Brazil’s Betting Tax Debate Rekindled After Congressional Rejection
The Brazilian government is facing renewed budget challenges following the lapse of Provisional Measure (MP) 1.303, which occurred after the Chamber of Deputies failed to act on the legislation this week. This development disrupts a significant tax reform that would have increased taxes on online betting, financial assets, and fintech companies. The government now confronts a potential budget shortfall exceeding BRL 50 billion (approximately $9.2 billion) for the years 2025 and 2026, compelling President Luiz Inácio Lula da Silva’s administration to explore alternative fiscal strategies to maintain public finances.
Haddad’s Tax Reform Proposal Fails, Betting Sector Avoids Planned Tax Increase
In June, the Finance Ministry introduced a comprehensive tax reform plan intending to raise the betting tax from 12% to 18%. The proposal also sought to broaden the tax base to include fintech companies and modify income tax regulations relating to investments. Additional suggestions included limiting tax offsets and incorporating the “pé-de-meia” student savings initiative into the national education budget floor. However, since this proposal never proceeded to a vote, the existing tax rates and regulations remain unchanged.
Finance Minister Fernando Haddad emphasized the importance of the reform in promoting fairness across economic sectors and curtailing what he described as “abusive compensations” by corporations, as reported by Brazilian media. In light of the setback, Haddad indicated that the government is considering alternative measures, such as reducing tax incentives or introducing new taxes, to compensate for the expected revenue loss from the now-defunct measure.
The failure of the proposal ensures that betting companies will continue to pay the current 12% tax on their total gambling revenue instead of facing the proposed 18% rate increase. Additionally, a temporary rule that would have imposed taxes on funds sent abroad by betting firms was not implemented, sparing the industry an estimated BRL 5 billion (around $929.6 million) in retroactive taxes.
Workers’ Party Proposes New Bill to Raise Betting Tax Following Legislative Setback
The repercussions extend beyond financial circles. President Lula described the expiration of the provisional measure as “a defeat for the Brazilian people,” highlighting that the intended reform sought to rebalance contributions by increasing taxes on wealthier groups.
Conversely, business organizations welcomed the decision. The National Confederation of Industry praised Congress for rejecting a policy that would have increased costs for Brazilian citizens, while the Brazilian Association of Crypto Economy viewed the outcome as positive for regulatory balance and constructive dialogue.
In response to the legislative block, members of the Workers’ Party swiftly introduced new legislation aiming to raise the betting tax to 24%, doubling the current rate. The proposal intends to allocate the increased revenue toward funding social security programs, citing concerns over the negative financial impact of gambling on families.
Political analysts observe that this episode reveals emerging divisions within President Lula’s team. Rapporteur Carlos Zarattini made last-minute revisions to the provisional measure, replacing the planned increase in betting taxes with a different approach focused on taxing past earnings. This shift attracted strong criticism from various political factions and contributed to the measure’s failure, leaving the future of Brazil’s newly regulated betting market uncertain once again.
