The Brazilian Supreme Court has moved to examine the collection of the Municipal Service Tax (ISS) of the city of Rio de Janeiro in relation to horse racing bets. The case involves the operator of the Gávea racetrack, the Jockey Club Brasileiro (JCB) and the municipality.

The aim is to ascertain whether the ISS can be applied to bets and if the tax should be based on the collection of them or the sale of the entrance tickets to the racecourse. On June 1, the Brazilian Association of Capital Finance Departments (ABRASF) filed a document with the Supreme Court to contribute to the case.

In the document, shared by BNL Data, the organization ensured that fixed odds bets will be regulated starting the second half of 2020. It also sets that the taxation must be calculated “on the value of the bet, which is the consideration for the provision of the service of races and competitions, provided in point 12.10 of the services list of LC 116/2003.”

The document asserts that bets are “superfluous expenses” and that “it shows a high capacity from the service provider, since it’s supposed to have all necessary services for its economic life.” Consequently, the association considers it wrong to eliminate the betting tax in favor of calculating it on ticket sales.

“The financial impact that the decision of the Supreme Court will have on this tax (which generates around $1.5bn in the Brazilian online market, and it’s on its way to be regulated) will be key to finance public policies of local entities throughout the country, not only for their general income, but also for the extra-fiscal role that the ISS can play,” concluded  Ricardo Almeida Ribeiro da Silva, ABRASF’s legal advisor.