Betting revenue: between taxation and profit sharing.
Authorized to operate in Brazil since 2018 by Law 13.756 , the online betting market has expanded rapidly, challenging borders and the national regulatory framework.
Often operated by platforms hosted in other jurisdictions, these so-called "bets " remained, until 2024, available to bettors with just a few clicks, but beyond the reach of Brazilian authorities due to a lack of sub-legal regulation.
This reality may [1] change from January 2025, when the obligations for public allocation of part of the revenues earned from bets will come into force.
According to the Macroeconomic Research Department of Itaú Unibanco SA [2] , the activity moved around R$ 24,1 billion between June 2023 and June 2024 alone, representing 0,22% of GDP.
Simultaneously, negative externalities such as mental illnesses resulting from addiction [3] , consumer capture from retail trade [4] and family indebtedness [5] are attributed to bets, many of which are reported to be manipulating event results [6] and instrumentalizing money laundering crimes [7].
In this context, abstracting from judgments about the convenience or not of permitting the activity in the country [8] , it seems necessary to assess what the counterparts of the activity will be that can be reverted in favor of society.
According to Article 30 of Law 13.756/2018 , the taxation model adopted follows the concept of Gross Gaming Revenue (GGR), whereby the betting operator retains 88% of the net revenue—corresponding to the amount collected ( turnover ), less the prize paid to the bettor and the income tax on that prize. This percentage belongs to the operator and will be subject to Corporate Income Tax (IRPJ)/Social Contribution on Net Profit (CSLL), PIS/Cofins, followed by IBS/CBS and, probably, Selective Tax. It remains to define the legal nature of the remaining 12% of the net revenue collected, and the legal regime applicable to it.
According to the same rule, 12% of the net revenue collected must be allocated to specific purposes, distributed as follows: 10% for education; 13,6% for public security; 36% for sports; 10% for social security; 28% for tourism; 1% for the Ministry of Health, intended to mitigate the social impacts of the games; 0,5% for civil society entities; 0,5% for the Fund for Equipping and Operationalizing the Core Activities of the Federal Police (Funapol); and 0,4% for the Brazilian Agency for Industrial Development (ABDI).
The original version of Law 13.756/2018 also amended Article 26 of Law 8.212/1991 , which establishes the social contribution on prediction contests, as provided for in Article 195, item III, of the Federal Constitution . The new rule determines that the basis for calculating the contribution is the (gross) revenue earned from contests, raffles, and lotteries, and that its rate is the percentage allocated to social security by the law for each lottery modality. Therefore, in the case of fixed-odds betting, the contribution would be 10% of this (gross) revenue.
However, according to the current wording of Article 30 of Law 13.756/2018 , the social security contribution rate on lotteries payable by fixed-odds betting operators has fallen from 10% to 1,2%, and its calculation basis has changed from gross revenue to net revenue, as per the joint interpretation of Article 26 of Law 8.212/1991 and §1-A of Article 30 of Law 13.756/2028 , which allocates 10% of the 12% of net revenue (or 1,2% of net revenue) to social security. Although significantly reduced compared to the original amount, the levy complies with Article 195, IV, of the Federal Constitution , without representing a new source of financing subject to the requirements of Article 195, §4, of the Federal Constitution.
Questions may arise regarding the specific allocation of 0,1% of net revenue (1% of 12%) to health, because there is no legal provision qualifying this percentage. However, considering that health is one of the branches of social security, according to articles 194 to 204 of the Constitution , and that contributions are qualified by the normative purpose to be financed by them, it is concluded that 1,3% of the net revenue collected by fixed-odds betting operators is a social contribution on revenue from prediction contests, of which at least 0,1% must be allocated to health.
It remains to be determined on what basis the law is obligating operators to transfer the remaining 10,7% of net revenue collected to the Federal Government. Ultimately, can this 10,7% of net revenue be classified as a tax?
The legal earmarking of these 10,7% for public purposes is incompatible with the legal nature of the tax, which is characterized by the generality of its collection and the absence of earmarking for specific purposes ( Article 167, IV, CF ).
Furthermore, the thematic areas chosen by the legislator to allocate these resources make it impossible to categorize them as a contribution for intervention in the economic domain or as another general social contribution, under the terms of Article 149 of the Federal Constitution . It is also not possible to classify them as a tax, considering that Article 32 of Law 13.756/2018 already established a specific supervision fee as a counterpart to the exercise of police power over the sector.
