Gambling Companies Could Leave Costa Rica if Taxed

Gambling Companies Could Leave Costa Rica if Taxed

- Inside Costa Rica

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 Zuniga 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," Zuniga 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 contributes 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 GBP45 million in lost tax as well as a GBP30 million loss in
10percent 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.