Government Proposes Increasing Betting Tax from 12% to 18%

The Ministry of Treasury is actively discussing strategies to address fiscal challenges for 2025 while adhering to the fiscal framework. A key proposal under consideration is increasing the tax on betting platforms from the current 12% to 18% on Gross Gaming Revenue (GGR). This adjustment aims to bolster public finances amid negotiations to resolve the deadlock surrounding the Tax on Financial Transactions (IOF). The proposal has gained traction following discussions with congressional leaders, who are exploring alternatives to offset potential reductions in other tax measures.

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Background of the Betting Tax

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The betting industry was legalized in Brazil in 2024, with an initial government proposal to tax betting companies at 18% on GGR. However, during legislative debates, this rate was reduced to 12% due to industry pushback and concerns about competitiveness. The current discussions revisit the original 18% rate as a means to generate additional revenue for public services, particularly in light of fiscal pressures and the need to balance the budget.

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Current Taxation Structure for Betting Companies

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Betting platforms in Brazil are subject to multiple federal and municipal taxes, which significantly impact their financial operations. The existing tax obligations include:

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• Contribution to Social Security Financing (COFINS): 7.6% of revenue
• Corporate Income Tax (IRPJ): 15% of revenue
• Social Contribution on Net Profit (CSLL): 9% on profit
• Social Integration Program (PIS): 1.65% on profits
• Tax on Services (ISS): 2% to 5%, depending on the municipality

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Combined, these taxes result in a total tax burden ranging from 35.25% to 38.25%. With the current 12% GGR tax, the overall taxation for betting companies ranges between 47.25% and 50.25%. The proposed increase to 18% would elevate the total tax burden to approximately 53.25% to 56.25%.

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Potential Impacts on the Betting Industry

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Raising the GGR tax to 18% could have significant implications for the betting sector:

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• Reduced Profit Margins: With only 82% of GGR remaining after the proposed tax, companies may face challenges covering operational costs, marketing, and other expenses.
• Market Competitiveness: Higher taxes could deter new entrants and push existing operators to relocate to jurisdictions with lower tax rates, potentially reducing Brazil’s share of the global betting market.
• Consumer Costs: Companies might pass on the additional tax burden to consumers through higher fees or reduced odds, which could affect user engagement.
• Regulatory Compliance: Increased financial pressure may lead some operators to explore unregulated markets, undermining the government’s efforts to regulate the industry.

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Broader Economic and Fiscal Context

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The proposed tax hike is part of a broader strategy to address fiscal challenges in 2025. The government is navigating negotiations with Congress to balance revenue generation with economic growth. Alternatives to the IOF, such as the betting tax increase, are seen as viable options to maintain fiscal stability without overburdening other sectors. However, the government faces resistance from industry stakeholders who argue that excessive taxation could stifle growth in a nascent industry.

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Stakeholder Perspectives

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• Government: The Ministry of Treasury views the tax increase as a necessary step to fund public services while adhering to fiscal rules. The proposal aligns with the original 18% rate suggested during the 2024 legalization process.
• Betting Industry: Operators argue that the cumulative tax burden, which could exceed 50%, threatens their viability and may lead to job losses and reduced investment in Brazil.
• Congress: While some congressional leaders support the tax hike, others advocate for a balanced approach to avoid stifling economic growth in the betting sector.

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The proposed increase in the betting tax from 12% to 18% reflects the government’s efforts to address fiscal challenges while maintaining compliance with the fiscal framework. However, the measure raises concerns about its impact on the betting industry’s sustainability and competitiveness. As negotiations continue, the government must weigh the benefits of increased revenue against the potential risks to a growing sector.

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