The Brazilian government has recently introduced a temporary tax reform measure, proposing to raise the gambling tax rate from 12% to 18%. Together with income tax and local taxes, the overall tax burden for operators could approach 50%. This move has sparked strong backlash from the industry, with several leaders warning that it will severely hit the legal market and foster illegal gambling.
BetMGM's legal head in Brazil, Eduardo Ludmer, stated: "Operators had originally invested tens of millions of reais based on a 12% tax rate. The sudden policy shift completely destroys market confidence." It is reported that operators need to pay up to 30 million reais in licensing fees, and now facing this sudden change in tax burden, some companies may withdraw from the licensing application process, potentially causing the government to lose up to 2.8 billion reais in potential revenue.
The two major industry associations, ANJL and IBJR, jointly condemned the tax increase as "unacceptable" and warned that it would undermine legal certainty, making Brazil appear "lacking in business credibility" to global investors. They emphasized that offshore operators still control 50%-60% of the market share, and the tax increase will only make it difficult for legal companies to compete with them.
More worryingly, the regulatory agency Anatel, tasked with combating illegal activities, is reportedly short of funds and struggling to effectively block black market platforms. Meanwhile, the central bank has not taken strong sanctions against payment merchants cooperating with illegal gambling, allowing them to continue their activities.
Legally, the gambling industry is still facing a constitutional review by the Supreme Court of Brazil, and if the ruling is unfavorable, the entire industry could be plunged into uncertainty.
IBJR and ANJL have joined forces to launch a lobbying offensive, submitting technical reports to Congress and pointing out that combating 10% of the illegal market could generate enough tax revenue to replace the increased tax target.
Industry insiders emphasize that the government and Congress still have a limited understanding of the gambling economic structure and urgently need to educate legislators and the public to improve the recognition between legal and illegal operators.
Although the tax increase remains a temporary measure and it is uncertain whether it will ultimately become law, its symbolic significance and suddenness have already severely damaged market confidence. The industry calls for the restoration of policy stability to ensure the healthy development of the legal gambling market, public fiscal revenue, and the sustainability of thousands of jobs.
