Tax Plan Sparks Clash with Brazil’s Gambling Sector

São Paulo, Brazil — Brazil’s gambling industry is bracing for potential tax increases, just a week after the Senate approved sweeping new restrictions on gambling advertising. Six of the country’s largest gaming trade associations, including the Brazilian Institute of Responsible Gaming (IBJR) and the National Association of Games and Lotteries (ANJL), issued a joint statement on Tuesday condemning what they view as an unsustainable rise in the sector’s fiscal burden.

At the center of the dispute is Decree No. 12,466/2025, issued by the federal government in late May. The decree proposed raising the Financial Operations Tax (IOF) from 0.38% to 3.5% on credit and foreign exchange transactions—changes that could be implemented immediately. While the move has drawn criticism from Congress, which has floated the possibility of revoking the measure, the government has countered with talk of offsetting the revenue shortfall by increasing taxes on regulated gambling operators.

Sector Challenges Decree, Warns of Overburden

Industry representatives argue that further tax hikes would jeopardize the viability of legal operators, who they say are already heavily taxed. In a joint statement, the associations said the proposal “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.”

According to their estimates, the 79 licensed operators in Brazil have already paid BRL2.4 billion ($420 million) in licensing fees and are expected to contribute over BRL4 billion ($700 million) in taxes and social payments in 2025.

Currently, gambling operators face a complex and layered tax system:

• A 12% gross gaming revenue (GGR) tax
• A 9.25% PIS/Cofins levy
• Up to 5% in municipal taxes
• Roughly 34% corporate tax on profits, split between income and social contributions

Brazil is also in the process of transitioning to a new tax regime, which could add an estimated 13% to gross revenue via a dual tax system on goods and services. The possibility of a new consumption tax—commonly referred to as a “sin tax”—has raised concerns the industry’s overall tax burden could approach 50%.

Aiming to Close the Fiscal Gap

President Luiz Inácio Lula da Silva’s administration has made it clear that closing Brazil’s budget deficit remains a priority, with the goal of reaching fiscal neutrality by 2025. Tax lawyer João Rafael Gandara of Pinheiro Neto Advogados believes the proposed gambling tax increase reflects this urgency.

“The IOF hike may be a last-ditch effort to meet deficit targets before next year’s elections,” Gandara told iGB, suggesting the government is looking for politically feasible alternatives if Congress blocks the decree.

The Ministry of Finance is aiming to raise BRL20 billion ($3.5 billion) through the IOF changes. If replaced by gambling tax hikes, the government would need to collect roughly 77% of current monthly gambling revenue to match those figures—a target the industry warns could backfire. In addition to regulatory concerns, the associations argue that excessive taxation could weaken the legal market and empower unlicensed operators. They cite international examples from Italy and Spain, where similar policies led to a loss in government revenue and a rise in illegal betting.

“Measures that compromise legal operations tend to cause the opposite effect to that desired: the strengthening of clandestine platforms that do not collect taxes,” the statement read.

Estimates from the first quarter of 2025 indicate Brazil’s legal gambling market handled BRL3.1 billion per month, while illegal operators moved between BRL6.5 billion and BRL7 billion—activity largely beyond the state’s control.

It is unjustifiable to impose new tax burdens on a sector that is already extremely burdened and contributes significantly and responsibly to the country.

The Future

While online betting was formally legalized on January 1, the future of land-based gambling remains uncertain. Minister of Tourism Celso Sabino had anticipated Senate discussions on casino legislation in the first half of 2025, but time is running short. Still, some in the legal and gaming communities see opportunity. Gandara pointed to recent discussions at the SiGMA Americas Summit in São Paulo, where lawmakers floated the idea of legalizing land-based casinos as a potential fiscal offset.

“For gambling companies, this could be a silver lining,” Gandara said. “If properly regulated, land-based casinos might generate significant revenue and help reduce the pressure on the online sector.”

The current standoff between the government and Brazil’s gambling industry highlights the broader tension between fiscal necessity and sustainable regulation. As Brazil moves forward with tax reforms and prepares for an election year, the future of its burgeoning gambling sector may hinge on whether the state can balance revenue collection with long-term market viability.