Brazil’s Ministry of Finance has approved a Provisional Measure to raise the tax rate on gross gaming revenue (GGR) from 12% to 18%.
The drastic decision has been taken as Brazil’s Government seeks to find alternative means to boost the country’s economy, after a previously proposed hike in the Financial Transactions Tax (IOF) was shelved amid fears of reduced investor confidence.
Finance Minister Fernando Haddad stated on the decision: “This [Provisional Measure] will allow us to recalibrate the IOF decree, focusing its new version on regulatory aspects, so that we can reduce the tax rates outlined in the original decree, which will be revised accordingly.”
Recent estimates cited in BNLData state that the Brazilian betting market is generating around R$2.8bn (€440.5m) in monthly turnover, with federal receipts via DARF Form 5862 (the payment channel for fixed-odds betting tax) already contributing approximately R$755m in the three months between February and April.
The decision will be a blow to operators seeking to gain a significant share in the burgeoning market, as the rise will leave the country near the top of international markets when it comes to GGR tax for iGaming, diluting its allure among the global players.
The current framework includes a 12% gaming tax, 9.25% in PIS/COFINS, up to 5% ISS (municipal services tax), and 34% in corporate profit tax. Adding a potential Selective Tax (a form of “sin tax” under discussion), effective tax rates could close to 50% — a threshold that many fear would deter investment and undermine market sustainability.
A coalition of trade associations, headed by the Instituto Brasileiro de Jogo Responsável (IBJR), has called for a revision of tax policy, noting that operators in Brazil already face a substantial tax burden.
The IBJR, alongside the Associação Nacional de Jogos e Loterias (ANJL), warned that the tax hike could push the effective burden above 35%, once corporate, municipal and social contribution taxes are taken into account.
A joint statement from the coalition described the proposed tax changes as “unjustifiable from any technical, economic or public policy perspective”.
The IBJR-led coalition warns that raising taxes could prompt operators to relinquish their licences, further emboldening Brazil’s black market, which is currently estimated to generate approximately R$6.5bn to R$7bn per month.
