President Lula left reeling after Bets regime vote collapse, as tax plan for online gambling licences becomes a fiasco for the PT government and the 2026 Budget.
Chaos and confusion have gripped Brazil’s Workers’ Party (PT) government following the spectacular failure to pass a new tax plan on the online gambling licences of the Bets regime.
In a frantic 48-hour period, PT deputy Carlos Zarattini, rapporteur of Provisional Measure (MP) No. 1,303/2025, stunned allies and industry observers by changing course just hours before the scheduled vote in the Chamber of Deputies.
The proposal, originally intended to raise standard income taxes on betting operators from 12% to 18%, was abruptly rewritten by Zarattini at the eleventh hour.
The minister scrapped the planned rate increase and replaced it with a retroactive taxation model branded “Litígio Zero Bets” (Zero Litigation Bets) a move that caught both Congress and the betting industry completely off guard.
New articles cited that licensed operators active in Brazil’s market from 2014-to-2024 would be “invited to voluntarily comply” and present accounts on income generated prior to launch of the Bets regime. The scheme would apply a 15% income tax on retrospective income, along with a 100% fine applied to the total tax due.
Since the launch of Brazil’s online gambling market, the issue of retroactive taxation has been repeatedly debated by Senate committees and the Receita Federal, the federal revenue service as a possible condition for licensing.
The proposal has divided legal opinion, with experts questioning whether the government can legitimately apply taxes retrospectively to a period when online gambling held no legal status — an issue that continues to highlight Brazil’s complex transition from a grey market to a regulated framework.
However, the measure was given less than 24 hours for review before being put to a vote. Deputies across multiple parties objected to the sudden changes and lack of consultation, leading to its overwhelming rejection in the Chamber with 231 votes against.
The collapse triggered instant political fallout within the Lula administration. Finance Minister Fernando Haddad, who had championed the 18% rate increase as a key pillar of the government’s 2026 fiscal plan, was reportedly furious at the surprise rewrite. The defeat leaves a R$20.9bn shortfall in Brazil’s expected tax revenues for next year.
Local media described the atmosphere in Brasília as “a backdrop of panic and finger-pointing”, with ministers and party officials accusing one another of mishandling the vote. Senior PT figures privately criticised Zarattini for his “unilateral” decision, while others blamed the government’s centrist allies — PP, União Brasil, PSD and the Republicans — for walking away from pre-agreed support.
Adding to the tension, Zarattini publicly accused São Paulo Governor Tarcísio de Freitas (Republicans) of leading an orchestrated campaign to sink the measure for political gain.
“Tarcísio, instead of governing São Paulo, keeps calling deputies to pressure them not to approve it. It’s obvious there’s an election campaign under way,” Zarattini told news source, Folha.
Industry reaction has been mixed. While operators welcomed the rejection of steep tax hikes, many have expressed frustration over the lack of stability and transparency in Brazil’s legislative process.
For now, operators and analysts alike are left watching Brasília for the next move. As one insider put it: “Brazil’s betting market keeps growing, but the government still can’t decide how to tax it.”
Plínio Lemos Jorge, president of the National Association of Games and Lotteries (ANJL), said: “Changing the fiscal rules without due process creates legal uncertainty. It undermines investor confidence and risks deterring new entrants from joining the regulated market.”
The fallout from the failed MP has thrown Brazil’s gambling tax agenda into disarray. With only three months left in the Bets regime’s inaugural year, the framework remains incomplete — key rules on taxation, advertising and compliance still await definition.
