More Taxes For Costa Rican On-Line Gaming Operators

by Mike Godfrey, Tax-News.com, New York

13 February 2003

Costa Rica's government has continued its efforts to extract some revenue from its booming gambling industry, with the news that the economy ministry will establish a registry of online gambling companies, and will charge each one between 10m and 24m Colons (US$26,000 to $63,000) according to the number of persons employed.

The initiative follows congressional legislation that established taxes targeted at gaming companies. Last December, provisions to tax casinos and online betting operators were approved in the National Assembly by a margin of 45 to 5.

Slot machine operators had protested that plans to tax them between US$250 and $300 per slot machine, per month would drive smaller operators out of business, and in the event the rate per machine was reduced to US$20. Computer terminals used to place bets were to have been charged US$1,000 per month, but this was revised down to $500.

It remains to be seen whether the on-line gambling operators will accept what seems to be a fairly heavy impost, or whether they will defect en masse for friendlier shores, or just take avoiding action by outsourcing labour-intensive work to other jurisdictions.

The increase in Government attention comes at a bad time for the gambling industry, which is under threat from United States legislation seeking to prevent US citizens from utilising offshore gambling services. The US is supposed to have put pressure on Costa Rica to start cleaning up its gambling sector as part of its preparations to join the Free Trade Area of the Americas.

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