Brazil's Gaming Tax Increase Fails to Pass and the Market Breathes Sigh of Relief as 18% Rate Proposal Expires

Brazil's controversial proposal to increase the gross gaming revenue tax from 12% to 18% has officially expired after failing to secure congressional approval, marking a significant defeat for President Luiz Inácio Lula da Silva's fiscal agenda and providing temporary relief to the country's newly regulated betting industry.

On October 8th, 2025, Brazil's Chamber of Deputies removed Provisional Measure (PM) 1,303/2025 from its legislative agenda, with 251 deputies voting in favour of removal and 193 opposed. The measure, which required approval from both legislative houses by the October 8th deadline, lost all legal validity when it failed to advance to the Senate.

President Lula responded to the decision on social media platform X, asserting that "the lower house's decision is not a defeat imposed on the government, but on the Brazilian people."

The Brazilian government introduced PM 1,303/2025 in June 2025 through Finance Minister Fernando Haddad, seeking to raise the gambling tax rate from 12% to 18% of gross gaming revenue effective October 1st, 2025. The measure came into effect immediately upon publication on June 11th, with provisions scheduled to take full effect in January 2026.

Finance Minister Haddad defended the proposal as necessary to address Brazil's R$20 billion budget deficit and rebalance public finances. The government initially estimated that the provisional measure would generate an additional 20.9 billion reais (approximately $3.92 billion) in revenue for 2026.

"This MP will allow us to recalibrate the IOF decree, focusing its new version on regulatory aspects, so that we can reduce the tax rates outlined in the original decree, which will be revised accordingly," Haddad stated when announcing the measure.

The gambling tax increase represented a replacement for the government's earlier proposal to raise Brazil's Financial Transactions Tax (IOF) from 0.38% to 3.5%, which was shelved following opposition from the Central Bank and congressional leaders concerned about inflationary effects and reduced investor confidence.

The proposed 50% tax increase triggered immediate backlash from both domestic and international betting operators, who characterised the measure as potentially catastrophic for Brazil's nascent regulated market.

Eduardo Ludmer, BetMGM's head of legal in Brazil, expressed operators' frustration with the abrupt policy change: "They agreed to invest hundreds of millions into this venture and then six months down the road they just change the rules of the game without asking you."

Trade bodies including the Brazilian Institute of Responsible Gaming (IBJR) and the National Association of Games and Lotteries (ANJL) condemned the measure as "unacceptable," emphasising that frequent regulatory changes erode legal certainty and diminish Brazil's attractiveness as a gaming destination.

Six industry associations jointly issued a statement "vehemently reject[ing]" attempts to make the online betting and gaming sector a "scapegoat for the country's fiscal imbalance," warning of "irreversible setbacks" for the sector.

The IBJR warned that the 18% rate, combined with existing corporate income tax (15% plus 10% surcharge on profits exceeding R$240,000 annually), social contribution on net profit (CSLL at 9%), PIS/Cofins taxes (9.25%), and municipal service taxes (up to 5%), would push the total effective tax burden on operators beyond 50%.

"This will reduce operator investment and harm competition in the market," the IBJR stated, estimating that the tax increase could cause the illegal gambling market to claim over 60% of market share.

The provisional measure underwent review through a joint congressional committee that hosted four public hearings between August 7th and late August 2025, with a final vote deadline of October 9th, 2025.

Senator Renan Calheiros chaired the committee, while Deputy Carlos Zarattini served as rapporteur. Senator Randolfe Rodrigues defended the proposal as essential for economic fairness: "Today, we are one of the 10 economies in the world and, at the same time, one of the 10 most unequal countries. Something isn't right about this combination. The government sought, with this provisional measure, to build mechanisms for tax justice."

Finance Minister Haddad reinforced this position, stating: "Betting companies went four years without paying taxes. That's why we established rules and sent them to the National Congress, setting a framework for this economic sector. We proposed an 18% rate on GGR following the international standard, but Parliament reduced it to 12%. Therefore, the PM proposes reinstating the government's original proposal."

Deputy Carlos Zarattini acknowledged "the importance of the tax justice proposed by the government," while Deputy Lindbergh Farias stated that "Brazilian society supports increasing the tax on gaming, as it serves to promote tax justice."

However, some legislators suggested even higher rates. Deputy Mauro Benevides Filho declared: "The sector generated R$170 billion and paid zero income tax. I don't believe Congress will fail to approve the increase from 12% to 18%. We will work to ensure this increase passes."

Vice President and Minister of Development Geraldo Alckmin went further during the National Supply Chain Forum, suggesting: "I like your proposal. Not just the 18% that the government is proposing, but 27%. This will help prevent many families and society as a whole from being harmed."

The timing of the tax proposal proved particularly contentious, arriving just six months after Brazil's regulated online gambling market officially launched in January 2025. Operators had already committed substantial resources, including a R$30 million entry fee for five-year licences plus a R$5 million emergency fund requirement, under the original 12% tax regime.

