Brazil’s fearsome taxman, “O Leão” of notoriety, the lion that never sleeps, is threatening to kill-off the nation’s fledgling regulated online sports betting industry with a swingeing tax hike, warn operators.
Finance Minister Fernando Haddad announced on Sunday night that he is now planning to raise tax on sportsbook gross gaming revenue (GGR) from the current 12 to 18 percent.
The measure aims to offset revenue the government expects to lose after Congress rejected its move to raise the IOF (Tax on Financial Transactions) from 0.38 percent to 3.5 percent — leaving an estimated budget shortfall of R$6 billion, around US$1.07 billion (£798.2m) for this year and next, according to Itaú Bank.
Now iGaming industry associations have come out forcefully against the proposed hike, arguing that the sector already contributes significantly to public coffers: R$4 billion in taxes and social contributions (£532m/US$718.42m), plus R$2.4 billion (£319.25m/US$431.14m) in licensing fees so far in 2025.
With the total tax burden already nearing 50 percent of GGR, legal operators in Brazil warn that additional taxes will stifle innovation and undermine the clear progress made toward establishing a transparent and responsible industry.
Boosting Bad Market
They argue, forcibly, that such a tax hike will only push bettors and operators toward the unregulated black market, deterring unlicensed companies from pursuing legal status in Brazil.
The Brazilian Institute for Responsible Gaming (IBJR) called the measure unacceptable and warned that it could render operations unviable for many companies that have trusted and invested in Brazil’s regulated market. The proposal, the Institute says, creates legal uncertainty and threatens public revenue.
At the start of 2025, licensed operators each paid R$30 million (£3.99m/US$5.39m) for a five-year license, amounting to over R$2.3 billion already collected by the government.
And the industry’s planning and investment were based on the current 12 percent tax rate on GGR. Any mid-contract changes, the IBJR argues, undermine the economic and financial balance of the agreement and erode confidence in the regulatory environment.
The Institute warns that the proposed measure does not solve the government’s structural revenue problem and will have the opposite effect: raising the tax on betting could drive the illegal market’s share from the current 50 percent to at least 60 percent, resulting in an estimated R$2 billion (£266m/US$359.3m) annual loss in tax revenue.
“The path to increasing tax collection is not by penalizing those operating legally, but by rigorously combating illegal operations and protecting bettors through effective regulation,” the IBJR stated.
Raising the GGR tax from 12 percent to 18 percent would push the sector’s effective tax burden beyond 50 percent, when factoring in other taxes like PIS/COFINS (9.25 percent, ISS (five percent), corporate income taxes (34 percent), and regulatory inspection fees.
Tipping Point
Such a burden, risks becoming a tipping point — one that drives consumers and businesses underground.
Similar scenarios have played out in countries like Italy, Spain, Germany, Sweden and Portugal, warn iGaming industry experts, where over-taxation drove players and operators back to illegal platforms, weakening enforcement and reducing real tax revenues.
Higher operational costs could also result in worse odds and lower payouts for legal bettors in Brazil, further encouraging migration to unregulated platforms. While gaming taxes can be an effective fiscal tool, experts caution that they must be calibrated carefully to avoid tipping the balance toward illegal activity.
In the first quarter of 2025 alone, the regulated betting market in Brazil generated over R$3 billion per month (£399.1m/US$538.89m). By contrast, the unregulated market is estimated to handle up to R$7 billion monthly (£931.25m/US$1.25bn).
The tax increase could well backfire, warned Amilton Noble, Executive Director of lottery products firm Hebara S.A.
“Instead of fighting illegal gambling and increasing revenue through legal channels, the government and National Congress are irresponsibly shifting the rules mid-game — creating legal uncertainty arguably without precedent in recent Brazilian history,” he wrote in an op-ed.
Noble also warned of a chilling effect on prospective operators.
“Others currently in the process of applying for licenses–or considering entering the Brazilian market–will likely delay or abandon their plans, preferring to wait and see how the first year of regulation unfolds,” he predicted.
