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It had appeared set in stone that Brazil would close the first year of the bets regime with a declared tax rise to 18 % on licensed operators. Yet in breaking headlines this week, rapporteur Carlos Tarantini chose to disregard the expected text and instead introduced a new provision to apply retroactive taxes on the pre-market activities of licensed operators. The move marks another unexpected twist in Brazil's gambling framework. living operators and analysts uncertain over whether the new tax order is technically viable or merely another chapter in the unpredictable evolution of one of global gambling's most volatile emerging markets. Welcome to iGaming Daily. I'm your host for today, Fernando Nott, media manager for SBC. And today I'm joined by editor-at-large Ted Memmier. Ted, how are you today? Fantastic, Fernando. Looking forward to this one. Let's just say that. Yeah, definitely. I mean, even if your voice at first didn't sound as fantastic as you said, I think there's a lot to go through in this topic. have already talked to some extent about this before on iGamingDaily, but there's always some more information. The Brazilian government can't leave us alone. They just like keeping us busy. So to better understand why they do it, We are here today with Ana Maria Menezes, business journalist for SBC Noticias Brasil. Ana, how are you today? Hi, Fer. Actually, pretty excited to talk about this because yesterday I think I was until like 8 p.m. covering, watching the senators and deputies talking about it. So I think there's a lot to I need to put some knowledge out there so I don't keep it inside my head. So that's good. Yeah, definitely. Well, you say yesterday, but at the time of this recording, the MP was approved uh yesterday for us, but that's at the time of this recording. We are waiting again at the time of this recording for President Lula da Silva to actually decide whether he'll approve what was approved in Congress or if he'll change it and then we'll have to hashtag wait and see what happens. But we will. update you on the next episode most likely. So let's get on with things in iGaming Daily, supported by Optimo, the creator of Positionalist Marketing and number one player engagement platform. Thank you very much Optimo and Nana. Like we were saying, you broke the story this week. Take us through what happened. Okay, so just as sort of like a disclaimer, the Brazilian government likes to leave stuff for the last second. And this is important to know because yesterday, at the time of this recording, on the 7th of October, the Congress, the National Congress, which is made up by deputies and senators together, got together to reveal the provisional measure that was set to increase the GDR, the taxes on top of the GDR from 12 % to 18%. However, mere hours before the voting, the repertoire Carlo Zarattini decided to take this proposition out of the table. And so this was something very unexpected, at least from the general public. uh It was sort of like an adding to the document. But again, it changed pretty much the whole set of what was said in the first place. And not only that, he also proposed uh a new retroactive text program that is called Litigio Zero Becci. uh what would happen with this model. Operators can voluntarily settle past taxes by paying 15 % income tax rate plus 100 % fine within 90 days. And this is set for companies that operated in Brazil from 2014 to 2024, right before the regulation was set in place. So yeah, there was a pretty big change and it caught us all by surprise. He also changed some other measures that were said in the document, but they are not related to the industry. So that caused a lot of commotion at the National Congress, of course, because again, they had mere hours to read everything or to anyway, to understand what was going on. And there was a point that was that was commented a lot during the session. However, it was approved. It was 13 against 12. So again, pretty close, but it was approved at the 7th of October. of course, at first glance, we were thinking, hey, can you actually do this? Is this even legal? Is this even constitutional or whatnot? But how feasible is it to apply retroactive taxes, both from a technical and a legal perspective? That is a complicated matter in a way here. Last year, the 2024, the Supreme Court actually made a ruling that allowed the retroactive tax in another system. So it was not about the beddings regime. So this created sort of a precedent. So this could happen now. uh So legally, the Brazilian constitution forbids taxation without prior law. uh So they cannot be applied retroactively. However, this case with the Supreme Court, as I mentioned, since it set a precedent, It sort of creates, okay, it's technically non-legal, but the Supreme Court had a case. So it's just hard to navigate. uh So what was argued is that it's a voluntary program to avoid legal challenges. So how voluntarily is this really? Again, since this was said very recently, it's still pretty new to understand the repercussions in the long term. Because right now as we're recording this podcast, there