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Gambling Companies Could Leave Costa Rica if Taxed

Written by:
C Costigan
Published on:
Aug/03/2009

Following news over the past two weeks that the Government of Costa Rica is considering taxing online gambling firms operating in that country, operators have told Gambling911.com they would leave if push comes to shove.

On Tuesday, July 21, Finance Minister Guillermo Zúñiga announced that the Finance Ministry will introduce a bill in the Legislative Assembly to impose a special 2 percent tax on gambling revenues - online and offline - earned in Costa Rica, according to the Tico Times. The bill is set to reach the Legislative Assembly on Monday, Aug. 3, and a vote on its approval is expected to be held sometime in mid-August.

The Finance Ministry estimates that the proposed 2 percent tax will generate $85 million in government income.

"The principal idea of the bill is to regulate activity," Zúñiga said. "Gambling is something that we are currently not monitoring and, thus, not taking advantage of. If we can regulate it, it could create millions of dollars for the economy."

But those numbers are unrealistic should much of the online gambling sector bolt.  Costa Rica's land-based casinos generate very little revenues in comparison. 

"They (The Costa Rican Government) needs to understand our business and the consequences before passing such a law," said Mickey Richardson, CEO of BetCRIS.com, the largest and most established sports betting operation in Costa Rica in terms of bet sizes taken.  "Hopefully nothing will happen.  I think they would ask for our input and then we might be more supportive."

Richardson estimates that the industry both directly and indirectly employs some 10,000 people, perhaps even more.

"The industry pays above average salaries and contibutes substantially to household incomes," he said. 

Learning From Great Britain's Mistakes

Costa Rica may want to observe what is currently transpiring in the United Kingdom right now.

The country's second largest bookmaker, William Hill, this past week unveiled plans to move its Internet operation from England to Gibraltar in order to cut its tax bill.

The Sunday Times said UK-based internet betting companies pay 15 percent of their gross profits in tax, and that a move offshore by William Hill would put pressure on its rivals to follow suit.

Ladbokes, Great Britain's largest bookmaker, may do just that. Ladbrokes is keeping its cards close to its chest with a board meeting due the day after William Hill's results, according to the Daily Mail. But while it is understood to prefer staying in the UK, company sources admitted it would have to respond to any move by William Hill.

The choice between the United Kingdom and offshore locales such as Gibraltar is a practical "no brainer".  Those businesses operating in England pay a 15 percent tax while those based in Gibraltar pay 1.5 percent. 

According to the Gibraltar Chronicle, a mass exodus from the UK could spell trouble for the Racecourse Owners Association who would see a drop of £45 million in lost tax as well as a £30 million loss in 10% levy paid to them.

The Department for Culture, Media and Sport has acknowledged that it does want to level the playing field with overseas businesses but crucially predicts little, if no action prior to next year's General Election.

 

Panama Might be Best Bet

 

Those operators we spoke to suggest that Antigua and Panama offer the best options for relocating.

Panama in the past few years has opened its doors to online gambling operators, though few have actually moved there due to Costa Rica's "hands off" stance until now. 

"I love Panama," Richardson admits. 

BetCRIS has already opened a Caracas, Venezuela office for its Latin American clientele, though few would argue Caracas is a fair trade with Costa Rica during these times. 

Panama City on the other hand resembles Miami in many ways, with modern skyscrapers and some of the best eating establishments rising up over the last 15 years.  The Central American nation itself resembles Costa Rica in that it abolished its army over the last decade and is now among the most stable nations in all of Latin America. 

For now, Richardson admits it's a "wait and see" decision.  Nobody seems overly concerned just yet.

In the past, the Costa Rican Government has attempted to increase licensing fees for operators, but few paid them and the requirement was eventually dropped. 

Christopher Costigan, Gambling911.com Publisher        

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