Currently, gaming operators in Brazil are subject to a multifaceted tax structure that places them among the most heavily taxed in the global gaming industry.
The existing framework includes a 12% gaming tax on gross revenue, 9.25% from the PIS and COFINS federal social contribution taxes, and municipal taxes, which can add up to another 5%.
Altogether, this results in a gross revenue tax of up to 26%. In addition, operators are also taxed on their profits, with a corporate income tax of 25% and a social contribution on net profit of 9%, pushing the effective tax rate on profits to 34%.
On top of these obligations, operators are also required to pay a monthly inspection fee that can reach approximately R$2m per company.
The associations argued in an open letter that there is mounting evidence that implementing increased tax rates, alongside overly tight restrictions, are detrimental to a healthy gambling industry.
“The increase in the tax burden on legalised operators … directly compromises the permanence of companies in the Brazilian market — many of which are already considering returning their licences and closing operations in the country,” they said.
Some studies have emphasised that this could lead to a significant increase in black market gambling, with at least one study suggesting that this is already happening in the UK and other countries.
New tax rate would hit regulated sector
The proposed transition from the current tax system comprises a new framework that replaces PIS/COFINS and ISS with two new levies.
The Contribution on Goods and Services (CBS) and the Tax on Goods and Services (IBS) are expected to add a further 13% to the tax burden on gross revenue.
If implemented, this would bring the total tax on gross revenue to nearly 39%, excluding profit taxes and the inspection fee.
Adding to the pressure is the recent legislative approval of a new Selective Tax, which has yet to be fully defined in of rate but is anticipated to push the total tax burden close to 50%.
This cumulative taxation level, according to industry representatives, threatens the economic sustainability of the legal online gaming sector in Brazil.
The IBJR — which includes the Brazilian Association of Games and Lotteries, the Association of Bets and Fantasy Sports, the International Gaming Association, and others — has rejected the proposed tax increases.The group argues that the measures are unjustifiable on technical, economic, and public policy grounds.
The associations further stress that the current tax burden is already extremely high, and that regulated operators have made substantial financial commitments based on the existing legal and regulatory environment.
Potential market destabilisation
Any abrupt change to this environment risks invalidating these investments, destabilising the market, and possibly prompting legal challenges, the associations argued.
One of the most significant concerns raised by the industry is the potential for a rollback of progress made in creating a safe and transparent gaming environment in Brazil.
The organisations warned that increasing the tax burden to unsustainable levels could push consumers towards unregulated, offshore betting platforms.
These platforms operate outside of Brazil’s legal framework, do not contribute to public coffers, and often lack consumer protections, increasing the risk of fraud, addiction, and other harms.
Meanwhile, the representatives argued, legal operators in Brazil have acted responsibly, adhering to regulatory standards and contributing meaningfully to the country’s fiscal structure.
They cautioned that treating the regulated betting sector as a vehicle for addressing broader fiscal imbalances could backfire by instead encouraging the growth of the illicit market.
Moreover, the associations highlight the risk to regulatory predictability and investor confidence.
With licences granted based on a clear set of legal and economic expectations, sudden increases in the tax burden could deter future investments and damage Brazil’s reputation as a stable environment for gaming operations.
Despite their strong objections, the associations reaffirmed their commitment to engaging in institutional dialogue.
They emphasised the importance of collaborative policymaking and urged the government to reconsider measures that could jeopardise the sector’s growth, its contributions to public revenue, and its role in creating a secure environment for players.
The gaming industry now awaits further clarification from Brazilian lawmakers regarding the final rates and implementation timeline of the CBS, IBS, and Selective Tax components.
