Costa Rica May Tax Online Gambling to Fund Crime Fighting

Many of the world’s largest online gambling sites are operated out of Costa Rica. There are two simple reasons for this. First, the country has no specific laws regarding online gambling licensing, meaning that corporations, even foreign groups, can operate internet gambling sites under a very generic “data processing license”. Second, Costa Rica is listed as a “tax haven”. Foreign-source income is not taxed locally, giving international online gambling service providers a very strong financial incentive to base their operations in the country.  

This may not be the case for long. Costa Rica’s new president Laura Chinchilla, who was sworn into office on May 8th, has already mentioned plans to change Costa Rican Gambling Laws. Specifically, the new president wants to tax online gambling. The motivation behind this move is unabashedly financial. Costa Rica takes only 14.8% of local income as tax, which is not enough to fund the big crime fighting changes that Chinchilla wants to put into place.  

By imposing taxes on casinos and online gambling sites in Costa Rica, Chinchilla hopes to bring in an additional 1% of the country’s GDP. This increase in annual state income would be a quick and easy way for the new presidenta to fund her battle against drug trafficking and local crime. 

Most of internet gambling sites that operate out of Costa Rica target players on that site of the world, especially in North America. Both the US and Canada are currently working out provisions which could see local online gambling offerings. If this happens, it could deliver a fatal blow to Costa Rica’s hold on the industry, especially if the current tax incentives go away. While Chinchilla probably understands that taxing online gambling is only a quick fix, changes in the approach taken by Costa Rica’s northerly neighbors may cut her plan short sooner than she thinks.