Recording a defeat for President Luiz Inácio Lula da Silva‘s administration, Brazil’s Chamber of Deputies let a key Provisional Measure (MP) expire. The government intended the measure to raise federal revenue through new taxes on betting companies and financial assets.
The proposal served as an alternative to the recent increase in the Tax on Financial Operations or IOF. Lawmakers withdrew the measure from the legislative agenda on October 8. A majority voted not to review the text before its deadline. Effectively nullifying the measure, the final tally was 251 votes in favor of withdrawal and 193 against.
The MP aimed to introduce taxes on investment securities. The MP also aimed to impose retroactive taxation on betting operators active in Brazil before the industry received formal regulation. The government had expected to collect around R$ 5 billion or US$934 million from this initiative. Yet, the rejection means the tax on gaming will remain at 12%, instead of the proposed increase to 18% of GGR or Gross Gaming Revenue.
The rapporteur, Deputy Carlos Zarattini, had earlier presented a revised version of the measure. A joint committee approved it on October 7 through a single vote. Zarattini removed the planned tax hike on betting while keeping the clause for retroactive tax collection to reach a compromise.
Finance Minister Fernando Haddad had supported the measure. He said the retroactive taxation—a 30% charge combining taxes and penalties—would recover three years’ worth of unpaid revenue from offshore betting firms.
With the MP’s expiration, the government now faces a shortfall of R$46.5 billion ($8.7 billion) in its 2025 budget. This includes R$31.6 billion ($5.9 billion) in lost revenue and R$14.9 billion ($2.8 billion) in spending cuts. The defeat comes shortly after a bill exempting income tax for individuals earning up to R$5,000 ($934) monthly, another measure that reduces projected government revenue.
