A technical note was sent to all party leaders in the National Congress and also to the presidents of the Federal Senate, Davi Alcolumbre, and of the Chamber, Hugo Mota. The document, produced by the National Association of Games and Lotteries (ANJL), was sent on Sunday (8). The note presents alternatives to the proposal to increase the tax rate for betting sites from 12% to 18% of the Gross Gaming Revenue (GGR). The objective of the proposal is to compensate for the R$20 billion that the Minister of Finance, Fernando Haddad, predicted to collect in 2025 with the increase in the IOF.
The Technical Note “Economic-Fiscal Assessment of the Alternative of Increasing Taxation on Online Betting in Partial Replacement for the Increase in the Tax on Financial Transactions (IOF)” produced by economist and master in economics, Itanielson Cruz, analyzes the risks of this adjustment and asks: “Tax Increase on Sports Betting: Shooting Yourself in the Foot?”. The study, available for public consultation, points out that increasing taxes on a sector already characterized by a high tax burden can produce significant adverse effects.
Some members of parliament intend to reduce the IOF tax rate. They also intend to increase the tax on fixed-odds betting companies, in order to offset this reduction.
Increased tax burden will have negative impacts
The current tax structure for betting companies includes a 12% tax on GGR, generating monthly revenue of around R$3.5 billion. Operators also pay 34% on profits, including 25% Corporate Income Tax and 9% Social Contribution on Net Profit.
The annual inspection fee of up to R$23.3 million per company and a concession fee of R$30 million for regular operation for five years. For bettors, the tax burden is 15% of Income Tax on net prizes. The tax reform also provides for a selective tax with a standard rate of 26.5%, which should have an even greater impact on the sector.
The increase in the tax burden will have a negative impact on the fixed-odds betting sector. This will cause companies that are already licensed to stop operating in Brazil and start operating in the illegal market. It will also reduce tax collection, having the opposite effect to that intended, because companies will tend to leave the regulated market.
A 5% increase in the GGR tax would generate additional revenue of approximately R$180 million per month, totaling approximately R$2.2 billion per year. Experts warn, however, that higher taxes could lead licensed companies to offer less competitive odds, encouraging bettors to migrate to illegal platforms.
This migration represents one of the main risks of tax increases. In addition, there is a reduction in the number of operators, greater market concentration and possible legal challenges based on allegations of a breach of regulatory predictability.
Football clubs expressed concern
Football clubs have expressed concern about a possible collapse of the sports ecosystem. In a public statement, they estimated annual losses of R$1.6 billion due to the end of sponsorships from betting companies, should additional restrictions be imposed on the sector.
The illegal market represents approximately 60% of the fixed-odds betting sector in Brazil. In the first quarter of 2025, while the regulated market moved around R$3.1 billion per month, it is estimated that the illegal market operated with values between R$6.5 and R$7 billion per month.
Between October 2024 and March 2025, the Ministry of Finance identified 12,500 illegal betting websites. According to experts, strengthening oversight and encouraging legalization could reduce this to just 10% of the total.
Reducing the illegal market could generate more resources than increasing the IOF
This reduction in the illegal market could generate additional revenue of R$15 billion per year considering only existing federal taxes, a higher amount than the R$2.2 billion intended to offset the increase in IOF.
Additionally, based on informality estimates released by ANJL, it is projected that, in a scenario of significant migration to the regulated market, recurring federal revenue could be increased by more than R$8 billion annually.
To compensate for the reduction in the IOF rate, the federal government would need to tax almost 80% of the revenue from betting platforms. “Thus, combating the illegal market is much more efficient in collecting taxes,” highlights the text of the technical note.
The initial results of the regulation already demonstrate its revenue-raising potential. When the government authorized the first 66 companies to operate legally in Brazil, R$2 billion in royalties were collected.
There is still a risk that the government will suffer losses of at least R$2.8 billion if the requests currently underway at the Prizes and Bets Secretariat of the Ministry of Treasury are withdrawn.
Experts suggest three main alternatives to increasing taxes: strengthening oversight to identify and punish illegal operators; creating attractive conditions for irregular companies to regularize their status; and educating bettors about the risks of using unregulated platforms.
Instead of immediately changing the current tax rate, it may be more prudent to prioritize improving the regulatory environment and strengthening inspection actions, helping to preserve the integrity of the regulated model, strengthen legal certainty and maximize revenue collection results in a sustainable manner.
