For Brazil's Revenue Service , taxation of abroad ‘gambling’ is a challenge

Robinson Barreirinhas said he expects effective enforcement from 1 January 2025, when the so-called betting companies will be obliged to set up companies in the country, and that cases of fraud are already being investigated.

“There are cases in which the inspection itself, the investigation by the Internal Revenue Service and other security agencies shows that there is a simulation: in fact, the company is controlled by a Brazilian, one domiciled in Brazil. In this case, there is no doubt that we will charge.”

He praised the taxation model established by Law 14.790 of 2023 and said that the legal presence of companies in the country would lead to a ‘leap in quality’ in inspection and collection. However, Barreirinhas admitted to Senator Romário (PL-RJ), the CPI's rapporteur, that the IRS lacks legal instruments to tax bets that are not subject to Brazilian law.

"That's why the model approved by the National Congress provided for this obligation for the company to have a legal representative here so that there can be this dialogue (...) and the collection of taxes. (...) The whole world is debating how to deal, in the virtual environment, with an increasingly intense provision of services and exchange of goods.

He pointed out that there are doubts around the world about the taxation of transnational activities made possible by the internet, such as bookmakers, cryptocurrency exchanges and virtual shops abroad.

"We are following a worldwide movement of coordination between tax authorities so that there is co-operation in exchanging information related to financial transactions so that (...) we are able to implement the law.

The Federal Revenue Secretary also assured Romário that the betting accreditation data submitted to the Prize and Betting Secretariat is being analysed for inspection purposes.

"It's not a question of being, it's a question of necessity. The system will necessarily be shared with the Receita Federal in relation to the data needed to collect the tax.

Taxing gamblers

Barreirinhas also admitted that the IRS expects to tax ‘practically nothing’ from the bettors. He recalled that the agency asked for the veto of a provision in Law 14.790 of 2023 that allowed compensation between amounts wagered and prizes for one year, on the grounds that ‘very few people’ will win more than they wagered. The president's veto, however, was overturned by Congress.

" It's not a criticism. The IRS necessarily works with what is approved by the National Congress, and it is sovereign in this regard, but the fact is that the way this law was passed, with the veto overturned, basically makes it impossible to collect any tax from the gambler.

To Senator Carlos Portinho (PL-RJ), Barreirinhas added that even if the gambler makes a profit, it is difficult to inspect a large number of taxpayers, many with ‘very low’ incomes and probably within the income tax exemption bracket. Generalised collection, he said, will only be effective when betting companies start to provide transaction data linked to punters' CPFs, but he questioned the cost of inspecting individuals for very little revenue.

"Our focus has to be on the company. It's the company that wins, it's the company that makes a profit, it's the company that has to pay Income Tax, Social Contribution, PIS-Cofins.

Tax evasion

Portinho also questioned the oversight of foreign exchange transactions in remittances between gamblers in Brazil and bets abroad, and vice versa, assessing that there is tax evasion when payment companies keep the funds in Brazil and don't make these remittances. For Barreirinhas, this situation is widespread in online businesses and is being targeted by the Revenue Service and the Central Bank.

"Not that it's necessarily illegal, but if there's a company in Brazil receiving and paying, it has to pay taxes. (...) Often there is [also] a violation of foreign exchange legislation.

Portinho criticised the legislation that was passed, which, in his opinion, gave bets and gamblers a whole year off without taxation. He associated the situation with ‘harmful effects’ such as the irregularities of the companies Esportes da Sorte and Vai de Bet, targets of a Federal Police operation, and estimated that other related crimes should be revealed.

Barreirinhas defended the work of the Financial Activities Control Council (Coaf), which he believes is attentive to all atypical financial movements, and praised the integration of information from the Central Bank with the Federal Revenue Service.

"With our technological expertise, we are able to gather information from various sources, process this information and be effective. We are absolutely effective in relation to bet not for lack of information. From the 1st of January, we will have a series of other data that will allow for a different world in relation to this inspection - he told Senator Styvenson Valentim (Podemos-RN).

However, Styvenson, citing the Federal Police operation on bets that resulted in the blocking of more than R$2 billion, questioned the efficiency of the inspection, which would not have seen the growth of the criminal operation.

"Who's out of step? Who's the tortoise and who's the jet? - he asked.

In response, Barreirinhas recalled the importance of the Internal Revenue Service's role in tackling organised crime in coordination with other intelligence agencies, noting that it is not always convenient for this participation to be publicised in the press.

Postponements

At the end of the hearing, the chairman of the CPI, Senator Jorge Kajuru (PSB-GO), announced the postponement of the vote on the five requests scheduled for this Wednesday's meeting. Among the postponed requests are invitations to the Minister of Sport, André Fufuca, to clarify the ministry's work in combating fraud (REQ 110/2024 - CPIMJAE) and to former football referee Alfredo Loebeling (REQ 106/2024 - CPIMJAE), in relation to complaints about the quality and operation of the VAR (Video Assistant Referee).

Source: Agência Senado