COSTA-A-PLENTY RICAN TAX

14 September 2007

Online gambling haven hikes taxation


Online gambling company managements in Costa Rica will be doing their viability sums if a new tax proposal is passed into law.

According to the English-language newspaper AM Costa Rica, the Partido Acción Ciudadana has introduced a bill to tax sportsbooks and other electronic betting operations, imposing a heavier tax burden than a previously stalled proposal.

The new proposal, number 16.450, is the latest in a long line of proposals to tax the betting industry.

The Acción Ciudadana proposal would tax betting operations based on the number of employees on their payroll. Up to 20 employees the annual tax would be 15 million colons, about $28 000. At the top of the scale operations with 61 or more employees would pay 28.4 million colons or about $54 600. The online gambling industry in the country is a significant employer of young, English speaking Costa Ricans.

The tax is being characterised as a "license" fee, although specific online gambling regulation and licensing has yet to be established.

In October 2002 sportsbook employees protested for two days outside the Asamblea Legislativa in opposition to a similar tax contained in the proposed fiscal reform package promoted by then-president Abel Pacheco. The entire plan died in the legislature, effectively blocked by the Movimiento Libertario which has championed the cause of the sportsbooks.

Since then the sportsbook industry has taken a few hits, AM Costa Rica recaps. One major betting operation, BetonSports abandoned US business after encountering legal difficulties in that country, axing staff. The firm is still trying to distribute funds to creditors and employees.

AM Costa Rica also points out that a large part of the day-to-day operations of Bodog.com has been transferred to Antigua with a recent agreement with Morris Mohawk Gaming Group in Canada to operate its gambling sites - another source of lost jobs for Costa Ricans.

The Arias administration package of new taxes also includes a licensing scheme for sportsbooks. Online casinos and sportsbooks first must register with the Ministerio de Economia, Industria y Comercio. Unregistered companies will in future be regarded as illegal operations.

The Arias proposal begins at firms with 10 employees and specifies a fee of 10 million colons ($19 200) a year. Firms with 61 or more employees would pay 24 million colons, about $46 100, making the Acción Ciudadana proposal around 18.5 percent higher for the gambling companies.

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