Government revenue from IOF and bets is likely to be lower than expected, says Senate body

The federal government's revenue from the increase in IOF (Tax on Financial Operations) and the taxation of bets – considered necessary to close this year's accounts – should be lower than predicted by the Ministry of Finance, according to the new report from the Independent Fiscal Institution (IFI), an agency linked to the Senate, released this Thursday (21).

According to the Federal Revenue Service, the IOF increase announced in May was expected to generate R$8.4 billion in 2025 and almost R$28 billion in 2026. However, the IFI estimates that taxpayer behavior could significantly reduce this gain, as many will likely adopt strategies to avoid taxation.

"According to our calculations, the government needs a fiscal effort of around R$80 billion. This could come through increased revenue, spending cuts, or both," said Alexandre de Andrade, the institution's director.

The IFI report outlines three scenarios for the impact of changes to the IOF tax, from the most optimistic to the most pessimistic, which would be an "adaptation" to financial market behavior ( see full text ). In the most optimistic scenario, revenue could reach R$9 billion in 2025, R$28.1 billion in 2016, and R$30 billion in 2027, raising the IOF/GDP ratio from 0.7% to 1.0%.

In an intermediate scenario, the increase falls to R$5.6 billion in 2025, R$19.4 billion in 2026 and R$20.5 billion in 2027. In the worst-case scenario, with strong adaptation by economic agents, the extra gain would be only R$3.1 billion in 2025, R$13 billion in 2026 and R$13.7 billion in 2027, maintaining the IOF/GDP ratio at around 0.6% to 0.7%.

Projections also indicate that the sum of the measures adopted by the government, including MP 1,303/2025, which taxes previously exempt funds, and the taxation of bets, should increase revenue by approximately R$16 billion in 2025, R$39 billion in 2026 and R$31 billion in 2027. Despite this, the impact would be insufficient to ensure compliance with fiscal targets, especially from 2026 onwards.

According to Alexandre de Andrade, one of the directors of IFI, the government will need to seek additional solutions to balance the accounts even if it excludes court-ordered payments from the spending limit set out in the so-called "default PEC."

"Removing these expenses already brings significant relief. However, expenses continue to grow at a very rapid pace. This is the case with social security benefits and the Continuous Benefit Payment Program (BPC)," he highlighted.

The proposed constitutional amendment (PEC) will allow approximately R$10 billion to be omitted from the calculation of the primary balance target in 2027, which corresponds to 90% of the expected court-ordered payments. This maneuver, according to the IFI, will temporarily provide relief to public finances, but it does not solve the underlying problem.

"From our perspective, this rule wouldn't be enforced by 2027. In the Executive Branch's scenario, however, with more optimistic data from the Ministry of Finance, there would be a leeway until 2031," the director explained.

The IFI also warned of the fiscal rigidity the government will face in the coming years. For Andrade, the exclusion of R$10 billion from the target calculation in 2025 and 2026 highlights the lack of budget space. He believes the amount isn't significant, but the need to exclude this amount from the target occurs because "fiscal space is very tight."