Brazil finance minister confirms gambling tax hike

Brazilian Finance Minister Fernando Haddad has confirmed gambling tax in the country will increase from 12% to 18% of GGR.

On 3 June the government issued a Senate bill that called for a financial transactions tax (IOF) rate increase from 0.38% to 3.5%, but this was ultimately revoked.

The gambling tax hike is an alternative to increasing the IOF itself. The IOF applies to foreign transactions and changes can be applied immediately, unlike many other tax changes.

But at the time, National Bank for Economic and Social Development President Aloizio Mercadante suggested increasing the Brazilian gambling sector’s tax burden, in order to offset revenue lost by revoking the IOF decree.

The change in tax rate has been included in an amendment of Brazil’s IOF policy.

Haddad said in a statement that the provisional measure on the IOF will “allow us to recalibrate the IOF decree, reduce the expected rates, and bring compensatory measures to maintain tax obligations”.

João Rafael Gandara, a tax specialist lawyer for Brazilian law firm Pinheiro Neto Advogados, told iGB recently the measures aligned with the government’s goal of reducing the deficit to zero in 2025.

Gandara also noted that with Brazil holding general elections next year, the IOF changes could be a desperate last-ditch attempt by President Luiz Inácio Lula da Silva to achieve that target, despite pressure by legislators to revoke any IOF increases.

On top of the tax on GGR, operators in Brazil currently face a 9.25% PIS/Cofins tax and municipal taxes of up to 5%.

PIS tax is a federal social contribution calculated as a percentage of revenue, while Cofins is a monthly federal social assistance contribution that is also based on a revenue calculation.

But the country is currently transitioning to a new tax system that would replace PIS/Cofins with a dual tax system of tax on goods and services and contributions on goods and service.

The provisional measures announced on Sunday will not come into force immediately and will need to be approved by the Chamber of Deputies and the Senate.

Sector speaks out on tax hike

The Brazilian Institute of Responsible Gaming (IBJR) has expressed its “vehement indignation” at the proposed increase in taxation for the sector.

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

IBJR noted that since the beginning of 2025, legal operations in the market have paid R$30 million ($5.2 million) each for a five-year concession. This amounts to roughly R$2.3 billion already collected by the Ministry of Finance.

“The sector’s planning was structured based on the current rate of 12% and any change in the middle of the contract compromises the economic-financial balance and confidence in the regulatory environment,” IBJR said.

It has also warned that an increase in online betting taxes would result in the black market growing from 50% to 60%.

While the organisation said it would continue to seek dialogue with the government and national congress on the issue, it has not ruled out court action.

Brazilian gambling operators were already concerned

At the beginning of the month, six of the largest gambling trade associations in Brazil issued a joint statement warning of the damage that increased taxation would have on the market.

The IBJR and the National Association of Games and Lotteries jointly penned a letter in response to the Senate bill that called for the IOF rate increase from 0.38% to 3.5%.

According to the associations, the 79 operators currently licensed have already contributed over BRL2.4 billion in authorisation fees. Their tax and social contributions in 2025 are expected to exceed BRL4 billion.

“In this scenario, it is unjustifiable – from any technical, economic or public policy perspective – to impose new tax burdens on a sector that is already extremely burdened and contributes significantly and responsibly to the country,” the associations said in their joint statement.