is a lot of movement going around for both senators and deputies to see what they can change and what they can take out of this provisional measure that is supposed to go live after the 8th, which is the day that we're recording this. So running out of time, that's what we all are. And it's very hard to predict what's going to happen because Again, we didn't predict the change in the provisional measure, but it happened. So that's a, again, hard topic. Even lawyers argue in terms of agreeing or disagreeing, but it could be used as too much power with the state. A lot of lawyers are saying that. So it's giving state too much power to just backtrack, decide what is going to happen based on not having a law, which is not technically constitutional. How much of a surprise has it been to your senators, your congressmen that at the 11th hour, they take this detour on taxes that were meant to be at 18 % that were supported by the government. But then the other factor here is that isn't this interpretation of a retroactive tax just going to open the doors to just liable and legal cases down the line? As in who pays what, any enforcement of kind of retroactive penalties. Yeah. So uh this was first proposed by Carlos Barrerinha. He works with the Ministry of Finance and he said that this amount of money with the retroactive taxes would be sort of a way to regain what was lost during that period. And at the same time, they're approving this, but not approving the GGR increase, the tax on the GGR. How the government is thinking about this in terms of getting more revenue, it's very confusing because how, again, it would make more sense to follow the GGR tax. Of course, we don't want that. But it would make more sense than to focus on the retroactive taxes, which could harm, in general, the whole constitutional program in a way. And I 100 % agree with you because who's going to pay for that? Who's going to agree to that? What is the political gain behind this? uh Those are questions that we're going to have to hashtag WaitingC and we are going to cover all of that on SPC Noticias Brasil of course. But yeah, right now I don't have so many answers to you honestly, I wish I did, but yeah, it's just hashtag WaitingC at this point. of course, at the time of this recording, we're still waiting on President Lula to express himself through an act of either support or reject or modify what was approved by But who does support this uh measure in Congress and the Senate? Is it the government-related parties? Is it the opposition? OK, so even before it reaches Lula, the congressmen, so the senators, and the deputies, they can still try to make their moves to not get this going. So this is also, again, Everything in less than 24 hours to happen is a lot, but they can still make their political moves to sort of uh take this down, which I don't think it would happen because there is a lot more involved than only the sports betting provisional measure. There's a lot more going on and things that uh affect the the daily lives of Brazilians too much in order to not pass. Honestly, again, my opinion on that, ah my own opinion. I could be wrong, hopefully not, but they can still take it down as I mentioned. And during the voting, some senators and some deputies went to the stand to say that they were asking the fellow deputies and the fellow congressmen in general to take this down. So that was a vocal opinion expressed by most of them. So it wasn't really something, okay, so we have this small voice screaming, shut it down, shut it, no. It was a big, it was a big amount of uh voices shouting at the same time and saying, we don't want this to move forward. And if it doesn't move forward, the whole measure just goes to the air. We lose a lot of money. Brazil loses a lot of money with that. So again, it's not just about the gambling uh industry with this one. There's, there are the lives of people behind every single day who live here, who are going to be affected by it. either if it goes live or even if it doesn't. So there is money going down the drain if it's not approved anyway. But to talk specifically about the support, the supports and the oppositions, the pressure to change the provisional measure came from the own supporters. And this was something okay, this this was interesting. So Carlos Aratini, he's from PT, which is the the Workers' Party in Brazil, which is the same party as President Lula and also Minister of Finance Fernanda Daici. So the pressure came from their own group, which again, interesting. uh And they also seek your support from the key centrist parties such as IMDB to ensure their approval, which happened in the uh voting. However, the opposition uh has people such as Jorge Saif. uh He's from the PEL, which is the biggest opposition party from PT, they strongly, this party, they strongly criticized the move saying that the government was creating taxes instead of cutting spending and that the final version uh was sort of like an attack to the constitution and all of that. So yeah, that's a lot. I'm gonna pull a trick out of the television here and Ted don't answer just yet. But after a very quick commercial break, I