A government leader also cites the taxation of betting companies as one of the main obstacles, while other points of resistance are seen as more isolated. According to this lawmaker, who spoke on condition of anonymity, betting industry supporters in Congress are scattered across several centrist parties as well as the Liberal Party (PL), and they have been working to obstruct negotiations.
As reported by Folha de S.Paulo, the overturning of the provisional measure (MP) forces a R$35 billion (US$6.5bn) adjustment to balance the 2026 budget, since the revenue-raising and cost-cutting measures included in the text were not approved.
The leader also noted that lawmakers who choose to defend the betting sector’s interests could harm not only the country—by reducing tax revenue—but also themselves, since congressional amendments could face cuts of R$7.1 billion (US$1.3bn) in 2026 if the MP’s initiatives are not compensated elsewhere.
The measure, issued on June 11, proposed increasing the gross revenue tax rate on betting companies from 12% to 18%, excluding prize payouts. The government expected to raise an additional R$1.7 billion (US$315m) in 2026.
On October 8, the text was shelved by the Chamber of Deputies without ever being voted on during its 120-day validity, the maximum period for a provisional measure.
In the days following the MP’s publication, the government faced resistance from several groups, including agribusiness, which opposed the taxation of securities issued by the sector that are currently exempt from income tax.
During negotiations, the economic team backed down and gave up on this measure, which would have had an even greater impact than the betting tax: projected revenue was R$2.6 billion (US$480m) for next year, including taxes on other tax-exempt instruments such as infrastructure debentures and real estate-backed securities.
Resistance persisted, and just before the MP’s expiration, the Lula government agreed to another concession: the rapporteur, Congressman Carlos Zarattini (PT-SP), dropped the proposal to raise the betting tax in his report released on October 6. It was an attempt by the government to salvage the rest of the bill, despite the contradiction with its own pro-taxation stance on betting companies.
On Tuesday (14), during a hearing of the Senate’s Economic Affairs Committee (CAE), Finance Minister Fernando Haddad defended what he called the “BBB tax” — on banks, bets, and billionaires — following the MP’s failure.
“I’ve already received signals from several lawmakers about fixing what happened. We will look for alternatives, because the so-called BBB tax [banks, bets, and billionaires] is only seen as unfair by those who are uninformed about what’s really happening in Brazil,” he said.
In recent days, the government has been assessing the political room to reintroduce each of the MP’s measures, this time through regular bills. Although experts do not entirely rule out reinstating the betting tax, they acknowledge that reaching a deal will be difficult.
A PT lawmaker says the government does not intend to immediately send a bill on the matter to Congress but may do so later.
Resistance from the agribusiness caucus, meanwhile, is expected to discourage any renewed attempt to tax exempt securities such as LCAs (Agribusiness Credit Bills) and LCIs (Real Estate Credit Bills). However, the Executive Branch still has regulatory tools to tighten oversight over such emissions.
Within the Lula administration, there is greater political space to move forward with spending containment measures, which could save around R$15 billion (US$2.8bn) next year.
These include tightening the rules for the ‘seguro-defeso’ (a benefit paid to artisanal fishers during the fishing ban season), limiting the granting of sickness benefits based solely on medical certificates (without in-person exams), and including the ‘Pé-de-Meia’ program (which offers scholarships to encourage students to stay in high school) in the constitutional education budget floor.
One faction within the Executive, focused on advancing the cost-cutting and social program control measures, even argued that the ‘seguro-defeso’ provisions should be sent as a separate bill. However, government negotiators continue to plan for a unified package.
On the revenue side, the government sees room to negotiate higher taxation for fintechs and on JCP (Interest on Equity, a mechanism used to remunerate company shareholders), as well as tougher rules for tax compensation — a mechanism companies use to offset taxes owed. Combined, these could yield R$16.6 billion (US$3.05bn) in additional revenue, according to the Federal Revenue Service’s original estimates.
Bolsonaro’s party agrees to vote with Lula’s PT to raise ‘Bets’ taxes
If the government manages to bring to the floor a proposal to increase the tax rate on betting companies, Lula’s administration will have an unlikely ally: Jair Bolsonaro’s Liberal Party (PL).
Party leaders say that if PT Senator Lindbergh Farias’s proposal to double the betting tax rate from 12% to 24% goes to a vote, the PL is likely to support it.
The betting tax had been part of the provisional measure (MP) that served as an alternative to the IOF (Financial Operations Tax), but it was removed at the last minute by rapporteur Carlos Zarattini (PT-SP) in an attempt to ease the bill’s passage amid heavy industry lobbying.
Senior PL members note that the party’s evangelical wing has always opposed gambling and emphasize that it was Lula, not Jair Bolsonaro, who signed into law the regulation of online betting in Brazil.
After the government’s defeat — with the MP expiring before being voted on — the Finance Ministry once again defended the taxation of betting companies as a way to boost government revenue.
Source: Folha / Metrópoles
