Taxes on Grey Market Could Bring Billions for Brazil Government

Brazil’s newly regulated gambling industry could face another wave of financial pressure, as the federal government considers imposing retrospective taxes on operators for activities conducted during the country’s extended grey market period.

According to local news outlet Metrópoles, discussions are underway between the Secretariat of Prizes and Bets (SPA) and the Federal Revenue Service (RFB) on whether to tax betting companies for revenues earned before the full regulation of online gambling, which took effect on 1 January 2025. The talks are taking place within a working group known as GTI-Bets, formed in early January to oversee compliance with tax requirements in the sector.

• Brazil is considering retrospective taxes on gambling operators for revenues earned during the extended grey market period before full regulation began.

• A recent tax hike raised the gross gaming revenue (GGR) tax rate from 12% to 18%, increasing the overall tax burden on operators to around 50%.

• Industry experts warn that higher taxes and retrospective charges could drive players toward illegal gambling platforms, potentially expanding the black market.

 

The so-called grey market period stretched far longer than anticipated. Former president Michel Temer signed initial online gambling legislation in December 2018, but it took five years for the Chamber of Deputies to approve the final regulatory framework. Many operators used this time to build brand recognition and market share, despite operating in a legally ambiguous environment.

RFB special secretary Robinson Barreirinhas signaled the government’s intentions as early as March, telling a parliamentary inquiry that authorities should recover taxes that “would have been paid” during the unregulated years. Metrópoles reports the proposed retrospective taxation could generate up to BRL 12.6 billion (USD 2.3 billion) in revenue.

 

Rising Fiscal Burden

The move comes amid a broader government push to extract more revenue from the gambling industry. Less than eight months after regulation began, operators are already dealing with a significant tax increase. On 11 June, a provisional measure raised the tax rate on gross gaming revenue (GGR) from 12% to 18%—a 50% hike—bringing the total effective tax burden on operators to around 50% when other levies are included.

The measure, which took effect immediately, still requires approval by both the Senate and the Chamber of Deputies to become permanent. An earlier plan to raise revenue through increased financial transaction taxes was abandoned due to political resistance, prompting the government to turn its focus to gambling.

Industry stakeholders have warned that high taxation could undermine the viability of licensed operators, potentially driving consumers toward illegal platforms. The Brazilian Institute of Responsible Gaming (IBJR) estimates that the black market already accounts for about half of gambling activity in the country, and that share could grow to 60% if legal operators are priced out.

 

The government should pursue taxes that would have been paid during the grey market period to ensure fairness and compliance

 

The Future

The potential retrospective taxation highlights ongoing tensions in Brazil’s approach to gambling regulation: balancing the need for fiscal revenue against the risk of destabilizing a newly legal industry. While the government seeks to capitalize on previously untaxed revenues, operators argue that retroactive charges—combined with higher current tax rates—could stifle the market before it has fully matured.

With billions in potential revenue at stake, the debate over retrospective taxes is likely to intensify in the coming months, shaping not only the profitability of gambling operators but also the success of Brazil’s broader regulatory experiment.