want you to tell us. How does this development alter the outlook of the bets regime for foreign operators? after this quick commercial break, Ted Memir will answer this question. We'll be right back. And we're back with more iGaming Daily. Ted, the floor is yours. How does this development alter the outlook of the bets regime for foreign operators looking into Brazil? Well, I can only speak on the reaction that we were given when kind of printing out this story and putting it out there. First of all, there was kind of a disbelief there and a lot of kind of leaders kind of fabugasted at the course that was taken. They'd been notified for kind of four months that the matter was for debate to increase from 12 to 18 % on tax, which was some substantial increase. Nonetheless, it's hard to kind of generalize the outright feelings from Brazil. It's been, I think year one was always going to be a loss-making year. a year of investment and a year of kind of finding people's footprints within the market. And I think that still stands and that that narrative will probably push on to year two. However, I think that there is kind of the shock factor at what's being implied in terms of what the retroactive taxes might evolve to. Does it mean that there's going be a tougher enforcement? What, you know, if it's voluntary, How's that application gonna be passed on? How's it gonna be enforced on the licenses? There could be a lot of liabilities down the line. And this is why I'm asking that. think if you are a foreign operator now, you're definitely calling up your lawyers. You're out, trying to interpret what the tech says, which was very brief. And you're looking for answers to find out just how liable you might be to... to these retro taxes. I wouldn't say it's a scary time, but I think it's going to be another significant adjustment to consider. and definitely something to look into is the M &A side of things, because uh the Brazil market continues to expand at this point, but it will, of course, eventually contract. And uh one way that it will contract is when the bigger operators, the bigger international operators that haven't yet set foot in Brazil. start acquiring or buying out the smaller operators. of course, Brazil changing the rules so soon, like we have mentioned before in this podcast, definitely raised some eyebrows there. And maybe the bigger operators will not uh in the end come and say, hey, I really want to put money in your country. But instead, they will be like, hey, if you're going to change the rules every eight months, Maybe I'm going to go take my wallet elsewhere. But we mentioned the 18 % tax increase that Fernando Adagio was seeking. Does the introduction of the retroactive taxes effectively kill off this proposed tax increase? Yeah. If, again, if the whole measure is approved as it is right now, yes, it's going to be killed 100%. So we're going to keep. the taxes in 12%. But again, we have this other one coming, the litigios are bad. So again, the proportion is still needs to be examined. So I'm sort of like, okay, so we're not gonna have these tags now, but this other one that just came up, how much is it actually gonna cost us? So I think the operators do need some work there. Of course, there is still the hashtag, wait and see about what Lula is gonna say about this as well. what if the Congress is actually going to try to take this down in their own way. So there's still a lot to go on in, again, less than 24 hours. So operators probably should just breathe a little because even for the politicians, it's still too much going on. Will Fernando Jara have the final say on this? Because he has been pushing for... No, he doesn't. He proposed the this tax raise. But the final say is actually with Lula. So what he can do is he can say, okay, I agree to this part. This other part, no, he can just say, I don't agree with anything. And then he goes back to the Congress to be voted again. ah So this is this is how it could work. And how the Senate and the Congress can also affect it is they can simply push and push and push until 1159. uh of October the 8th and to make this sort of like the whole measure to simply not happen at all. So this is precisely why it's such a complex environment because a lot of people can still take this down. But in the end is in the hands of the president. So Adagy has there's nothing he can do right now besides playing the political game, which is something that he has been doing for a while now. Yeah, definitely uh a lot going on and a lot will go down in the next few hours. So make sure you are subscribed to SBC Noticias Brazil's newsletter as well. all the other media outlets in the SBC media network and also follow iGamingDaily on your preferred podcasting platform and social media so you can stay up to date. We will definitely be updating you on this because this is of course a developing story but tax isn't the only unsettled issue in Brazil because uh operators can be some Concerned to some extent with advertising and consumer protections, could there be another twist in Brazil before the end of the year? Oh, well. I mean, it's Brazil. I think at this