According to information, the withdrawal of the Speaker of the Chamber, Hugo Motta (Republicans-PB), in supporting the agreement that he helped negotiate with the Minister of Finance, Fernando Haddad, is a consequence of the behind-the-scenes action of players who defend the position of betting companies.
The understanding is that this behind-the-scenes work by online betting companies has helped to reverse part of the government’s plan to increase revenue in an attempt to achieve fiscal targets.
On Thursday (12), Hugo Motta warned the government of Luiz Inácio Lula da Silva that he and Congress leaders had discussed ways to prevent the decree and provisional measure that deal with the IOF, taxation on betting houses and some financial investments from coming into effect. This reversal momentarily put pressure on the dollar.
One of the main reasons for Motta’s change was the opposition of sportsbooks and Congress to the increase in taxes on the sector’s revenues from 12% to 18%.
Taxation of betting companies is part of the government’s package
The increase in taxes on online gambling is part of the package recently announced by the government. This includes an increase in taxes on financial investments and a reduction in exemptions to close some gaps in the budget. The measures have raised concerns among investors.
The package aims to raise around R$10 billion this year. The increase from 12% to 18% of the gaming tax represents R$300 million of the total, according to estimates by Treasury Minister Fernando Haddad.
Brazil legalized online gambling in 2018. But it only approved a regulatory and tax framework in 2023. In 2024, when it began taxing online gambling, the government proposed an 18% tax rate, which was reduced to 12% by Congress. Now, the government is trying to increase this tax.
Increase in the sector’s tax rate favors the illegal online betting market
The betting industry is now arguing to lawmakers that raising the tax would reduce the companies’ supposedly already low profit margins, making it harder for them to compete with illegal operators and organised criminal groups.
“Raising the gaming tax rate from 12% to 18% will increase the sector’s tax burden to over 50%. This is unfeasible for any legal economic activity,” the Betting and Fantasy Sports Association said in a statement this week.
“Despite being legalized, attempts are now being made to make the activity unviable through overtaxation. This can only benefit illegality and organized crime,” the association added.
The agribusiness and real estate sectors also opposed the proposals. This is because they would end tax exemptions for credit securities known as LCIs and LCAs, which finance activities in these sectors. These securities would now be subject to a 5% tax.
The latest proposals tweaked an earlier plan to raise taxes on certain financial transactions through the IOF, which also drew opposition from business leaders and Congress.
The eventual failure of the new plan would further intensify pressure on Haddad, who faces growing investor distrust over measures to eliminate the primary fiscal deficit this year.
