Impending Tax Increase in Brazil’s Gambling Sector: What’s at Stake?
The Brazilian government plans a significant shift in its gambling taxation framework, opting for a 50% increase in the tax rate, bringing it from 12% to 18% of Gross Gaming Revenue (GGR). This decision must also be viewed in the broader context of ongoing social and economic contributions.
Finance Minister Fernando Haddad announced this tax hike in light of recent fiscal strategies aimed at stabilizing the country’s economy. On June 3, the government proposed a Senate bill to increase the financial transaction tax (IOF) rate from 0.38% to 3.5%, which was later rescinded. Instead, increasing the gambling tax emerges as a workaround to elevate revenues without altering the IOF, which currently applies to foreign transactions and allows for more immediate implementation.
Aloizio Mercadante, President of the National Bank for Economic and Social Development, has weighed in, suggesting that boosting taxes on the gambling sector could help recover lost revenues from the revoked IOF adjustments. This adjustment to the gambling tax is embedded in a larger alteration to Brazil’s fiscal policy regarding the IOF.
Haddad emphasized that this provisional measure aims to recalibrate existing tax decrees, lower projected rates, and ensure compliance with existing tax obligations. Tax attorney João Rafael Gandara from Pinheiro Neto Advogados pointed out that these strategies align with the government’s ambition to reach a zero deficit by 2025, indicating a possible last-minute push by President Luiz Inácio Lula da Silva as general elections approach amid legislative pressures.
In addition to the heightened GGR tax, Brazilian gambling operators currently contend with a 9.25% PIS/Cofins tax and municipal levies reaching 5%. Notably, PIS is a federal contribution tied to revenue, while Cofins functions as a monthly federal assistance contribution based on the same revenue figure. As Brazil transitions to a dual tax system, these contributions are set to be restructured.
However, implementation of these provisional measures will not be immediate; they require approval from both the Chamber of Deputies and the Senate.
Industry Responses to the Tax Hike
The Brazilian Institute of Responsible Gaming (IBJR) has publicly voiced strong objections to the proposed tax increase, labeling it “unacceptable.” Their statement suggests that such a measure could jeopardize the viability of many companies operating within the regulated market, resulting in legal uncertainties and detrimental impacts on public funds. The IBJR highlighted that legal operators have already contributed R$30 million each for five-year concessions, totaling around R$2.3 billion collected by the Finance Ministry since 2025.
The organization stresses that the current operational landscape was built around the existing 12% tax rate, and any mid-contract changes could destabilize financial planning and erode overall confidence in the regulatory environment. They also warn that increasing taxes could potentially escalate the black market’s share of online betting from 50% to 60%. While the IBJR continues to pursue dialogue with government officials and legislators, they have not ruled out potential legal action.
Growing Concerns Among Operators
Just recently, six of Brazil’s major gambling trade associations united in raising alarms about the potential fallout from increased taxation. In a joint statement, the IBJR and the National Association of Games and Lotteries expressed their concerns about the detrimental effects of the proposed taxes in light of the Senate’s push for higher IOF rates.
Currently, with 79 licensed operators, the industry has already contributed over BRL2.4 billion in fees, with tax and social contributions expected to exceed BRL4 billion in 2025. The associations argue that imposing further tax burdens on an already heavily taxed sector is unwarranted, considering the significant and responsible contributions they make to the nation’s economy.
This changing landscape of taxation highlights a critical juncture for Brazil’s gambling industry, as stakeholders navigate the complexities of fiscal reform amidst growing operational costs and market pressures.