Brazil has settled on a new gambling tax rate of 18%, a rise from the current 12%. The new rate will be implemented in stages, rising to 15% next year and then reaching 18% in 2027. 

It will apply to Brazil’s newly regulated gambling industry, including an expanding esports betting scene. 

The Senate’s Committee of Economic Affairs (CAE) approved the plan last week, favoring the 18% rate as opposed to previous plans to double the rate to 24%. 

President Luiz Inácio Lula da Silva (Lula) and Finance Minister Fernando Haddad have endorsed plans to allocate R$300 billion for social spending in 2026. Lula says it will be “the largest social-investment package in Brazil’s history.”

Regulated Market Providing Tax Boost

Brazil implemented new regulations for sports betting in January this year and officially approved esports betting in April. 

In the first six months of the regulated market, the country reported collecting R$3.8 billion ($700 million) in tax revenue. This came from licensed companies generating R$17.4 billion ($3.2 billion). 

Under the new framework, there are now fewer than 100 licensed companies. That number has been gradually expanding as more companies apply for certification. 

In October, esports betting supplier Oddin obtained a license to offer residents opportunities to wager on Counter-Strike 2, Dota 2, League of Legends, Valorant, and Free Fire as well as the company’s eSims events. 

Critics Argue Tax Hike Will Feed Black Market

As part of the new regulations, Brazil has been clamping down on unlicensed gambling. The country said it has blocked over 15,000 websites since October of last year. 

A study by LCA Consultoria and Instituto Locomotiva estimated that illegal gambling companies continue to hold between 41% and 51% of the betting market. 

This translates to an annual revenue range of between R$26 billion ($4.73 billion) and $40 billion ($7.28 billion), resulting in approximately $2 billion in lost tax revenue. 

Fernando Vieira, executive president of the Brazilian Institute of Responsible Gambling (IBJR), stated that the country should focus on efforts to reduce the share of illegal gambling companies, rather than increasing taxes. 

“Raising the tax burden on the regulated online betting and gaming sector can generate a contrary feat to what was expected, strengthening the underground market,” Vieira said on LinkedIn.

He added, “After all, the challenge of increasing revenue will not be solved by strangulating regulated companies, which already face a heavy tax structure. Together, we need to effectively combat the actions of platforms that operate underground.”