According to Ordinance 1.212, of July 30, 2024 , from the Secretariat of Prizes and Bets of the Ministry of Finance, the allocations of items IV-A and VI of §1-A of article 30 of Law 13.756/2018 constitute " social contribution " revenues. The other purposes are classified as " Participation of the Union in the revenues of fixed-odds betting lotteries ". In the Union's understanding, only 1,3% of the net revenues are of a tax nature, in the form of a social contribution on prediction contests, while the remaining 10,7% are treated as patrimonial revenues.
The Union's participation in the revenue generated by private initiatives from fixed-odds betting is legally justified because it is a type of lottery, a category that has the legal nature of a public service, as decided by the Supreme Federal Court in ADPF 492/RJ.
Because it is a type of public service, its operation depends on delegation, via concession or permission, always preceded by bidding ( art. 175 of the CF ), or via authorization regime with exemption from bidding [9] , a model recommended for activities that do not deserve “ restrictions on supply that justify the opposition of barriers to entry, in which case competition for the market, via bidding, would create an inefficient and illegitimate exclusivity, by restricting access to possible interested parties ”, according to ADI 5549.
The public entity's collection of a portion of the revenue (pre-tax income) generated by the private operator, far from constituting confiscation, functions as a counterpart from private entities authorized to operate services that do not require infrastructure investments.
It shapes and delimits the right to private property [10] and reflects the legitimate exercise of the State's ownership over lottery services, reaffirming the importance of its regulatory and funding role for public policies in specific and strategic areas, such as education, health and public safety.
It can be concluded, therefore, that the hybrid revenue collection model adopted, where tax obligations coexist with state participation in the revenues generated, is an institutional arrangement of Public Law that channels forces traditionally opposed in the relationship between the State and the market in favor of the collective interest.
***
[1] ADI 7721 , filed by the National Confederation of Commerce (CNC), and ADI 7723 request a declaration of unconstitutionality of several articles of Law 14.790/2023. The preliminary injunction granted on 11/13/2024 , however, does not affect the conclusions of this text. https://portal.stf.jus.br/processos/detalhe.asp?incidente=7044517
[2] https://macroattachment.cloud.itau.com.br/attachments/a77e92d9-319f-45ca-b657-6c721241804b/13082024_MACRO_VISAO_Apostas_on-line.pdf
[3] Korn DA, Shaffer HJ. Gambling and the Health of the Public: Adopting a Public Health Perspective. J Gambl Stud. 1999
[4] https://fecomercio.com.br/upload/file/4abc78754558d42963ef60fffb527e1ea80c006b.pdf
[5] https://www12.senado.leg.br/institucional/datasenado/materias/relatorios-de-pesquisa/golpes-digitais-atingem-24-dos-brasileiros-aponta-21a-edicao-da-pesquisa-panorama-politico
[6] MESP Ordinance 109, of November 12, 2024. https://www.cnnbrasil.com.br/politica/ministerio-do-esporte-impoe-medidas-para-combater-manipulacao-em-jogos-passiveis-de-aposta/
[7] https://www.bbc.com/portuguese/articles/c9qg907er8go
[8] Casabonna distinguishes five broad approaches to the regulation of digital games: “(1) fully prohibitive jurisdictions , where Internet gambling is prohibited; (2) protectionist prohibitive systems , which allow gambling, but only if the Internet operator is domestically licensed. This approach seeks to prevent foreign providers from offering gambling products and services; (3) fully liberal systems, which impose no obstacles or limitations regarding the nationality of players and the origin of online operators; (4) restrictive liberal jurisdictions that prohibit licensed operators from offering their services to players from countries where gambling is prohibited; and (5) prohibitive liberal systems that allow online gambling businesses to operate from their country, but prohibit games from being offered to their residents” Casabona, Salvatore. The EU's online gambling regulatory approach and the crisis of legal modernity . Working Paper No. 19. Singapore: EU Centre in Singapore, 2014.
[9] Although the absence of bidding, in the case of fixed-odds betting, is the subject of ADIs 7721 and 7723 , for alleged violation of art. 175 of the CF , the model is not new. It is already applied by Law No. 12.996/2014 to regular interstate and international collective road passenger transport, whose constitutionality was declared by the Supreme Court in ADI 5549.
[10] MURPHY, Liam; NAGEL, Thomas. The myth of property: taxes and justice. Translated by Marcelo Brandão Cipolla. São Paulo, Martins Fontes, 2005.
***
(*) Ariella Ferreira da Mota is a Federal Attorney. Specialist in Tax Law from IBET. Master's student in Tax Law at FGV and Yohana Cola Valle De Oliveira is a Federal Attorney, working in the Special Monitoring Division of the PRFN of the 6th Region. Postgraduate in Tax Law from Faculdades Milton Campos. Master's student in Tax Law at FGV. The article above was published by JOTA.Info.
