Brazil PT Government Faces Collapse of Bets Regime Tax Plan

Brazil’s Workers’ Party (PT) government has been thrown into disarray following the dramatic collapse of a proposed tax reform for online gambling licenses under the Bets regime.

In the lead-up to the Chamber of Deputies vote, PT deputy Carlos Zarattini, rapporteur of Provisional Measure (MP) No. 1,303/2025, surprised colleagues and industry stakeholders by drastically altering the proposal just hours before the vote.

Originally, the plan sought to increase the standard income tax on betting operators from 12% to 18%. However, Zarattini scrapped the rate hike at the last minute and introduced a retroactive taxation mechanism, dubbed “Litígio Zero Bets” (Zero Litigation Bets), leaving both legislators and the gambling industry unprepared.

The new provisions required licensed operators active between 2014 and 2024 to voluntarily report prior earnings and pay a 15% tax on historical income, along with a 100% fine on the total amount due. Retroactive taxation has long been debated within Senate committees and by the Receita Federal as a possible licensing requirement, but legal experts remain divided on whether it is enforceable for periods when online gambling was not officially regulated.

With less than a day for review, deputies across party lines expressed concerns over the abrupt changes and lack of consultation, resulting in a decisive rejection: 231 votes against the measure.

The failed vote immediately sparked political fallout. Finance Minister Fernando Haddad, who had championed the 18% increase as part of the 2026 budget plan, reportedly reacted angrily to the last-minute rewrite, which leaves a projected R$20.9bn revenue gap for the government.

Local media described Brasília as “a scene of panic and blame,” with PT officials criticizing Zarattini’s unilateral decision, while others faulted centrist allies including PP, União Brasil, PSD and the Republicans for withdrawing support. Zarattini, in turn, accused São Paulo Governor Tarcísio de Freitas (Republicans) of orchestrating pressure on deputies for political reasons.

Industry reactions have been mixed. Operators welcomed the rejection of higher taxes but expressed frustration over legislative unpredictability. Plínio Lemos Jorge, president of the National Association of Games and Lotteries (ANJL), warned that sudden fiscal changes without proper procedures create legal uncertainty and may deter investment in the regulated market.

With just three months remaining in the inaugural year of the Bets regime, Brazil’s online gambling tax framework remains unsettled, leaving rules on taxation, advertising and compliance still unresolved. Analysts and operators are now watching closely for the government’s next steps, as the market continues to expand amid ongoing regulatory uncertainty.