Operators in the newly launched Brazilian gaming market are facing a further tax conundrum following the publication of ordinances establishing ‘GTI Bets’.

The Secretariat for Prizes and Betting (SPA) and the Federal Revenue Service (FRS) announced the formation of the Inter-Secretarial Working Group, known as GTI Bets, to monitor the fiscal compliances of online gambling licences.

Upon closer scrutiny of the ordinances, it was revealed that the GTI Bets is “supporting the proposal for a compliance programme for the regularisation of tax obligations related to periods prior to the authorisation for licensed entities”.

In response to the news, Ricardo Assis, Editor of SBC Noticias Brasil, consulted legal experts on the scope of GTI Bets’ responsibilities and received mixed responses.

Speaking on the latest episode of iGaming Daily, he said: “I talked to Filipe Rodrigues, CEO of Jogo Positivo, and he said that the joint ordinance does not state whether the tax obligations in relation to the period prior to the authorisation are primary or accessory.

“In his understanding, this would be an abuse of state power because they can only collect taxes when there is an express legal provision to do so. In his vision, it’s unconstitutional to ask for retroactive taxes without having anything established before.”

On the other hand, Andréa Ueda, an associate lawyer at AMIG Brazil, admitted that the potential for retroactive taxes shouldn’t be a surprise to the industry. She told Ricardo that they were discussed in conversations between operators and the Ministry of Finance since the beginning of the process to bring regulation to Brazil.

Operators in the region are now set for a nervous wait as the Supreme Court considers the legality of demanding retroactive taxes.

Considering the potential reaction if the government is given the green light, Anna Maria Menezes, Business Journalist for SBC Noticias Brasil, suggested that it could accelerate the process of consolidation in the Brazilian market – which is currently home to 67 authorised companies and over 130 brands.

She said: “André Gelfi, [President of the Brazilian Institute of Responsible Gaming], said that in five years he’s expecting the number of sportsbooks in Brazil to drop by half. The way I see it is that retroactive taxes can maybe speed up this process.

“We have to think about the planning that these sportsbooks have [done] throughout the year. The federal licence [was] already a huge amount of money that companies needed to gather in not that much time.”

Ricardo added that the decision would be more likely to hurt smaller operators that can’t rely on revenue from other countries to pay the tax bill.

Elsewhere in the episode, the trio also touched on the latest in the ongoing legal dispute between LOTERJ, Rio De Janeiro’s state lottery, and the federal government.