Brazil Considers Further Tax Increases on Licensed Gambling

The pressure on Brazil’s licensed gambling sector has intensified after the government introduced a provisional measure to raise the tax rate on operators to 18% of gross gaming revenue (GGR). This move, which constitutes a 50% increase from the previous 12% rate, comes amid ongoing efforts to combat illegal betting and boost public revenues.

On Wednesday, the government officially published Provisional Measure No. 1,303, which amends Law No. 13,756/2018 governing betting taxes. Of the newly set 18% tax on GGR, 6% will fund social security and health contributions, while the remaining 12% is designated for sectors including sports and education. Although the measure is effective immediately, it requires approval from Brazil’s Senate and Chamber of Deputies to become permanent.

 

Key Points

• Brazil’s government has raised the tax on licensed gambling operators from 12% to 18% of gross gaming revenue, pending legislative approval.
• The increase aims to offset lost revenue from scrapped financial transaction tax hikes and fund social security, health, sports, and education sectors.
• The licensed gambling industry warns the higher tax could drive bettors to the illegal market, which currently controls an estimated 60% of Brazil’s betting sector.

 

The Developments

Finance Minister Fernando Haddad confirmed the tax increase on Sunday, linking it to the government’s broader financial strategy after revoking a decree that would have raised the financial transaction tax (IOF) from 0.38% to 3.5%. The elimination of that IOF hike created a shortfall, which Aloizio Mercadante, president of the National Bank for Economic and Social Development, suggested should be offset by higher gambling taxes.

Alongside the tax rise, the provisional measure aims to tighten controls on illegal gambling, a persistent challenge in Brazil. Amendments to Law No. 14,790/2023 now require internet service providers and app companies to maintain permanent communication channels with the Secretariat of Prizes and Bets. The law also mandates internal procedures to prevent cooperation with black market operators and grants authorities broader powers to sanction illegal betting sites and address match-fixing.

Despite these regulatory efforts, the illegal betting market remains substantial. André Gelfi, cofounder and CEO of the Brazilian Institute of Responsible Gaming (IBJR), estimates that unauthorized operators still control about 60% of Brazil’s betting market, despite the legal framework launching earlier this year.

The licensed gambling industry has responded sharply to the tax hike, led by the IBJR, which condemned the measure as “unacceptable” and harmful to the sector’s financial stability. The institute highlighted that legal operators have already paid over BRL 2.3 billion ($415 million) in license fees, and changes mid-licence term threaten economic balance and legal certainty.

The IBJR warned that increasing the tax could undermine licensed operators’ viability, potentially driving bettors to illegal platforms. They project the black market could grow from around 50% to at least 60% of the total market share, causing an estimated BRL 2 billion annual loss in revenue. The IBJR argues the government should focus on combating illegality rather than penalizing lawful businesses.

Adding to industry concerns, Brazil’s Vice President Geraldo Alckmin indicated the tax on gambling might increase further. Speaking at a Brazilian Association of Supermarkets event, Alckmin suggested the government might work with Congress to raise the tax rate beyond the current 18%, potentially up to 27%.

 

The measure is unacceptable and makes it impossible for many companies that trusted and invested in the regulated market to operate.

 

The Future

Alckmin justified the potential increase as necessary to protect families and enhance government revenues, stating, “We need to increase the tax [on bets]. Not just 18%, which is the government’s proposal, but 27%. This will prevent many families from being harmed.”

The prospect of further tax hikes has escalated uncertainty for licensed operators, already navigating a complex regulatory environment and significant competition from illegal betting. The government’s balancing act between increasing public revenue and fostering a viable legal gambling market remains a critical challenge as Brazil’s betting industry continues to evolve.