Brazil’s Senate Commission of Economic Affairs has approved a tax proposal on online games, despite a lack of clarity as to how the government will implement its federal gambling laws. 

President of the Chamber of Senators Rodrigo Pacheco hinted that “whilst the debate won’t happen anytime soon”, interested parties should have information with regards to what type of taxes will be applied should the federal gambling bill secures its full approval.

The latest development sets that the “organization, administration or exploitation of skill games and online games, such as poker or chess”, will be subject to a tax should the Senate give its final green light. 

Of significance, a different approach to tax collection has been proposed, where the commission favours final takings to be transferred to the executives of regional municipalities where the players reside. Tax charges will be distributed by Brazil’s ISS tax service.  

The proposal outlined that the tax framework could be applied to further gambling verticals such as online casino games and sports betting dependent on regulatory outcomes that are yet to be decided.  

“The ordinary law would make the administrator identify the players and unify other obligations that the electronic platform must comply with at a national level,” supporting Senator Jaques Wagner explained. 

The author of the proposal, Senator Flávio Arns, said: “This informality around taxpayers is a public knowledge issue. The result of technological advances and the lack of updates surrounding legal tax regulations that make auditing difficult and compromise potential tax collection.”

“Internet operations have been a thing for a long time, which has led to new service providers, especially in electronic entertainment activities. However, the legislation is not always able to keep up with new technologies,” he said.

The Chamber of Deputies took a big step in late February to approve Bill 442/91 to regulate gambling, that currently awaits its regulatory debate by the Senate.

The lack of consensus between senators will slow down the process, as Pacheco said, and added that “the proposal will follow the normal processes, always including a broad discussion, as it happened with the Chamber of Deputies,” implying that there is no urgency to debate the bill.

Market observers have been warned that the tax proposal will not receive special treatment, such as a direct vote of the plenary session of the House, and long delays are expected. 

Pacheco will be the one to define whether the bill is included on the agenda, but he needs the approval of the party leaders before doing so. This may take several months and the senators estimate that it will not happen in 2022.