Among the various topics discussed in the vote on Bill 68/2024, which will implement the tax reform of Constitutional Amendment 132/2023, the idea of subjecting betting companies to the payment of selective tax (IS), colloquially called the “sin tax", stands out.
The motivation lies in the alleged harm to mental health that would be caused by the activity.
All of this is happening, coincidentally or not, amid the spread of news about the impact of betting on the most economically vulnerable part of the population. And, in a hasty manner, before the sector is fully regulated by the Secretariat of Prizes and Bets, which should be concluded by December 31.
Despite the variables already on the table in this discussion, there are strictly legal elements that, in our view, should be the subject of some reflection, in order to avoid moving towards a taxation that will be questioned in the courts in the future.
It is important to remember that gambling has been prohibited by the law on criminal offences for over 80 years. Nothing has changed here.
The so-called ‘Bets’ actually operate the lottery activity, specifically in its “fixed-odds betting lottery” modality.
This is a lawful activity and is regulated by Law 13,756/2018, together with the federal lottery, the specific prediction lottery, the sports prediction lottery and the exclusive instant lottery (Lotex).
More than that, it is a public service (article 29), which is the responsibility not only of the Union, but also of the states and the Federal District (article 35-A), provided by a private individual with authorization and in a competitive environment (article 4, of Law 14,790/2023).
All lottery modalities belong to the “prediction contest” genre, and are therefore subject to taxation of 12% as a specific contribution to social security provided for in article 195, item III, of the Constitution. This contribution is allocated to different entities and purposes, depending on the type of lottery.
In all cases, part of the contribution is allocated to the National Public Security Fund. With the exception of the federal lottery, all others revert part of the contribution to the Ministry of Sports. There is also provision for distribution to culture, the national penitentiary fund, sports confederations, the Ministry of Tourism and even the Red Cross.
Interestingly, however, only fixed-odds betting lotteries, i.e. bets, are required to transfer part of their revenue to the Ministry of Health, precisely for the prevention, control and mitigation of social damages arising from gambling. No other lottery modality has this obligation.
In addition to being a public service, therefore, the revenue from lottery activities is partially “earmarked,” being linked to these governmental and extra-governmental transfers, contributing to the funding of public policies in the areas of culture, public safety, sports, tourism and education.
Given this, does it make sense to subject the provision of a public service to the “sin tax"? Is it reasonable to impose a heavier burden on an activity that collects resources directly destined for various government services, including health care itself? And this through a tax that, unlike the revenue generated by bets, will not be specifically earmarked for the treatment of the mental health of bettors?
Furthermore, if we are talking about a public service under the responsibility of the Union, states and municipalities, even if provided with authorization, would it be possible to charge a tax on this activity when the Constitution, in its article 150, subsection VI, item “a”, provides for reciprocal immunity on state assets, income and services? Let us remember that the Supreme Court has already declared the Minas Gerais state lottery protected by the aforementioned reciprocal immunity.
It is true that article 150, § 3, excludes from this protection “economic activities governed by the rules applicable to private enterprises.”
Even so, the STF has a collection of decisions immunizing all services provided by the Post Office (not only postal activity), consulting and advisory activities by Infraero (not only the administration, operation and exploration of airport infrastructure) and even the production of telephone tokens and printing of stamps by the Mint (not only the issuance of currency).
In other precedents, it is true that the court adopted a more restrictive understanding, excluding from immunity activities capable of manifesting wealth in favor of the individual, even if at the same time they generated benefits for the Government.
In the case of lotteries, regardless of any consideration of proportions, the generation of mutual benefits – for the individual and for the State – is unquestionable. That is why, although it may seem exaggerated to suggest immunity for lottery activities, it seems at least contradictory to want to subject them to the additional burden of selective tax.
José Luís Ribeiro Brazuna
Professor at IBDT, Master in Tax Law from the Law School of USP and founder of Bratax (Brazuna, Ruschmann and Soriano Sociedade de Advogados)
