either unable to perform his duties because of the large amount of work, or not tries very much.

It should be remembered that the legalization of the gambling still does not mean that after that the illegal will be completely eradicated. An example of many countries proves it. Especially Brazil is a country where a lot of travelers come from the Caribbean, where the gambling is often the main source of replenishment of the state budget. Coming to Brazil, they also crave the thrill and are ready to play in the casino, even knowing that violate the law. So when the internet gambling in Brazil will be legalized in Brazil, not all the possible revenue from them in taxes will go to the treasury. The service that controls the legality of the activities of casino operators will continue to have an extensive work front.

However, the Brazilian mafia declares today its desire to emerge from the shadows and to pay taxes. The study of IJL, held in 2014, one of nine illegal operators advocated the legalization of gambling. The fact is that the taxes as a result will cost less than the bribes given to the officials and police. In this case, although the percentage of mobsters, who want to get out of the shadows, is not so great – just over 10%, it is clear that, when the gambling will be legalized, in the business will enter experienced investors that come from the shadow economy. The same happened in the US when it was gradually legalized the gambling in different states. Today, the income from which is a significant proportion of tax revenue, and that’s not to mention the jobs created and the reduction of criminal burden.

In Brazil, all will depend on what level of taxation will consider acceptable the congress deputies. The World average – 30% of bets in a land based casino, and less, 15-20% – for online casino operators. Exactly this level offers to establish one of the world’s leading online gaming companies NetEnt to the Brazilian government.

The players’ opinions

IJL conducted a survey among the players of the illegal gambling.

– Is unpleasant to play in the “illegal” gambling, even though everyone knows that they exist, – says one of the visitors of the clandestine casino. – It’s just funny that “illegal” does not prevent some officials impose these casinos the same illegal tax! On the other hand, you cannot demand from the casino owners to improve the service – be satisfied with what we have, they say. And they, too, can be understood – no one will invest in such conditions, in the service quality improvement and finally, the taxes. If I’m still playing, I would be happy if the casino paid the taxes. It will not affect the rates and the cost of the services but the parasites around will be fewer. I’m all for legalizing it will be useful to all parties.

– Do not forget about the political aspect – says another player. – The government and the president are facing a financial hole, which is becoming more and more open. They urgently need to come up with methods of replenishment of the treasury. From this point of view, the legalization of gambling – is not the worst, but even one of the best options. Among the 200 million people there are many who want to legally play and work legally in this area.

– I believe that the state should be the state and fight the so-called “shadow economy” and “gray business”, – says the third. – There are laws, they must be respected. And if no one sees sense to observe them, it’s time to have to rewrite them. The shadow business too long casts a shadow on all, not only on the economic but also on the moral sphere of life of the country, so that it must be destroyed.

The crime must be declared a war.

So, for the Brazilians themselves is unacceptable primarily the criminal atmosphere, in which pushes them the ban on gambling. In the second place, they care about the economic aspect – that the underground casinos do not pay taxes. The service issues are far from being in the first place. This is not surprising. However, as the experience of other more developed countries in this area, soon after the world-class operators come to the market of the country the players’ requests on the quality of service of the gambling will grow exponentially.

Who is against?

Even if the criminal authorities, who obtain profit from the current state of affairs, are ready to legalize the gambling, there is a question – There are those who are against? Strangely enough, yes.

First of all, the political opponents of the current government. In a country where recently there was only the second in its history impeachment, the legalization of gambling, in spite of all the associated advantages that have been discussed above – is a good reason for charges. By signing the law, the president assumes certain political risks.

Secondly, a group of activists, who believe that gambling, even legal, will be used for money laundering. They look to the past experience of the country where the lottery was authorized only for about 10 years, and then was again banned for this reason.

Thirdly, it is traditionally strong in Latin America, the Catholic Church, for which the ban on gambling is consistent with its doctrine.

Assess the progress in Brazil and its foreign partners in the country’s gambling business will be soon enough. However, to achieve its goal – to establish a steady flow of funds in the budget – the government and the president must not only release the law but also ensure its observance. This will require, on the one hand, developing by-laws, on the other – to step up the fight against illegal gambling.

In the subordinate legislation, in particular, should be determined numerical values (the percentage of tax deductions, the maximum number of casinos owned by the same company, the share of foreign capital, etc.) should be defined. These details largely determine the development of the market. As for the fight against crime, defeat it completely fails, even in countries where gambling is legalized. So, in order to justify one of the Brazilians expectations associated with the legalization of gambling – that it will be decriminalized – the police will have to adopt new ways to combat.

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