News

Monday, 17 May 2010 00:00

For many years, online gambling operators enjoyed running their businesses tax free with their base in Costa Rica, but that gravy train is about to end. 

The long term lack of any real regulations concerning online gambling in Costa Rica combined with a highly benevolent system of taxation for foreign companies basing their businesses there has made it a popular choice for a large number of online gambling operators along with associated gaming software providers. But while the good times have seen many of these companies make phenomenally huge profits, very little of them have found their way into the depleted coffers of the country that allows them to prosper. According to a report out this week in The Economist, the highly respected and popular UK publication, this situation is about to change.

The country's newly inaugurated President, Laura Chinchilla Miranda, who made it her election pledge to fight crime and corruption, is looking for ways to fund her objectives. Having been elected on the 8th May and in the position to make things happen, she has turned her attention to what appears to be the softest of all targets, that of the online gambling industry that is flourishing in her country.

The Economist report that the new President is planning a five percent tax on the companies that engage in online gambling and have their base in Costa Rica with a view to raising the country's Gross Domestic Product (GDP) by one percent. Currently, the government collects only 14.8 percent GDP from taxes. The proposed rise is expected to go a long way towards redressing the present four percent annual deficit of GDP.  

While on paper this move seems sensible and highly desirable, President Miranda may well be walking straight into an angry hornet's nest. Attempting to tap the online gambling industry for revenue over the years has met with fierce resistance at every turn. Despite several attempts the industry has staved off any moves in that direction with many leading politicians standing in the way of progress. The new President will need cooperation from the country's Liberation Movement, a political party whose long time leader Otto Guevara opposes any such tax and will threaten to tactically delay or even halt any attempts to impose them.
 
Costa Rica has always been appealing to e-commerce operators and especially those engaging in Internet gambling. Even those companies not incorporated within the country can be licensed to operate websites based there. To add to the appeal, they do not have to pay tax on income derived from foreign sources. Around 380 companies currently turn over several hundred million dollars each year operating under licence in Costa Rica.