Brazil’s Gambling Tax Hike Sparks Political and Industry Clash

Brasília — July 23, 2025 — Brazil’s National Congress has launched a joint committee to assess a highly contested proposal to increase taxes on gambling operators, following the government's decision to raise the gross gaming revenue (GGR) tax rate from 12% to 18%. The move, formalized under Provisional Measure (PM) 1,303/2025, has ignited debate between lawmakers seeking greater tax justice and industry leaders warning of economic fallout.

The 50% tax hike, effective immediately upon the PM’s publication on June 11, adds to the broader tax burden operators face, which includes corporate income tax and social contributions—amounting to an estimated 50% overall. Critics from Brazil’s nascent licensed gambling sector argue the change threatens business viability and may drive consumers toward unregulated platforms.

The joint congressional committee—chaired by Senator Renan Calheiros and with Deputy Carlos Zarattini as rapporteur—is tasked with evaluating the measure and submitting a recommendation before an October 9 deadline. A series of four public hearings, the first scheduled for August 7, will gather feedback from stakeholders across the political and economic spectrum.

A Strategy to Rebalance the Budget

Provisional Measure 1,303/2025 forms part of a broader fiscal strategy by the federal government, aimed at closing a BRL20 billion ($3.6 billion) budget gap. The tax shift follows a government decision to revise a controversial financial transactions tax (IOF) increase, originally planned to rise from 0.38% to 3.5%. Instead, officials redirected their focus to sectors seen as under-taxed, including gambling.

Senator Randolfe Rodrigues, a key government ally and leader in Congress, defended the decision as a move toward addressing inequality. “Today, we are one of the 10 largest economies in the world and also one of the 10 most unequal,” Rodrigues said. “The government sought, with this provisional measure, to build mechanisms for tax justice.”

Under the new tax structure, one-third of the revenue from the 18% GGR tax will go toward social security and public health, with the remainder allocated to areas such as education and sports.

Industry Backlash and Legal Uncertainty

The licensed gambling industry, legalized less than two years ago, has pushed back strongly against the tax increase. The Brazilian Institute of Responsible Gaming (IBJR) warned that the hike may lead to a surge in illegal betting activity, predicting the unregulated market could absorb over 60% of gambling revenue if the measure is made permanent.

“The measure is unacceptable and makes it impossible for many companies that trusted and invested in the regulated market to operate,” the IBJR said in a June statement. “It generates legal uncertainty and threatens public revenue.”

Industry leaders argue the abrupt tax change undermines regulatory stability and investor confidence, both seen as vital for the long-term growth of Brazil’s gambling sector.

While some lawmakers have rallied behind the tax hike, others have questioned both its fairness and its effectiveness. Senator Izalci Lucas has been among the most vocal critics, arguing the measure does not go far enough in taxing the gambling sector and unfairly burdens other industries such as agriculture and construction funds. “You take the betting industry, which has destroyed Brazil, reduced supermarket consumption, reduced retail consumption,” Izalci said in a speech earlier this week. “This government only thinks about raising taxes.”

He also criticized the administration for failing to enforce restrictions on gambling by welfare recipients, particularly those receiving benefits under the Bolsa Família program.

 

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

What Comes Next

The joint committee’s internal vote is expected on August 26, ahead of the full congressional vote by October 9. If lawmakers reject the provisional measure, the tax rate will revert to its previous 12% level, but if approved, the 18% rate will become permanent.

As debate continues, the measure remains a flashpoint in broader discussions about economic reform, social equity, and regulatory stability. With both public and private interests heavily invested, Brazil’s approach to gambling taxation may set a precedent for how the country balances revenue generation with sustainable market development.