Brazil’s Chamber of Deputies has removed Provisional Measure (PM) 1,303/2025 from its legislative agenda, ending a controversial push to levy retroactive taxes on gambling operators. The measure, which had been revised as an alternative to a proposed gambling tax hike, fell short of congressional support, marking a significant setback for the government’s fiscal strategy.

The withdrawal vote took place on Wednesday, with 251 deputies in favor and 193 against, according to iGaming Brazil. With the measure removed, PM 1,303 cannot advance to the Senate, causing it to lose all legal validity.

President Luiz Inacio Lula da Silva weighed in on X, asserting, “The lower house’s decision…is not a defeat imposed on the government, but on the Brazilian people.”

From Tax Hike to Retroactive Scheme

The original measure sought to permanently raise the gambling tax rate from 12% to 18% of gross gaming revenue (GGR), replacing a provisional increase introduced in June. With the withdrawal, operators will now continue paying the standard 12% rate.

To compensate for the scrapped tax hike, the bill proposed the RERCT Litígio Zero Bets, a voluntary program designed to regularize previously undeclared gambling funds. Operators would have paid a 15% tax on gambling activities from 2014 to 2024, alongside a 15% penalty for late declarations, resulting in an effective 30% charge.

Udo Seckelmann, head of gambling & crypto at Bichara e Motta Advogados, noted the potential benefits: the program “could have offered legal certainty for licensed betting operators in Brazil, helping them to avoid tax disputes in the future.”

Revenue Implications for the Government

The government had projected that the retroactive tax could generate approximately BRL5 billion, while the broader bill—including other economic measures—was expected to bring in BRL17 billion ($3.2 billion) for 2026. These funds were seen as critical to achieving a primary budget surplus target of 0.25% next year.

Senator Rehan Calheiros, chair of the joint committee reviewing the measure, warned of its financial impact: “This is very bad. It ends up affecting public finances. I think it’s regrettable.” Workers’ Party leader Lindbergh Farias went further, labeling the withdrawal “an act of sabotage against Brazil.”

Treasury Minister Fernando Haddad, however, reaffirmed that the government will continue to pursue its fiscal targets despite the measure’s rejection.

Political Reactions and Legislative Dynamics

Rapporteur Carlos Zarattini (Workers’ Party-SP) emphasized the extensive negotiation behind PM 1,303: “We have worked for 120 days to ensure the MP’s approval. We made progress on several points, met many demands, and created a text that would have all the conditions to be approved in this House and signed by the President of the Republic—a consensus text.”

Opposition voices criticized the proposal as misleading. Congressman Mendonça Filho described it as a “lying MP,” pointing out its original goal was to replace an overturned IOF increase.

Industry analyst Elvis Lourenço expects the government to revisit the retroactive tax concept: “Politically, the [failure of PM 1,303] signals limited congressional appetite for a fast-track fiscal package tying betting taxation to broader revenue measures. Expect the government to reframe or refile elements in a new bill/MP, but timing is uncertain.”

What This Means for Betting Operators

For operators, the measure’s removal means no retroactive tax obligations in the short term. The program had offered a path to regularize undeclared funds with a 90-day window for voluntary compliance, alongside measures to curb illegal betting, including site blocking and transaction monitoring.

Despite the immediate reprieve, the government’s interest in recovering substantial potential revenue—estimated at three years’ worth of increased gambling tax—suggests similar initiatives could reemerge in the near future.

The GTI-Bets working group, created in January by the Secretariat of Prizes and Bets and the Federal Revenue Service (RFB), has monitored compliance within the licensed sector. Robinson Barreirinhas, special secretary of the RFB, highlighted the importance of recovering taxes lost to the grey market.

While the Chamber’s decision delays the retroactive tax, the underlying fiscal challenges remain. Operators may avoid additional charges for now, but the government is likely to revisit proposals that combine tax recovery with regulatory certainty. The outcome of PM 1,303 signals both the complexity of fast-tracking fiscal measures in Brazil and the ongoing balancing act between revenue generation and market stability.