Costa Rican ‘Call Centres’ Keep Gaming Tax-Break

Daniel Macadam published an intriguing article on this issue, you can find this article on the Gambling Compliance website, but you will need a subscription, but don’t worry, we’ve posted the article below. Truly, the only way this benefits the Call Center industry is if this legislation also forces the notoriously horrible Costa Rican banking sector to offer services to the industry. See the Gambling Compliance article by Daniel Macadam below…

Costa Rican ‘Call Centres’ Keep Gaming Tax-Break

Online gambling companies operating out of Costa Rica are set to swerve a tax rise planned for land-based casinos, as the new government backtracks on proposals for a 2 percent gross gaming tax on all of the country’s gambling operations. The National Liberation Party (PLN) administration, led by recently elected President Laura Chinchilla, announced plans last week to tax casinos 15 percent of gross gaming income each month.

Internet gaming companies registered in Costa Rica will remain exempt from gaming taxes and instead pay an annual flat fee of US$50,000, after furious lobbying from The Association of Call Centre Employees that looks after their interests.

Draft legislation submitted by the previous PLN government in October aimed to bring both online and offline gaming companies under tighter licensing and taxation controls, in an effort to boost fiscal revenues and tackle money laundering.

Without a tax on internet operators the new proposals will raise an estimated $30m per year, $50m less than the plan presented in October.

“There was a lot of pressure from the gaming industry, particularly the online industry, and that is why the government has taken a step back,” Francisco Conejo, a specialist gaming lawyer in Costa Rica, told GamblingCompliance.

Online operators argued that a 2 percent gaming tax would scare away businesses from Costa Rica to neighbouring countries such as Panama and Antigua, which offer attractive tax breaks for internet gaming companies.

“The government decided that the 2 percent tax was not going to be competitive and now they are going back to the $50,000 charge,” Conejo said. “The call centre industry is really happy with this decision.”

Internet gambling operations occupy an uncertain legal position in Costa Rica, as industry figures maintain that the companies are nothing more than call centres that deal with overseas bets, and so do not generate taxable gaming revenues.

Conejo also told GamblingCompliance earlier this year: “There are no internet gaming operations in Costa Rica. What we have in Costa Rica are call-centres that provide services to international internet gaming operators.

“These call-centres do not process bets and the money never enters Costa Rica.”

The Association of Call Centre Employees takes issue with another part of the proposed legislation, though, which allows the government to request financial information on the online companies. As with any gaming tax measures, the call centres argue that such requests are outside of the government’s jurisdiction.

Chinchilla, a staunch advocate of regulating and taxing gambling, was sworn in as president in May, and last week’s announcements are the first official indication of how her administration will tackle gaming in Costa Rica.

The 15 percent tax on land-based casinos will be partnered with a liberalisation of gaming regulations, so that developers are no longer restricted to only opening casinos in hotels.

Under rules spearheaded by Chinchilla as Justice Minister in 2008, new casinos can only open in hotels with three or more stars and are restricted to 10 tables and 60 slot machines for a 60 room hotel.

At the time Chinchilla said that the regulations would “restrict the industry, rather than encourage it” and that casinos “must be understood as an incentive for tourism”.

Casinos currently pay 10 percent tax on gaming yield, and the new government hopes to use the proceeds from the 5 percent tax increase to fill the budget deficit and fight crime.

Costa Rica’s annual deficit is 4 percent of GDP, according to The Economist, while its tax revenue is 14.8 percent of GDP. Costa Rica’s tax system brought the attention of the Paris-based Organisation for Economic Co-Operation (OECD) last year for failing to meet international standards on fiscal transparency.

An update by the OECD last week showed that the country had improved, but, along with countries such as Belize and the Philippines, still not substantially implemented the expected standards.

The Central American country was also highlighted as an international money laundering risk earlier this year, as the US State Department called on the Costa Rica legislature to pass October’s bill to better regulate casinos and online gaming companies.

The updated bill, which keeps the plans to create a Gambling Control Board and introduce strict anti-money laundering measures, will be put before the Treasury Committee and then the Costa Rican legislature.

“Even if the president puts all her past political force into this, it will take at least six months to be passed into law, because it is a new project,” Conejo said.