As of January 2025, Brazil granted 66 licences to operate fixed-odds betting platforms, 14 definitive and 52 provisional, with major operators including SuperBet, MGM, Bet365, Betsson, and Caesars participating.

Despite concerns about the tax increase, revenue collections exceeded expectations during the first half of 2025. Brazil collected R$4.73 billion in the first seven months of 2025, with July alone generating R$928 million compared to R$8 million in July 2024. Between February and April 2025, the sector contributed R$755 million in fixed-odds betting tax and R$2.4 billion in licence fees.

Following the expiration of PM 1,303/2025, the Workers' Party immediately introduced a more aggressive proposal. On October 9th, 2025, one day after the provisional measure collapsed, Deputy Lindbergh Farias presented Bill PL 5,076/2025, proposing to double the gambling tax rate from 12% to 24% of gross gaming revenue.

The new bill allocates 50% of tax proceeds to social security and public health, with the remaining funds directed toward sports, culture, and social programmes. The proposal frames the tax increase not merely as revenue generation but as a measure to address gambling-related social harms.

"This growing increase in bets and the number of bets is accompanied by several social and economic problems," the bill reads, with Farias arguing that "what often begins as a joke can eventually lead to gambling addiction."

Brazilian iGaming expert Elvis Lourenço, managing partner at EX7 Partners, delivered a scathing assessment of the 24% proposal: "24% is insane. It will collapse the market."

Lourenço suggested the proposal represents political positioning ahead of elections rather than sound fiscal policy: "This becomes an election agenda. It's good for the speech of the actual government," referring to the administration's rhetoric about taxing the "three Bs", billionaires, banks, and betting.

However, Lourenço indicated room for negotiation exists: "So if you look for the best worst scenario, it is 15% at least, 18% maximum because that was on the first agenda."

Finance Minister Haddad's public statements throughout the debate intensified industry concerns about the government's long-term commitment to the regulated market. In a July 2025 interview with Brazilian news outlet Metrópoles, Haddad strongly criticised the betting sector, stating: "The previous government treated online betting sites as if they were philanthropic organizations. No real was received from them during those four years."

Haddad questioned the sector's economic contribution: "These companies are piling up profits in Brazil, creating few jobs, and shipping most of their profits overseas. What is the nation's benefit with this model?"

In an even more dramatic statement during a July 22nd, 2025 interview with media outlet ICL, Haddad declared he would personally vote to ban online gambling entirely, describing the market as a "disgrace" and arguing that "no amount of tax revenue can offset its social harms."

Following Congress's summer recess, Haddad told economist Eduardo Moreira: "If it were up to me, I'd hit the stop button. No amount of tax revenue justifies the mess we've landed in." He added that "Congress should reconsider gambling", a particularly striking statement given his direct role in crafting the regulatory framework.

The Finance Ministry indicated it is considering severe restrictions on gambling advertising modelled after tobacco regulations, potential separation of online casino-style games from sports betting, and even a complete rollback of the regulatory architecture.

With PM 1,303/2025 officially expired, Brazil's gambling tax rate remains at the original 12% of gross gaming revenue established under Law No. 13,756/2018. The government has not announced an immediate replacement measure.

However, Bill PL 5,076/2025 proposing the 24% rate has received urgent status approval from the Chamber of Deputies' Finance and Taxation Committee, expediting its path through Congress. The IBJR released an infographic on October 23rd, 2025, highlighting that the proposed 24% GGR rate, combined with Brazil's broader tax reform introducing the CBS (Contribuição sobre Bens e Serviços) and IBS (Imposto sobre Bens e Serviços) taxes at a combined 28% rate, could result in a total effective tax rate of 45.4% on betting consumption.

André Gelfi, president of the Brazilian Institute of Responsible Gaming, warned: "The Brazilian tax burden will be at least 350% higher than the English one as presented." The IBJR has urged Brazil to adopt a tax structure equivalent to the United Kingdom's model, which they characterise as "essential to avoid an immediate disruption in the flow of resources that sustain the country's sports ecosystem."

Industry analysts note that excessive taxation risks driving consumers and operators back to the unregulated offshore market that Brazil's regulatory framework was designed to eliminate. Research published in 2025 indicated that legal operators currently control 49% of Brazil's online betting market, while illegal platforms hold a 51% share, a precarious balance that higher taxation could further destabilise.

The government remains committed to addressing its fiscal deficit, with Finance Minister Haddad stating that Brazil will continue pursuing its public accounting targets regardless of congressional outcomes. Additional tax reform proposals remain under consideration, most notably a 10% withholding tax on dividends, which faces increased pressure for approval following the expiration of PM 1,303/2025.

As Brazil's gambling industry navigates this period of regulatory uncertainty, stakeholders emphasise the need for stable, predictable policy frameworks that balance legitimate fiscal objectives with market sustainability and competitiveness against illegal operators.