As Brazil readies for the opening of its regulated gaming market on 1 January, the country’s government is pushing for a selective “sin tax” on sports betting, igaming and fantasy sports.

On the latest episode of iGaming Daily, Fernando Noodt, Senior Journalist for SBC Noticias, was joined by Ricardo Assis, Editor of SBC Noticias Brasil, and Bárbara Teles, Director of Government Relations for the Brazilian Fantasy Sports Association, to discuss the ramifications of the legislation for the fantasy sports industry.

Speaking about the taxes, Teles said: “It is a tax applied to services or products that have an impact on the environment or health of the population. 

“In the initial text that was submitted to Congress, the sin tax was applied to smoking products, alcoholic drinks, sugar drinks and mineral goods. This assessment of the [House of Representatives] also included betting and fantasy sports in this sin tax. 

“The purpose of this measure of the sin tax is to generate public revenue for Brazil and to discourage behaviours that are perceived to be socially undesirable. This tax shows an effort of the Brazilian government to restrict more the gambling sector, to restrict the activities here in Brazil and impose high taxes”

Teles explained that the fantasy sports industry was surprised it was included in the selective tax given that it is a skill-based game with a “low risk of developing addiction in the population” and not traditionally viewed as gambling.

“I believe this is a more political decision than technical one,” continued Teles. “We have a statement from the Ministry of Sports that says that fantasy sports is considered an esport here in Brazil and should be included in the same tax regime as sports and not lotteries. 

“We have a statement from the Ministry of Finance saying that fantasy sports are not a lottery and are not betting. We have had a study made for the industry that has proved that fantasy sport has a low probability to develop addiction in players.

“The government is trying to pay their bill and they are balancing their needs for revenue regeneration, but they are not understanding the differences between the modalities here, so I think it’s more of a political scenario than a technical one.”

After changes were made to the bill by the Brazilian Senate, the text will be re-submitted to the House of Representatives before being sent to the President to be sanctioned. This means that for now, the industry will have to wait and see how the tax is applied to the sector.

Towards the end of the episode, Teles also charted the growth of fantasy sports in Brazil and its potential to compete alongside bigger markets, such as India and the US.

She said: “The market is involved in showing that fantasy sports is not only a hobby-based platform but is sophisticated. We have fantasy sports not only on soccer but on other modalities of sports. So the sector has attracted significant investment here in Brazil. 

“The study that we made pointed out an increase of 120% in the fantasy sports sector here in Brazil, so Brazil has the potential to be the third biggest market for fantasy sports [behind the US and India. To achieve this level, we have to have a business model and a business environment that must be designed to balance taxes but not as high taxes as we are expecting. 

“Despite this, I think the market here in Brazil will continue to grow. We have a lot of potential, we have technology and we have young people developing fantasy sports here in Brazil. So I think we can increase the fantasy sports size here in Brazil.”