Brazil: Chambers moves to redirect gambling taxes for public security 

Ongoing fiscal developments in Brazil sees the Chamber of Deputies approve a ‘constitutional amendment’ to secure funding for Public Security (PEC) via taxes generated from gambling.

On Thursday, Deputies unanimously approved the proposal of União Brasil minister Mendonça Filho of the state of Pernambuco (PE), to alter tax arrangements of the Brazil Bets regime.

As noted by SBC Noticias Brazil: “The text approved by the Chamber of Deputies provides for the allocation of money raised from fixed-odds betting and online gambling to the National Public Security Fund (FNSP) and the National Penitentiary Fund (Funpen).”

The proposal does not increase the tax burden on licensed operators. Instead, it reshapes how revenues are distributed across federal programmes funded by the Bets framework.

At present, Brazil applies a 12% tax on Gross Gaming Revenue (GGR), a threshold that will rise gradually to 15% by 2028. Further income is generated by a 15% tax on player winnings and standard corporate taxes applied to operators.

Under Law 14.790/2023, the current structure distributes betting tax proceeds across several government beneficiaries, including: Ministry of Sport (36%), Ministry of Tourism (22.4%), National Public Security Fund – FNSP (13.6%), Education sector (10%), Social Security (10%), Brazilian Sports Entities/Clubs (7.3%), and the Ministry of Health (0.7%).

The newly approved ‘Public Security PEC’ would gradually redirect a larger share of these proceeds toward security-related funding and projects. 

The amendment proposes a three-year implementation period, during which 10% of revenues generated by betting will be allocated to the FNSP and FunPen between 2026 and 2028, rising incrementally to a maximum ceiling of 30%.

Before calculating the allocation, the total revenue pool must first deduct player winnings, income tax on those winnings, and the gross profits of betting operators.

While the measure introduces no new taxes, it would reduce the share of funds currently allocated to other beneficiaries including sports development programmes, tourism promotion initiatives and certain social funding mechanisms.

The proposal will now move to the Federal Senate, where lawmakers will determine whether the constitutional amendment becomes part of Brazil’s fiscal architecture for the next phase of reforms of the Brazil Bets regime. 

The development follows last week’s political debate surrounding CIDE-Bets, the controversial proposal to introduce a 15% surcharge on fixed-odds betting operators. The measure had been attached to the Anti-Racketeering Bill (PL 5,582/2025) before being removed by deputies during the Chamber’s review.

Supporters of CIDE-Bets expressed dismay at the decision. Backers within the governing coalition had argued that the levy could generate up to R$30bn (€5bn) in new revenues urgently required to fund Brazil’s public security agenda.

In particular, the tax was framed as the primary financial mechanism needed to modernise Brazil’s prison system – long criticised for severe overcrowding and structural failings and being in a continued blackhole.

In 2023, Brazil’s Supreme Court ruled that the country’s prison conditions constituted an “unconstitutional state of affairs”, calling for reforms to address systemic failures in incarceration standards — a mandate that successive governments have struggled to finance.

However, the attachment of CIDE-Bets ultimately proved politically problematic. 

Lawmakers warned that the fiscal proposal had sidetracked the central objective of the Anti-Racketeering Bill, which sought to establish new criminal liabilities, corruption offences and legal tools to strengthen Brazil’s ability to prosecute organised crime.

Concerned that the tax proposal could derail progress on the criminal justice legislation, deputies chose to remove the CIDE-Bets provision, allowing the anti-racketeering framework to proceed independently.

Despite its removal, CIDE-Bets remains a live political issue and is widely expected to re-emerge in a revised form as lawmakers continue to debate how Brazil’s newly regulated betting market should contribute to funding the country’s public security system.

Whether the amendments proposed by Mendonça Filho will satisfy sceptics seeking greater fiscal support for public security remains unclear, leaving CIDE-Bets lingering on the sidelines as a potential future reform of Brazil’s gambling tax structure in the backdrop of Brazil’s General Election taking place on 4 October 2026… as on the matter of tax all bets are off.