point, yes, definitely there could be some other twists. And advertising rules and also player protection measures are still being drafted. So there is a lot that... could happen at this point. However, this is not the focus immediately. So this is also important to say we're already in October and by the end of the year, everything is going to shut down and coming back only way later in January. So honestly, I do believe that right now Brazil has a lot going on in order to focus. And this is me being 100 % honest. I do think we have a lot going on here. So instead of focusing precisely on advertising, ah this is probably going to get for next year. But yeah, I do believe they're divided as well, whether to follow the European standards or to adopt a software model. We have as well Argentina, uh our neighbor country uh taking a pretty hard stand when it comes to advertising. So this could also influence us in a way to understand how it's going to happen with another country. So again, everything is in the clouds right now. but I do not believe that we're going to take an effective look into this this year. Yeah, definitely. Go check out after you finish listening to this episode. Go check out our previous episodes on Latin American markets because we have been talking a lot about advertising. But as we approach the end of 2025, this isn't the market that the operators were promised, right? We just said a lot of changes going on. So how will the industry leadership review these developments? uh And how will you guys follow what's going on in Brazil going into the final stretch of the year? Okay. I'll give you kind of the Western kind of viewpoint of it. again, look, Brazil launched on, you know, very kind of uneven ground and with an unsettled framework. that was always kind of being in development. So these kind of twists and turns to a certain extent should have been kind of factored in. Again, I point back to if you see the majority of operator accounts, they did factor in that Brazil for the first year would be loss making. It is stuck to that script. There should be no surprise there. Look, Brazil is, as you said in your introduction, the most unpredictable market. And part of that is because Global gambling has never seen a market, a federal market this size that has to cater to 200 million consumers. It's never been done before. It hasn't been seen even in the likes of the US. And this always adds a layer of very tacit and complicated uh orders that you have to put in. Brazil is an unfinished story. It can't be judged on year one. And I think that with kind of cooperation and better representation, it should get to a better platform. Ana, you want to add anything? How will you be following these developments, of course, very closely since you are Brazilian and you are covering this for SBC News, this is Brazil. Yeah, so from our side, we're also sometimes surprised by the changes. However, I do believe since we're used to this on a deeper and also personal level, to be honest, because it goes to other decisions as well. As I mentioned, it's not only related to the gambling industry. I do believe we know a bit more how to navigate these things. However, and it's good for the listeners to know as well, we have elections next year. So this is going to a uh lot how the decisions are made, who's making the decisions as well. So the listeners should know that some things that could change and change drastically could be related to the chess movements that the politicians are making thinking about next year's elections. And again, this is normal for a lot of countries, but here we're already expecting it. And we're already expecting in so many different layers in society, it's hard to say how it's only gonna affect the gambling industry. But we're gonna have to hashtag wait and see. And from our side on SBC News, is Brazil, we are talking to people from the industry operators. providers just to understand what they're thinking about the market and how they view next year in terms of elections. So just so you guys know, we are already on that on top of that. And you can of course check everything on SBC News in Brazil and also subscribe to the newsletter. uh We send it every Monday, Tuesday, and also Thursday with the most important news in the country for the week. All right. And also make sure you go ahead and check out this VC events because we have a SVC Summit Rio coming up next March. A lot of this will be discussed and a lot of whatever may happen between today and next March will definitely be covered there. So make sure you are in Rio, be there or be square. Like they say, maybe that's an old people's phrase by now. I don't know. I'm, I'm afraid I'm not a native. uh English or American but yeah bear with me here. This has been all for today, remember to subscribe to all the newsletters to keep up to date. We'll have more updates about this in the next few hours slash days. So Ted Memmure, Ana Maria Meneses, thank you very much. Thank you very much Anaia McDonald, Anaia McDonald that's how you say it, for producing this episode. I'm Fernando Nott and to our listeners out there we'll see you in the next one. Goodbye.