The Brazilian government now faces new budget concerns after the Chamber of Deputies let Provisional Measure (MP) 1.303 lapse this week. This move derailed a big tax overhaul plan that aimed to raise taxes on online betting, financial assets, and fintech companies. The setback creates a possible gap of over BRL 50 billion ($9.2 billion) for 2025 and 2026. As a result, President Luiz Inácio Lula da Silva‘s team must now find other ways to balance public accounts.
Haddad’s Tax Proposal Falters, Betting Industry Spared Tax Rise
The Finance Ministry put forward a plan in June to make changes to taxes. They wanted to bump up the betting tax from 12% to 18%. The proposal aimed to expand taxation to cover fintech companies and adjust income tax rules for investments. It also suggested putting limits on tax offsets and adding the “pé-de-meia” student savings program to the national education budget floor. However, because no one voted on this proposal, all the old tax rates and rules are still in effect.
Finance Minister Fernando Haddad argued that the reform had crucial importance to ensure fairness between sectors and stop what he called “abusive compensations” by corporations, reported Brazilian media outlet G1. He said the government would now come up with other ideas for President Lula to look at. Haddad mentioned that they are thinking about reducing tax breaks or bringing in new taxes to make up for the money they expected from the measure that just ended.
The end of this measure also means betting companies will keep paying the 12% tax on their total gaming income instead of the 18% the government wanted. A short-term rule that would have taxed money sent abroad by betting firms in the past also did not happen, which saved the industry from paying about BRL 5 billion ($929.6 million) in back taxes.
PT Moves to Raise Betting Tax After Congress Rejects Lula’s Plan
The consequences have spread beyond the financial world. Lula called the MP’s loss “a defeat for the Brazilian people,” stressing that the measure aimed to fix imbalances by boosting contributions from richer groups.
At the same time, business groups and industry associations cheered the decision. The National Confederation of Industry (CNI) said Congress acted by turning down a move that would have increased costs for all Brazilians. The Brazilian Association of Crypto Economy (ABCripto) labeled the result a win for regulatory balance and discussion.
Despite the loss, the Workers’ Party (PT) acted fast to bring back part of the plan. On Thursday night, PT lawmakers put forward a bill to raise the betting tax to 24%, twice its current rate. The extra money would go to fund social security. They said this increase would protect public health, claiming that betting can hurt family budgets.
Political experts said this event shows growing rifts in Lula’s government team. Rapporteur Carlos Zarattini rewrote the MP at the last minute, swapping the betting tax hike for a plan to tax past earnings. This change sparked harsh words from both friends and foes. The muddle and lack of talks led to the plan’s failure, leaving Brazil’s new betting market uncertain once more.