Lula defends raising taxes on online betting to 18% and increasing IOF

Against a backdrop of growing criticism from public agents of the sports betting and online gaming sector, which has accelerated the segment's image deficit, President Luiz Inácio Lula da Silva (PT) defended higher taxation on online betting and an increase in the Financial Operations Tax (IOF).

"We're taking sectors that make a lot of money and pay very little. Betting pays 12 per cent, we want it to pay 18 per cent. They earn billions, billions, billions and billions. They don't want to pay. Fintechs today are almost like banks. They don't want to pay. So we have to fight these fights. We can't give in every time," said Lula.

This was the president's second appearance on the programme. The first took place in 2021, when he was still a pre-candidate for the presidency. In the current interview, the President reinforced his views on tax policy: ‘We want to achieve tax justice, so that people who earn more pay more, and those who earn less pay less.’

Lula's statements come at a time of wear and tear for Finance Minister Fernando Haddad with the National Congress and the financial market, especially after discussions began on changes to the IOF.

The proposal to raise the tax on bets from 12 per cent to 18 per cent has caused apprehension among betting operators due to the potential impact on their operations. The government is using the sector as a way to put pressure on parliamentarians to approve measures to compensate for the IOF increase.

On Sunday, Haddad criticised the Bolsonaro administration for failing to adequately regulate the betting sector. ‘Is it reasonable for a government that says it's for the family to give up R$40 billion in gambling taxes?’ he questioned. He also stated that ‘Bolsonaro has failed to collect 40 billion reais in taxes from virtual gaming bookmakers and has not readjusted the minimum wage and corrected the income tax table’.

The government has argued that the proposed tax increases mainly affect the ‘privileged classes’. At an event on Thursday, Lula asked: ‘Do you know how many billions we give in exemptions to the rich in this country who don't pay taxes?’.

In a post on social media, Haddad highlighted the Lula government's stance on taxing specific sectors of the economy. ‘We're the ones collecting tax from bets and billionaires,’ said the minister, adding: ‘We're the ones exempting workers from income tax.’

Senator Randolfe Rodrigues (PT-AP), the government's leader in Congress, said that a senator should chair the joint committee responsible for analysing the IOF Provisional Measure. The rapporteur will probably be deputy Carlos Zarattini (PT-SP).

Randolfe said that the Lula government still has no definite position on the legalisation of casinos in Brazil, which is being discussed in Congress through Bill 2.234/2022. The senator said that the assessment within the Executive is that bets represent ‘an unfortunate epidemic’ that has hit Brazilians.

"The government believes that some measures are necessary. For example, fitting betting into the excise tax. That's why Provisional Measure 1.303 increases the tax rate on bets from 13 per cent to 17 per cent," said the senator. There is a difference in the figures mentioned by the senator, since the MP increases the tax on online betting from 12 per cent to 18 per cent.

According to journalist Juca Kfouri, at a dinner organised by Grupo Prerrogativas on Friday (13), Minister Fernando Haddad, when asked if the taxes paid by betting compensate for what SUS spends on the addicts they produce, replied that it doesn't - and that if it were up to him there would be no online gambling in Brazil.

In a speech on Wednesday (18), Senator Eduardo Girão (Novo-CE) expressed opposition to the bill that seeks to authorise the operation of bingos and casinos in the country. He argued that approving the bill would exacerbate the social problems already seen with online sports betting, which will be legalised in 2023.

Girão expressed concern about the impact of gambling on different age groups. According to him, while betting already affects people up to the age of 50, the legalisation of bingo halls and casinos would also affect the older population, which is already facing problems related to the INSS, the subject of a possible CPMI whose request was read out in the Plenary session of Congress on Tuesday (17).

The tax package proposed by the Lula government is facing resistance in Congress, especially from parliamentarians aligned with Bolsonaro. Opponents have revived the nickname ‘Taxad’ for the minister, associating him with the creation of taxes. Senator Carlos Portinho criticised: "The advertising rules were necessary and immediate. It was the government that refused to tax bets and worked against it, as I defended at the time. Now it's rushed into it. But changing the rules in the middle of the game."

The sports betting and online gaming sector is facing a growing image deficit in Brazil. In the corridors of the Senate, some parliamentarians say that a possible bill proposing the end of betting would be approved without difficulty in the House.

Minister Haddad has already spoken out against the current gambling model, saying that it ‘doesn't create jobs’. Despite the sentiment against betting in Parliament, the Federal Senate chose not to proceed with the proposal to create a specific CPI to investigate the sports betting sector in Brazil.