Once the 'Bets' legalization phase has been completed and their respective licenses have been granted by the Prizes and Betting Secretariat (Ministry of Finance), betting houses are now focusing their attention on other legal aspects related to their activity, which generates billions in various economies around the world.
Among these, the tax legal aspects stand out, as they naturally have a major impact on the calculation of the 'Bets' financial results and on the collection of taxes by the Tax Administration, given their turnover scale.
'Bets' revenue is measured by PIS and Cofins in their non-cumulative calculation system [considering the adoption of the real profit regime], giving rise to a detailed analysis of the essential and relevant inputs for the development of this economic activity. At this points, it is worth considering that there are some that are obviously essential and relevant from the perspective of those who know how 'Bets' works and the operational flow, but that may not seem so relevant from the perspective of common sense, that is, of those unfamiliar with the activity developed by fixed-odds sports betting houses.
In other words, there are inputs that are absolutely relevant and essential to an economic activity, but the perception of these characteristics tends to escape the judgment of those who do not know the activity in depth. Applying this rationale to the 'Bets' activity, we can mention advertising and publicity expenses, raising the question: are they essential and relevant inputs for 'Bets'?
We understand that they are, without a shadow of a doubt! In the case of 'Bets', the relevance and essentiality of purchasing advertising and publicity are essential for the service/utility provided by the betting company to reach its consumers.
And this happens because 'Bets' companies operate exclusively in a virtual environment, through applications and websites, and it is imperative that they be publicized so that their target audience – bettors – are aware of their existence, the betting combinations they offer and what their differentials or attractions are so that they are chosen among so many other competing betting houses, including those that operate outside of the law.
Therefore, it is clear that 'Bets' companies must be present where their target audience is, that is, in static and electronic media located in public spaces, commercial establishments, shopping malls, sports stadiums and also on social networks and media, internet search engines, artificial intelligence, etc.
In this sense, we can borrow from popular wisdom to say “out of sight, out of mind.” We therefore understand that the massive presence of advertising for 'Bets' companies in various environments on the material and virtual planes is essential for their existence and operation to be known and for them to be able to attract customers and bettors, without whom they would not have revenue and would, obviously, fail.
In our view, the multiplicity of existing 'Bets' companies and the fact that they operate only in a virtual environment constitute solid grounds for the conclusion that advertising and publicity in this economic activity have the attributes of essentiality and relevance, which continue to be the pillars of validation of the appropriation of PIS and Cofins credits in the non-cumulative system.
That's not all. It seems to us that in addition to assessing the essentiality and relevance from the perspective of economic activity, there is also an empirical and case-by-case verification capable of proving the relevance of the input under analysis, namely, measuring the flow of bets made in periods in which there is massive publicity of 'Bets' in advertising campaigns, sponsorships and advertisements, and in periods without advertising investment.
The flow of bets in the second scenario “plummets” brutally, demonstrating indisputably that advertising and propaganda are essential inputs for its operation.
Finally, it is worth noting that although there are some case law precedents that classify advertising and propaganda expenses as merely operational/related to sales and, for this reason, limit the appropriation of PIS and Cofins credits in the non-cumulative system, we do not believe that they can serve as a basis to contradict the essentiality and relevance invoked herein.
This is because the promotion of sales of goods and services in general cannot be compared to the sales of fixed-odds bets in a virtual environment carried out by betting companies, given their peculiarities, already explained.
Therefore, it seems clear to us that the new services, technologies and utilities available for consumption today, such as fixed-odds bets operated by 'Bets' companies, cannot be subject to old interpretative models, built on the basis of very different factual-material and legal realities.
Interpreters need to “do their homework” in the sense of Learn about 'Bets', how they operate, what their uses are, and how they become accessible to their customers, so that they can understand the issue and answer our question with a resounding yes, or even a no, but based on new and authentic perceptions about the issue.
Fernanda Drummond Parisi
PhD and Master in Tax Law from PUC-SP, partner at Drummond Parisi Advogados and director of ABDF
