Betting tax increase proposed in Brazil in order to help mitigate spending freeze
The president of the National Bank for Economic and Social Development (BNDES), Aloizio Mercadante, defended the increase in the Tax on Financial Transactions (IOF), recently announced by the federal government. At an event about Brazilian industry, Mercadante responded to criticism from sectors such as business, stating that it is necessary to present alternatives and not just criticize measures. In his speech, Mercadante stated that one alternative could be to increase taxes on sports betting.
The contentious measure was enacted by President Luiz Inacio Lula da Silva to boost revenue and mitigate a significant spending freeze and was designed to comply with this year’s fiscal regulations. It has sparked considerable backlash, as it promptly escalated the cost of credit for businesses, contributions to pension funds, and certain foreign exchange transactions.
“The minister [of Finance, Fernando] Haddad has to present the fiscal budget. It is his responsibility. So, he has to indicate what the alternative is. I publicly make a suggestion here: let’s increase the taxes on bets, which are undermining popular finances. We could, with this, reduce, for example, the impact of the IOF and create an alternative,” Mercadante said.
According to Agência Brasil in an interview with the press after the event, Mercadante explained that the increase in IOF, along with the stabilization of the dollar, would allow the Central Bank to make a “safe, progressive, and sustainable” reduction of the basic interest rate, the Selic.
Later in the week economists from Itaú bank suggested a series of measures for the government to compensate for the estimated revenue loss stemming from the partial retraction of the increases in the IOF rates. The proposals consider that the Executive could opt for compensation through revenue.
Speaking to journalists at the “Macro em Pauta” event held by the bank in São Paulo, the experts highlighted potential options, including higher taxation on sports betting. “There are many people who have taken to sports betting. I see no reason why they shouldn’t be taxed like cigarettes or alcohol. It could be an important source of revenue,” said Itaú’s chief economist, Mário Mesquita, at the event, according to InfoMoney.
Business sector representatives in Brazil have jointly released a manifesto calling on the National Congress to overturn a decree from the government increasing the IOF. According to the signatories of the document, the tax increase will impose a new burden of R$ 19.5 billion ($3.82 billion) in 2025. Brazil’s government has agreed to present an alternative plan to the increase. “We want to build a solution with the government, the Legislative Branch has no interest in setting the country on fire,” Lower house speaker Hugo Motta said at a press conference last Thursday (29).
