Unconstitutionality of the inspection fee on "BETS"

A decree was recently published by the Ministry of Finance establishing an inspection fee for fixed-odds betting companies – the so-called “ bets ” – recently authorized to operate in Brazil, after a long period of waiting for regulation on the matter.

The aforementioned inspection fee will be payable by the operating agent, and will range from R$ 54.419,56 to R$ 1.944.000,00, depending on the revenue collected. The range will be determined based on the revenue collected after deducting 12% of the GGR (“ gross gaming revenue ”).

According to the aforementioned regulation, the rules are effective immediately upon publication. The inspection fee will be applied according to the value ranges used to cover the costs and maintenance of the betting company.

Payment by the companies must take place by the 10th of the month following the month in which the prize distribution to bettors occurred.

According to Professor Paulo de Barros Carvalho, " fees are taxes characterized by presenting, in the hypothesis of the norm, the description of a fact revealing a state activity, directly and specifically directed at the taxpayer. In this, they differ from taxes, and the analysis of their calculation bases must necessarily show the measure of the intensity of the State's participation. If the legislator mentions the existence of a fee, but chooses a calculation base that measures a fact unrelated to any activity of the Public Power, then the tax type will be another, naturally a tax."

That seems to be the case, leaving little room for doubt.

This is because Law No. 13.756/18 established fixed-odds betting in Brazil, allowing companies in this sector to operate in the country.

Last year, after a long wait by the market, the Ministry of Finance finally established a series of rules for the operation of online fixed-odds betting companies, which came into effect on January 1, 2025.

The start of the regulated online betting and gaming market also marked increased oversight by the Ministry of Finance over bettors and companies. As of January 19th of this year, the government had already received R$ 1,65 billion in concession payments (amounts paid by companies to operate in Brazil) from a portion of the betting companies seeking regulation in the country.

In order to be granted authorization to operate, each interested company had to pay a fee of R$ 30.000.000,00 (thirty million reais).

Taxation of the betting sector also includes a selective tax, established by the tax reform. This is because there are alleged health risks (e.g., gambling addiction) for bettors.

By controlling financial operations, the Treasury will monitor transactions to identify suspicious activities.

The problem is that, when creating the fee, it would be necessary to justify, based on incidents that occurred in a specific economic segment, the equivalence with the cost (even if estimated/approximate) of the service to be funded, otherwise it would be characterized as a tax.

This is because, in a relatively recent ruling, the full bench of the Supreme Federal Court deliberated on the impossibility of charging fees for the exercise of police power at levels higher than the cost of the state service to be remunerated.

On that occasion (ADI 6211), the plenary of the Supreme Federal Court decided that the revenue resulting from fees for the exercise of police power cannot be disconnected from the cost of the related state activity.

In the judgment, the vote of the rapporteur, Minister Marco Aurélio, prevailed. According to him, “ the fee, unlike the tax, has a reciprocal character, that is, it must be linked to the effective or potential execution of a specific public service or, as in this case, to the regular exercise of police power. In the calculation basis of the fee, a correlation between costs and benefits must therefore be observed, in observance of the principle of proportionality .”

It is worth clarifying that, according to Willis Guerra Filho (2003, p. 245), “ the principle of proportionality can be understood as a mandate to optimize maximum respect for every fundamental right in a situation of conflict with another(s), to the extent that is legally and factually possible, translating into a content that is divided into three partial principles: adequacy, exigibility, and proportionality in the strict sense .”

In the Brazilian legal system, the principle of proportionality is an implicit constitutional principle because, although it derives from the Constitution, it is not expressly stated therein. It is for this reason that the normative basis of the principle of proportionality has been subject to numerous considerations regarding the absence of an explicit normative statement.

In turn, Paulo Bonavides (2001, p. 356) points out that “ the principle of proportionality belongs to that class of principles that are more easily understood than defined. It so happens that, although not explicitly stated in the constitutional text, its presence is unequivocal in the Magna Carta .” This is because the fact that the principle of proportionality implicitly derives from the Constitution does not prevent its validity from being recognized, by virtue, among other things, of the provisions of paragraph 2 of article 5, according to which “ the rights and guarantees expressed in this Constitution do not exclude others arising from the regime and principles adopted by it .”

In the analysis of the case (ADI 7354/PA), it was established that the fee would be calculated based on the volume of water resources used by the taxpayer, and the data show a lack of proportionality between the cost of the state activity that justifies the fee and the amount to be spent by individuals for the benefit of the public entity. The amount collected, it was stated, is ten times greater than the annual budget of the state's environmental management department.

Hence the assertion that the fee has a reciprocal and synallagmatic character: being linked to the effective or potential execution of a specific and divisible public service, or, as is the case, to the regular exercise of police power, the value of the tax must reflect, within reasonable limits, the cost of the state activity from which it derives.

According to Hugo de Brito Machado, ' nothing justifies a tax whose total collection in a given period exceeds the cost of the state activity that allows it to exist', and in determining the tax base, 'even if by approximation and with a certain margin of discretion' , a correlation between costs and benefits must be observed, otherwise the nature of the tax will be distorted (MACHADO, Hugo de Brito. Curso de Direito Tributário. São Paulo: Malheiros, 2018. p. 443).

Given the need to maintain a close relationship between the performance of the activity that gives rise to the charges when defining them, and considering the difficulty or even impossibility of precisely determining the cost related to the state activity, it becomes feasible for the Public Administration to establish an approximate, proportional amount, prohibiting the adoption of a tax base specific to a tax, as per article 145, § 2, of the Federal Constitution.

The basis for calculating the fee must be related to the cost of the service provided. If the charge is not proportional to the cost of the service, there is a risk of unconstitutionality, as in the case of a fee based on the volume of water resources used by the taxpayer.

(*) André Luiz Andrade dos Santos, tax partner at the law firm Chalfin, Goldberg & Vainboim Advogados.