Article By Stephen Crystal – Founder & CEO, SCCG – SCHEDULE A MEETING!
Brazil’s government has taken a bold step in its fiscal strategy by issuing a Provisional Measure (MP) to raise the tax on online betting operators from 12% to 18% of their Gross Gaming Revenue (GGR). This 50% tax increase, set to take effect on October 1, 2025, comes as part of a broader plan to address the country’s fiscal needs while attempting to regulate the gambling market more aggressively.
The Fiscal Strategy Behind the Tax Hike
The government’s rationale behind the proposed tax hike is clear: to address the growing budget deficit and redirect the revenue towards critical public services, particularly social security and health programs. The additional 6% in tax revenue will be allocated to these essential areas, while the original 10% will continue to fund federal operations.
While the proposal addresses immediate financial needs, it is also strategically aimed at curbing the influence of illegal betting platforms, which continue to thrive in Brazil. In an effort to strengthen the legal market, the MP introduces stringent regulatory measures, including restrictions on payment providers and a ban on advertising illegal platforms.
Industry Pushback and Concerns
However, the proposed tax increase has triggered significant backlash from the legal gambling industry. Operators, who have already endured a period of regulatory reform and investment, are concerned about the financial impact. The Brazilian Institute of Responsible Gaming (IBJR) has been vocal in its criticism, warning that the tax hike could push consumers back to the illegal market.
Currently, the illegal market is estimated to account for 50% of gambling activity in Brazil, and IBJR fears that this increase could push that figure to 60%. The institute has argued that such a shift would result in a loss of more than R$2bn annually in potential public revenue, undermining the very goals the government seeks to achieve.
Regulatory Measures: A Stronger Grip on Operators
Alongside the tax hike, the Brazilian government is tightening its regulatory framework. The MP introduces measures to clamp down on illegal gambling operations, such as requiring internet providers, payment platforms, and app stores to comply with government orders to block or suspend unlicensed services. Additionally, companies that engage in match-fixing or maintain ties with illegal operators face harsh penalties. Corporate accountability is being reinforced, with provisions ensuring that executives involved in unauthorized betting activities will be barred from holding leadership roles in the regulated sector.
These measures are intended to improve market integrity and protect bettors, but they also present operational challenges for betting operators. The added financial and regulatory burdens could stifle the growth of the legal gambling market, which many operators and investors had already committed to, based on the original tax structure.
The Road Ahead: Congressional Approval and Industry Adaptation
The MP, while effective immediately, still requires approval from the Brazilian National Congress within 120 days. The initial phase involves discussions within a joint congressional committee before it moves to the Chamber of Deputies and the Senate. If passed without amendments, the measure will become law; however, it may also undergo revisions or vetoes by President Lula da Silva.
Finance Minister Fernando Haddad has defended the proposal, emphasizing that it balances fiscal responsibility with the need for stricter regulatory oversight. Despite opposition, the government believes that the changes will provide the necessary funding for social programs and help stabilize the gambling sector in the long term.
A Delicate Balance: Will Brazil’s Gambling Industry Survive the Tax Increase?
The proposal to raise the betting tax in Brazil is a contentious one. While the government seeks to generate critical public revenue, the tax hike could undermine the stability of the regulated market, driving more consumers to the illegal sector. The backlash from industry representatives, along with the potential for legal action, highlights the delicate balance that Brazil’s government must navigate.
As the MP moves through the legislative process, operators, lawmakers, and government officials will continue to debate the best way to ensure the growth of a fair, sustainable gambling market in Brazil—one that can support public welfare without compromising the industry’s future.
