Brazil has introduced a new measure that has hiked gambling tax by half. Industry insiders are critical of the policy change, citing that it would end up pushing players towards unregulated markets.
Brazil shook its licensed gambling industry in June with its bold plan to raise gambling taxes by 50%. The sudden move is outlined in Provisional Measure 1,303/2025.
However, many stakeholders warn that such a heavy burden might force some businesses to shut down. Congress has until October to decide whether this sharp tax hike will become a permanent part of Brazil's gambling landscape.
The new 18% GGR tax took effect right after it was announced on June 11. A third of it will support social security and healthcare, while the rest will be allocated to areas such as sports and education. This tax replaced a plan to raise the financial transactions tax from 0.38% to a steep 3.5%.
Brazil utilizes the IOF (Imposto sobre Operações Financeiras) or Tax on Operations of Credit, Exchange, and Insurance to regulate its financial markets. The country applies it to foreign transactions like loans, investments, insurance, and currency exchanges to generate a lot of revenue. A proposed sharp increase caused public outcry.
The government turned to gambling taxes to ease the backlash. It aims to cover a BRL20 million (~$3.6 billion) budget gap. A smaller IOF hike is still in the options, but the gambling industry is warning that the tax could boost illegal activity to 60%.
Brazil's Congress has set up a joint committee to review the proposed gambling tax hike. The committee plans four public hearings, starting on August 7 and ending later in the month. Their vote is expected on August 26, ahead of the final Congress deadline on October 9.
Brazil's latest move to raise the GGR tax from 12% to 18% might look like a quick way to boost revenue, but it's a risky bet. Similar strategies have backfired worldwide.
Gambling operators in Brazil already carry a heavy load. Operators pay multiple taxes, a BRL30 million (~5.5 million) license fee, and monthly inspection costs. The total tax hit can pass 50%. And the pressure on legal operators could intensify further with a new selective tax expected soon.
Experts warn that sudden tax hikes hurt the legal gambling market. Higher costs push operators and scare off new entrants. They also make it harder for licensed sites to compete. Illegal platforms free from taxes and rules offer better deals to players. consequently, the unregulated market is already estimated to control about 50% of Brazil's gambling scene.
A study by Copenhagen Economics, done for the Swedish government, showed that high taxes on gambling operators can push players away from the legal market. The report found that a tax rate of 15% to 20% strikes the right balance.
But once the tax goes above 20%, legal operators struggle to compete. More gamblers turn to unlicensed sites. Notably, local reports already indicated that a 5.3% turnover tax pushed licensed operators to cut prize values and offer worse odds.
Legal platforms became far less appealing, and bettors quickly shifted to unlicensed sites with better returns. Legal platforms now attract just 20% to 40% of online bets, even with strict regulations in place. Clearly, Brazil is making a risky gamble.
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