Fintech vs Bank: Counting the tax

Brazil’s banking sector has found a new topic to argue about: taxation. Febraban, the federation of traditional lenders, released a study arguing that digital platforms and traditional banks should be taxed under the same rules. Nubank replied that it already pays an effective tax rate of 34.1% — higher than that of most large banks. Both sides appear right, but only because they measure different things.

The trick lies in the metric. Febraban points to the nominal rate written into law: 45% for banks, between 34% and 40% for fintechs. Even so, Nubank argues that its effective rate — 34.1% — is higher than that paid by most large banks, whose effective burden often ranges from 25% to 32% after deductions and interest on equity (JCP). Curiously, the bank — now led by a former central bank president — also happens to be the most profitable in the world, according to The Banker.

The result is a circular debate in which profitability becomes a moral argument. It is not the tax authority that determines who pays more, but each company’s spreadsheet. The discussion over how much fintechs should pay says less about taxation and more about the maturity of the financial sector.

The whole system has grown. The rollout of Pix, mass digitalisation and financial inclusion have created a much larger market in which everyone — incumbents and newcomers alike — increased revenues, profits and customer bases. The pie got bigger, and there was room for all.

Growth, however, brought new pressures. Rapid expansion and the entry of new players exposed gaps in supervision: some fintechs have been used in fraud, betting and money-laundering schemes. That has revived the debate over regulation and oversight, and the balance between innovation and control.

The government is now trying to redefine tax rules after the expiration of Provisional Measure 1,303, which would have equalised rates between banks and fintechs. The trend points to adjustment, not rupture. Fintechs and banks will have to operate under increasingly similar standards.

The question of “who pays more tax” has less to do with fiscal justice than with market power. Those who innovated responsibly will keep growing. Those who didn’t play by the rules — digital or traditional — will be left behind in a market maturing too fast to tolerate shortcuts.