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The Associação Nacional de Jogos e Loterias (ANJL) has released an economic study stating that the proposed tax increase on the Gross Gaming Revenue (GGR) of Brazil’s online betting operators may have devastating negative consequences for the country’s regulated gambling sector. The study, authored by economist Itanielson Cruz, estimates a potential rise in monthly revenue from R$170 million to R$680 million, but also predicts a total loss of up to R$2.8 billion in tax revenue due to operator flight from the regulated market.
Gross Gaming Revenue is the revenue generated from bets after deducting paid winnings and withheld income tax on those winnings. ANJL’s report warns that increasing the tax rate on GGR at this stage will risk destabilizing Brazil’s new legal betting market, particularly for operators that have acquired licenses or are in the process of acquiring them.
Impact on Legal Operators and Market Stability
The proposed change, to offset reduced revenues that are a consequence of recent changes to the Financial Transactions Tax (IOF), would directly affect companies that are already operating or that intend to initiate operations in the legal Brazilian market. Those firms, affirms ANJL, are particularly vulnerable due to their commitment to compliance with the legislation, which are already complex and costly requirements.
Economist Cruz highlighted the delicate timing of the proposal and stated: “The increase in the GGR tax rate comes at a sensitive stage in the roll-out of Brazil’s new regulatory framework for betting and could add to the risk of judicial challenges from licensed or potential operators.”
Plínio Lemos Jorge, president of ANJL, had the same fear. “To modify the conditions of regulation that were already established creates the potential for legal dispute, as the economic-financial balance of the contracts cannot be maintained under the new conditions,” he said.
Risk of Migration to the Informal Market
Among the key risks outlined in the report is the potential expansion of Brazil’s already sizable unregulated betting market. As witnessed in other highly taxed sectors, over-taxing legal operators can drive users and businesses into unlicensed alternatives, undermining the effectiveness of tax collection and siphoning the formal economy.
The report notes: “In already highly taxed industries like online gambling, tax hikes can foster a move to unregulated sites, compromising the efficiency of tax revenue collection and fuelling informality.”
This worry is heightened by that Brazil’s regulated betting market remains in its nascency. Any instability introduced at this point, the ANJL cautions, can discourage investment and slow down the development of the industry. The impending implementation date of the new tax—June 2025—further contributes to the uncertainty for operators who are in the process of licensing with the Secretariat of Prizes and Bets (SPA).
International Comparisons and Long-Term Consequences
The report refers to international case studies to highlight the impacts of abrupt tax changes without comprehensive impact assessments. In markets where regulatory stability has been undermined, the legal sector loses ground to illegal operators, distorting competition and weakening enforcement mechanisms.
In spite of a GGR forecast based on real sector data, the report cautions that the behavioral reaction of economic agents can cancel or even reverse expected fiscal gains. “Revenue growth will not necessarily follow the tax increase linearly,” the report explains. “Operators may reduce activity, seek legal redress, or exit the market entirely.”
Conclusion: A Call for Careful Policy Design
ANJL believes that, while increasing fiscal revenue is a legitimate policy objective, the current approach entails significant risks. The proposal threatens to undermine the integrity and competitiveness of Brazil’s regulated betting industry without realizing the intended fiscal outcomes.
The group urges decision-makers to conduct further research and consult with sector operators before imposing structural tax reforms that can damage an emerging economic activity with excellent revenue-generating and job-creating potential.
The full research of the estimated R$2.8 billion loss in the betting sector of Brazil is available via the ANJL for stakeholders and the general public.
Source: iGaming Brasil
