ANJL, one of the entities that brings together betting and gaming operators, along with other companies in the sector, published a technical note summarizing the current situation and the risks associated with the measure to increase taxation, along with a series of alternative proposals for the government to analyze in order to avoid changing the GGR.
The study, conducted by economist Itanielson Cruz, also warns that “the proposal to increase the rate on GGR comes at a sensitive moment in the implementation process of the new regulatory framework and may increase the likelihood of legal action by already licensed companies or those with pending applications.”
Among the associated risks identified by ANJL:
Flight to the illegal market: With a high tax burden, the ODDS offered by licensed companies become less competitive, encouraging bettors to migrate to illegal platforms.
Exit of licensed companies: Companies already licensed in Brazil will tend to return their licenses and operate from abroad, beyond the reach of Brazilian regulation, as the tax value will become incompatible. Thus, companies will tend to operate in the illegal market, as was the case before the sector was regulated, representing a setback.
Reduction in revenue: As a result, tax evasion increases, and effective revenue may be lower than expected. The practical result of the tax increase on fixed-odds betting companies will actually be a decrease in revenue, because licensed companies will exit the legal market.
The ban on advertising by fixed-odds betting companies during matches and football broadcasts may have a significant negative impact on clubs. In a public note, they warn of a possible collapse of the sports ecosystem, estimating a loss of R$ 1.6 billion per year with the end of these sponsorships. The exit of licensed companies from the legal market could further worsen the situation.
Alternative proposal:
Instead of increasing taxes on licensed companies, the government could:
*Strengthen Enforcement:
Invest in mechanisms to identify and punish illegal operators.
*Encourage Legalization:
Create attractive conditions for illegal companies to regularize their operations.
*Educate Consumers:
Inform bettors about the risks of using unregulated platforms.
It is estimated that the illegal market currently represents about 60% of the sports betting market in Brazil. That is, most companies offering fixed-odds betting operate in the illegal market, not paying the taxes required by law. Thus, the tax increase tends to strengthen the illegal market, which is already large.
While the regulated market moved around R$ 3.1 billion (US$ 557m) per month in the first quarter of 2025, the illegal market operated with estimates between R$ 6.5 and R$ 7 billion (US$1.17bn and 1.26bn) per month.
So much so that recently the Ministry of Finance identified 12,500 illegal betting sites between October 2024 and March 2025.
Revenue potential with the proposed alternatives:
With the adoption of the proposed alternatives, the illegal market could be reduced to 10%, which would increase the revenue from taxes already required by law. By accounting only for the federal tax currently collected, combating the illegal market could generate R$ 15 billion (US$2.7bn) per year—much more than the R$ 2.2 billion (US$ 396m) increase intended with the IOF offset.
The amount of revenue resulting from combating the illegal market would practically match the revenue obtained by increasing the IOF rate. Furthermore, the federal government would have to tax almost 80% of the revenue from 'Bets'' platforms to offset the IOF reduction.
Given this scenario, it becomes evident that further increasing the tax burden on legalized sports betting companies in Brazil, as a way to compensate for the IOF rate reduction, could result in effects opposite to those intended: tax evasion, closure of licensed companies, and strengthening of the illegal market.
With the tax increase, the result is a reduction in tax revenue. Instead, the most efficient path to increase revenue and strengthen the regulated market is to invest in combating the illegal market, encouraging company regularization, expanding the tax base, and promoting a safer and more competitive betting environment.
As seen, by combating the illegal market, Brazil will raise much more than the amount intended to be raised with the IOF offset, even reaching the amount currently collected by the 3.5% IOF rate (which is planned to be reduced).
Thus, Brazil could raise more, protect consumers, and consolidate a sustainable and regulated industry without setbacks.
Changing the established regulatory conditions allows for judicial contestation
The opinion released by ANJL shows that the proposal to increase the tax rate on online betting GGR, presented as an alternative to offset the revenue reduction from the IOF review, will not produce significant effects on the budget: the monthly impact of the rate increase is expected to be around R$ 170 million (US$30.5m), reaching at most R$ 680 million (US$123m).
Additionally, the measure is expected to impact the operation authorization requests under review by the Secretariat of Prizes and Betting (SPA) and represent a loss of R$ 2.8 billion (US$ 503m) in revenue for the country, due to the withdrawal of new betting houses from entering the regulated market.
According to ANJL President Plínio Lemos Jorge, this is a scenario likely to materialize. “Changing the regulatory conditions that had already been established allows for judicial contestation, as the economic-financial balance of the contracts cannot be adjusted in the manner they were signed,” he explained.
The report also emphasizes that “in sectors with high tax burdens, such as online gaming, increased taxes may stimulate the migration of operators and users to unlicensed platforms, compromising revenue effectiveness and increasing informality.”
“In other words, even if the projected base is derived from a GGR consistent with real sector data, it is not possible to ensure that revenue will evolve proportionally to the rate increase, as the reaction of economic agents may neutralize—or even reverse—the estimated fiscal gain,” says an excerpt of the opinion.
The report also shows that international experience, even in countries with consolidated regulatory frameworks, demonstrates that abrupt and unassessed changes can compromise the competitiveness of the legalized sector and expand the scope of unlicensed platforms.
“The recent experience of France offers a relevant warning about the risks of overtaxation in regulated online betting markets. Even with one of the most consolidated regulatory frameworks in Europe, the country shows a significant rate of informality in the sector,” it states.
Source: GMB
