Taxation of betting sites and the disproportionate nature of the inspection fee.

A technical note prepared by the Central Bank of Brazil and released this week indicates that, throughout 2024, between R$ 18 billion and R$ 21 billion per month were transferred to betting and gambling companies. This represents approximately 24 million individuals who made at least one transfer via Pix (Brazil's instant payment system) to such companies. The biggest bettors are between 20 and 30 years old, and the average monthly value of bets varies according to age: "for younger people, the value is around R$ 100 per month, while for older people it exceeds R$ 3 per month, according to data from August 2024," reports VALOR.

Even more alarming is the finding that, in August of this year alone, 5 million beneficiaries of the Bolsa Família program spent approximately R$ 3 billion on gambling, with an average expenditure of R$ 100 per person. Considering that the Central Bank's survey only considers payments via Pix, it is possible that the numbers are underestimated.

The data sheds light on the impact of sector regulation and its revenue potential. According to the changes introduced by Law No. 14.790/2023, bettors will have to pay income tax on their net annual winnings from bets, at a rate of 15%, and the proceeds from the collection by the respective betting houses will be allocated (i) to the payment of the prize; and (ii) to the payment of income tax levied on the prize. After deducting these amounts, 88% will be allocated to cover the operating and maintenance expenses of the operating agent, and 12% will be collected by the agent for various purposes: education, tourism, public safety, the Brazilian Olympic Committee, among others.

Specifically regarding fixed-odds betting, Law No. 14.790/2023 amended Law No. 13.756/2018 to establish a fee resulting from the exercise of police power over the agents operating the betting operations. According to the new wording of Article 32 of Law No. 13.756/2018, the fee will be levied monthly "on the proceeds of the collection," after deducting the amounts related to the prize paid and the income tax levied on it. According to paragraph 1 of the same provision, the fee will be applied according to the ranges established in the annex to the law and intended "to cover the operating and maintenance expenses of the fixed-odds betting lottery operator."

From the outset, a certain inconsistency in the wording of the provision is noticeable. Since fees are taxes intended to cover the public assessment from which they arise, their application to the proceeds of the betting operator's revenue does not appear to have constitutional support. As is known, Article 145, paragraph 2 of the Constitution prohibits the creation of fees with a tax base that is the same as a tax. On this subject, the content of Binding Precedent No. 29 of the Supreme Federal Court is acknowledged, which authorizes the use, for the determination of the tax base of fees, of "one or more elements of the tax base of a given tax," but prohibits "complete identity between one base and the other." In the present case, it is precisely this identity that seems to exist.

If that weren't enough, there is another element that casts doubt on the validity of this fee. The annex to Law No. 13.756/2018, as amended by Law No. 14.790/2023, includes a table with the amounts to be collected monthly as an inspection fee, with these amounts varying (and increasing) based on revenue brackets for the agent. In other words, the more bets, the higher the fee: the lowest bracket (approximately R$ 31 million) results in a fee of R$ 54.419,56, and the highest (above approximately R$ 661 million) in a monthly fee of almost R$ 2 million.

It could be argued that the direct correlation between the amount collected and the value of the fee would be justified by the larger number of operations to be audited. However, legal questions remain: firstly, the clear statement that the basis for calculating the fee will be the amount collected by the agent, less the bonus and the respective income tax, is a clear violation of the Constitution; secondly, the fact that the values ​​chosen to cover the auditing reveal a clear revenue-raising purpose. On this last point, the jurisprudence of the Supreme Federal Court is clear: “it violates the principle of contributory capacity in the cost/benefit dimension […] a fee that flagrantly and disproportionately exceeds the costs of the state's auditing activity” (ADI 7400 and ADI 5374).

It is evident that betting activities need to be adequately taxed, considering both the contributory capacity involved and the potential harm that unlimited access can cause to specific individuals and to public health in general. However, the appropriate type of tax must be used for this purpose. Tax reform may be an opportunity to debate the issue, in light of the provision in Complementary Bill No. 68/2024, which foresees the possibility of taxing prediction contests via a selective tax. Taxation through a selective tax, which will be added to the IBS and CBS, could be a significant source of revenue and an instrument that complements other regulatory measures recently taken by the general government to regulate the sector.