Congress resists expanding taxation on betting and blocks compensation for the provisional measure increasing taxes.

The resistance from the National Congress to resuming the increase in taxation on sports betting has become the main obstacle in negotiations for measures to compensate for the rejection of the provisional measure (MP) that increased taxes.

The government of Luiz Inácio Lula da Silva (PT) is advocating for reviving the proposal to increase taxes on betting establishments, but economic experts acknowledge that reaching an agreement on this issue is very difficult, as the legislature has signaled its refusal to vote on such a measure, reveals a report by Folha de S.Paulo.

A government leader also cites the taxation of betting as one of the main obstacles, while other forms of resistance are considered isolated incidents. According to this congressman, who spoke on condition of anonymity, proponents of the betting sector in Congress are spread across various centrist parties and also within the PL party, and are working to hinder negotiations.

As Folha showed, the rejection of the provisional measure requires an adjustment of R$ 35 billion to balance the 2026 budget, given the non-approval of the revenue-increasing and expenditure-reducing measures that had been included in the text.

The leader also points out that parliamentarians who choose to defend the sector's interests may not only harm the country, due to the loss of revenue, but also the congressmen themselves, since the amendments could suffer a cut of R$ 7,1 billion in 2026 if the initiatives of the Provisional Measure are not compensated.

The measure, enacted on June 11, aimed to increase the tax rate on the gross revenue of betting companies from 12% to 18%, excluding prize payouts. The government projected collecting an additional R$ 1,7 billion in 2026.

On October 8th, the text was buried by the Chamber of Deputies without even having been put to a vote during the 120 days it was in effect, the maximum period for a Provisional Measure.

In the first few days after the act was published, the government had to deal with resistance from different groups, including agribusiness, which opposed the taxation of bonds issued by the sector that are currently exempt from income tax.

Throughout the negotiations, the economic team yielded and decided to abandon this change, which would have had an even greater impact than the bets: the projected revenue was R$ 2,6 billion next year, an amount that included the collection of Income Tax on other tax-exempt securities, such as infrastructure debentures and bonds issued by the real estate sector.

Resistance continued, and, on the eve of the deadline for processing the Provisional Measure, the Lula government agreed to a new concession: the rapporteur, Congressman Carlos Zarattini (PT-SP), abandoned the idea of ​​increasing the taxation of bets in his report released on October 6th. This was an attempt by the government to salvage the remainder of the proposal, despite the damage caused by the contradiction with its own pro-taxation stance.

Last Tuesday (14), in a hearing at the CAE (Committee on Economic Affairs) in the Senate, Minister Fernando Haddad (Finance) defended the so-called BBB taxation (banks, bets and billionaires) after the MP was overturned.

“I have already received signals from several parliamentarians indicating a willingness to correct what happened. We will seek alternatives to what occurred because, in fact, the so-called taxation of BBBs [banks, betting companies, and billionaires] is only unfair in the minds of people who are uninformed about what is happening in Brazil,” he said.

In recent days, the government has been discussing the political space to reintroduce each of the measures from the Provisional Measure, this time through a bill. Although experts do not completely rule out resuming the taxation of bets, they acknowledge that reaching an agreement is difficult. A congressman from the Workers' Party (PT) states that the government should not send a bill to Congress to revisit the issue now, but rather later.

The resistance from the agricultural lobby, in turn, should inhibit a new government push for taxing tax-exempt securities, such as LCA (Agribusiness Credit Notes) and LCI (Real Estate Credit Notes). But the Executive branch has sub-legal instruments to tighten control over these issuances.

According to members of Lula's government, there is more political room to resume spending cuts. These measures could yield savings of R$ 15 billion next year.

The list includes tightening the rules for unemployment insurance (a benefit paid to artisanal fishermen during the period when fishing is prohibited), limiting the granting of sick pay through medical certificates (without in-person examination), and including the "Pé-de-Meia" program (which pays scholarships to encourage students to stay in high school) in the constitutional minimum for education.

One faction within the Executive branch, concerned with implementing measures to reduce spending and control social programs, even internally advocated that the unemployment insurance measures be sent in a separate bill. However, government negotiators maintain their plan to address the measures together.

On the revenue side, the government sees room to negotiate increased taxation on fintechs and JCP (Interest on Equity, a way to remunerate a company's shareholders), as well as stricter rules for tax compensation—a mechanism used by taxpayers to offset taxes payable. Together, these measures would have the potential to raise R$ 16,6 billion, according to original estimates from the Federal Revenue Service.