On June 23, the Chamber of Deputies concluded the vote on the Conversion Bill (PLV) of Provisional Measure n. 1034/2021, whose objective is to increase the calculation basis of the Social Contribution on Net Income (CSLL) of the Banks, as well as the progressive escalation of the end of the exemption from the Special Regime of the Chemical Industry (REIQ), budgetary and financial consideration for to face the new expenses arising from the exemption of diesel (truck drivers' agenda), thus complying with the Fiscal Responsibility Law.
Taking advantage of the moment of adjustment of the tax matter in a Provisional Measure, the Parliament decided to correct the tax quadrant levied on fixed-odd betting lotteries (virtual and physical), enabling the collection until then non-existent.
Fixed Quota Betting Lottery is popularly known as sports lottery and was established by Law n. 13.756, of December 12, 2018, and defined as "a betting system related to real sports-themed events, in which it is defined, at the time of placing the bet, how much the bettor can win if the forecast is correct."
The amendment proposed by PM 1034/2021 to the system provided for in Law n. 13,756/2018 aimed at improving the way in which the proceeds of the Union's revenue were allocated. As the legislation was built in 2018, taxation would be levied on turnover (the gross value of bets placed), and the most appropriate incidence should fall on the Gross Gaming Revenue (difference between the gross value of bets placed minus the prize owed to players in this type of lottery). This is because the amount to be distributed as a prize is associated with the bet amount and not the total collected by the operator.
Thus, with the changes, the distribution of amounts collected by the State will be based on the calculation of the amount after taxes and prizes distributed, focusing on what can really be understood as the operator's revenue. In other words: the Provisional Measure brings legal certainty to a promising and prosperous market, which awaits investments as long as there is predictability in its legal framework.
The correction carried out through PM 1034/2021 is in line with what has been debated for years by the specialized doctrine that criticizes the complexity of the Brazilian tax system, one of its most absurd aspects being the collection of taxes within other taxes. The PLV makes an important correction by making it clear that the prize belongs to the winner and cannot be part of the operating agent's billing, as it is not the operator's revenue.
Recently, the Federal Supreme Court faced one of the discussions involving this issue – the inclusion of ICMS in the PIS and COFINS calculation basis (Topic No. 69 of the General Repercussion, RE 574.706). In the end, the STF decided that a tax, in this case ICMS, cannot be included in the calculation basis of PIS/Cofins social contributions. The nodal point of the decision is the understanding that the company's revenue (calculation basis for Social Contributions) cannot be composed of revenue/invoicing of the taxing entity – in the analyzed case, of the States.
The correction that PM 1034/2021 performs, therefore, is in accordance with the most recent understanding of the STF on the subject and will guarantee the effectiveness of the collection, without filing lawsuits questioning the composition of the calculation base immediately after the approval of the new wording given to Law n. 13,756/2018. Also because, again, the amounts that will be excluded from the calculation basis of PIS/Cofins social contributions levied on the operating agents' billing (prize, Income Tax on the premium and Social Contribution levied on the collection) are not revenues of the operating agents and, precisely because of this, they could not compose the calculation basis of the Social Contributions owed by such companies.
In addition to avoiding legal discussions that could, strictly speaking, interrupt tax collection, these changes should enable a legal framework compatible with the needs of the market, removing possible obstacles to investments. It is known that foreign betting companies show great interest in the Brazilian market as one of the main ones to be explored in the sport lotteries modality. With this legislative adjustment, the Union will be able to promote both the realization of these foreign investments, as well as the tax collection that is so necessary in times of public budget increasingly pressured by the increase in expenses made possible by the pandemic.
PM 1034/2021 is awaiting sanction by the President of the Republic.
In addition to the necessary legislative adjustments, the regulation of sports betting by the competent Ministry is pending. Law no. 13.756/2018 established in § 2 of art. 29 that the regulation of the matter would be carried out by the Ministry of Economy, a stage pending until today, but with significant advances by the Secretariat of Evaluation, Planning, Energy and Lottery (SECAP) of the Special Secretariat of Finance of the Ministry of Economy.
So far, three Public Consultations have been carried out on the regulation. The technicians seek to align the Brazilian sports lottery model with the best international practices, so that proper accountability for operations and security for all parts of the business is guaranteed.
The last draft of regulations released to the public changed the authorization model for the concession model, following the recommendation of the Attorney General's Office of the National Treasury (PGFN). The model was designed so that there was the possibility of forecasting penalties in the concession contract, since in the authorization model the only penalty to be applied would be cancellation.
It is important that these two stages are completed so that investments in the sector can advance satisfactorily. We emphasize the excerpt very well placed by the opinion of the rapporteur of PM 1034/2021 in the Senate, Senator Ciro Nogueira (PP/PI), when indicating that "the Fixed-Quota Betting system proposed herein will reduce the size of the illegal online betting market and it will increase tax collection, bringing more resources to Social Security.”
The Investment Partnership Program (PPI) website itself estimates that "this lottery activity has been virtually explored in the country by foreign companies, moving around R$ 2 billion a year that end up being remitted outside Brazil." There are still those who expect the new business to move around R$4 billion per year.
These data demonstrate how urgent it is to finalize the normative framework for fixed-odd betting – both the adequacy of the form of collection of the lottery carried out by PM 1034/2021 and its regulation by the Ministry of Economy.
Once this stage of defining the normative framework is completed, it will be possible to inaugurate a new stage for fixed-odd bets, in which investments by operating agents may occur, as well as the equivalent federal tax collection.
Finally, the Law will make it feasible to tax the exploitation of sports lotteries, unlocking such a promising market for Brazil, being an important first step towards the gradual opening of the gaming market in the country as a way to increase the Union's revenue. Thus, this new market, with legal certainty and clear rules, will be good for everyone - including government accounts
Marcos Joaquim Gonçalves Alves
Founding partner of the firm M.J. Alves e Burle Advogados e Consultores and consultant member of the Special Committee on Tax Law of the OAB
Alan Flores Viana
Partner at M.J. Alves e Burle Advogados e Consultores and member of the Tax Affairs Committee of the OAB-DF
Barbara Teles
Partner at M.J. Alves e Burle Advogados e Consultores, member of the OAB-DF Gaming Law Commission and member of the Brazilian Institute of Sports Law (IBDD)
Source: Estadao
