In response to the federal government's proposed increase in taxes on sports betting and online gaming, Fernando Vieira, the Executive Chairman of the Brazilian Responsible Gaming Association (IBJR), told Focus Gaming News that excessively high taxes could backfire, weakening industry revenue and driving players to the underground market.
Vieira noted that Brazil's sports betting and online gaming market has just entered the integration phase, facing a potential tax burden of up to 50% just seven months after regulatory implementation. This not only increases the legal uncertainty for operators but could also diminish the appeal of the legal market. According to a study by LCA Consultoria, currently about 51% of gaming transactions in Brazil occur in the underground market, which does not pay taxes or comply with any regulations, causing an annual tax evasion loss of about 10 billion reais.
"Increasing the tax burden on regulated gamblers is actually a gift to the illegal gambling market." Vieira emphasized, "The most effective way to increase revenue is not to suppress law-abiding operators, but to reduce the share of underground gambling."
Current Tax Burden and the Impact of Tax Increases
Currently, online gambling operators are required to pay an industry tax of 12%, plus ISS, PIS/COFINS, IRPJ, and CSLL, with a total burden of over 30%. The federal government's proposal to increase taxes could raise the overall tax burden to 50%, putting immense pressure on the market in its early integration phase. Additionally, licensed operators have paid 30 million reais (about 5.4 million USD) per person for a five-year franchise, totaling over 2.3 billion reais, while the industry plan is based on tax rules set at the end of 2024. Adjusting the tax rate just seven months later undoubtedly damages market confidence and legal certainty.
International Experience Warning
International data shows that excessively high taxes can inhibit the development of the regular market and foster illegal gambling. The case in the Netherlands shows that the tax rate increased from 30.5% to 34.2%, expected to rise further to 37.8% by 2026, leading to a decline in regular market revenue in the first half of 2025 to 83% of the same period in 2024, with an expected annual loss of 200 million euros. Operators reduce bonuses and promotions, players turn to underground gambling, channels decrease, and legal sector revenue plummets by 25%. A similar phenomenon has also occurred in Italy, where strict advertising restrictions have led to a surge in illegal activities.
Sustainable Tax Burden and Market Development
Vieira emphasized that the Brazilian gambling industry is still in its infancy, facing unfair competition from the illegal market. The key is to establish a sustainable, transparent tax system to ensure the legal development of the market, concentrating players in a regulated, mature ecosystem while protecting consumer rights. In this way, online gambling can not only achieve revenue targets but also maintain market integrity, sustainability, and responsible operation.
Advertising Restrictions and Underground Market Risks
Congress is currently considering Bill No. 2985, which aims to restrict gambling advertising. Vieira pointed out that excessive advertising restrictions would reduce players' opportunities to recognize legal operators, thereby increasing the risk of exposure to underground gambling. Legal platforms, through responsible advertising, can not only guide players but also educate users to identify regulated, secure platforms. Brazil's existing regulatory framework (Law No. 14.790/23, Decree No. 1.231/24, and the CONAR Guidelines Annex X) has already set clear advertising standards, focusing on ethical norms and the protection of vulnerable groups.
