Brazilian Gambling Sector Faces Potential Tax Hikes Amidst Regulatory Changes
Following the Brazilian Senate’s recent approval of new advertising restrictions, the gambling industry may face further challenges in the form of increased taxes.
Six of Brazil’s largest gambling trade associations have jointly issued a statement criticizing the government’s plans to raise taxes on the sector.
Associations such as the Brazilian Institute of Responsible Gaming (IBJR) and the National Association of Games and Lotteries (ANJL) have reacted to a Senate bill that proposes an increase in the tax rate on financial transactions (IOF) from 0.38% to 3.5%.
The IOF applies to credit transactions and foreign currencies and can be collected immediately, unlike many other tax changes.
The government published Decree 12.466/2025 proposing the change on May 22, but has since faced pressure from Congress, which has suggested its revocation.
However, the president of the National Bank for Economic and Social Development, Aloizio Mercadante, has defended increasing the tax burden on the gambling sector to offset revenue lost by revoking the IOF decree.
Reportedly, the Ministry of Finance would need to collect approximately 77% of the current monthly revenue from gambling operators in the country to compensate for the approximately R$ 20 billion (US$ 3.5 billion) in taxes that the IOF increase seeks to raise.
In their joint statement, the associations warned that additional taxes could jeopardize the viability of regulated online operators.
“Representative entities of the betting sector in Brazil express deep concern and vehement disagreement regarding the possibility of increasing the tax burden on legally established operators in the country,” the statement reads.
According to the associations, the 79 currently licensed operators have already contributed more than R$ 2.4 billion in authorization fees. Their tax and social contributions in 2025 are expected to exceed R$ 4 billion.
“In this scenario, it is unjustifiable – from any technical, economic, or public policy perspective – to impose new tax burdens on a sector that is already extremely burdened and contributes significantly and responsibly to the country,” the statement continued.
How the Betting Tax System Works in Brazil
Currently, in addition to a 12% tax on gross gaming revenue (GGR), operators also collect PIS/Cofins of 9.25%, as well as municipal taxes of up to 5%.
Furthermore, operators are taxed on approximately 34% of their profits, of which 25% is in the form of corporate income tax and 9% in social contribution taxes.
Brazil is transitioning to a new tax system, which would lead to the replacement of PIS/Cofins with a dual tax system of taxes on goods and services and contributions on goods and services. The associations estimate that this could increase the tax burden by another 13% on gross revenue.
As Brazil also considers the possibility of a consumption tax, which some have described as a “sin tax” on gambling, the associations warn that the sector is approaching a tax burden of around 50%.
“Brazil currently has a historic opportunity to consolidate a mature model of gambling regulation, with a high capacity for revenue increase, commitment to market integrity, and citizen protection,” the statement said. “It is essential to avoid irreversible setbacks.”
João Rafael Gandara, a tax specialist at the law firm Pinheiro Neto Advogados, believes the measures are aligned with the government’s goal of reducing the deficit to zero in 2025.
Due to the general elections next year, João suggests that the IOF increase may be a desperate attempt by President Luiz Inácio Lula da Silva to achieve this goal, despite growing pressure to revoke the IOF increase.
Could This Strengthen the Illegal Market in Brazil?
Similar to the response to the Senate last week, when new advertising restrictions were approved, the sector warns that additional taxes could risk the viability of online operators, while strengthening the black market.
The associations cited international experiences from Italy and Spain, where excessive taxation of newly regulated markets led to the expansion of the illegal market and loss of revenue for governments, while simultaneously weakening regulation.
“The adoption of measures that compromise legal operations tends to cause the opposite effect to that desired: the strengthening of clandestine platforms that do not collect taxes,” they added.
“In Brazil, the risk is already evident: while the regulated market moved around R$ 3.1 billion per month in the first quarter of 2025, the illegal market operated with estimates of R$ 6.5 billion and R$ 7 billion per month – values that are completely outside the control of the State.”
Do Casinos Represent an Alternative?
Despite Brazil launching its regulated online betting sector on January 1, it is still unclear when the legalization of casinos could arrive.
Brazil’s Minister of Tourism, Celso Sabino, predicted that the vote in the Senate would occur in the first half of this year, although time is running out quickly.
João believes that the legalization of casinos could bring the government the tax revenue it desires.
“Looking on the positive side for gambling companies, especially with talks about [physical] casinos, this would be an opportunity,” João adds.
“At the SiGMA Americas Summit in April, in São Paulo, the senator who has the bill to allow the operation of casinos in Brazil was present, and he was discussing this as compensation for some kind of tax. And I think this may be, at least, the appropriate time for that.”
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