Brazil: Lula publicly defends Finance Ministry's tax hike on betting and fintech sectors

Brazilian President Luiz Inácio Lula da Silva has publicly supported the Ministry of Finance’s plan to raise the Tax on Financial Transactions (IOF) for “sectors that make a lot of money," including betting companies and fintechs, urging that the government must resist pressure to back down in the face of opposition.

In a recent interview on the podcast “Mano a Mano,” hosted by rapper Mano Brown, Lula reinforced the government’s stance, saying: “There's nothing wrong with [Fernando] Haddad's IOF.” He argued that the proposed changes aim to bring fairer taxation to sectors that earn large sums while contributing relatively little in taxes.

“The betting companies pay 12%, we want them to pay 18%. They make 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 this, people, we can't give in all the time,” the president said during the interview.

Lula emphasized that maintaining fiscal responsibility requires difficult decisions, particularly when facing budget cuts. “Every time we go beyond the fiscal framework, we have to cut the budget. So, if I have to cut R$40 billion (US$7.4bn) from the budget for street works, for health, for education, I have to have compensation. The IOF is a small part of making this compensation,” he added.

The government initially proposed the IOF increase on May 22, but faced significant pushback from members of the National Congress. In response, on June 11, the administration issued a provisional measure that included not only adjustments to the IOF but also new taxation on investments, an increased levy on betting companies, spending cut proposals, and a revised decree featuring lower IOF rates compared to earlier drafts.

The updated decree preserves much of the original framework but introduces revisions to address contentious issues. Key among these are the removal of certain provisions related to additional rates on credit operations and a more nuanced treatment of foreign investment taxation.

Despite the government’s revisions, resistance within Congress remains strong. On June 16, the Chamber of Deputies approved an urgency motion for a bill that seeks to overturn the government’s new IOF decree. While the urgency measure allows the bill to be fast-tracked, the proposal itself has yet to be debated on its merits.