Dan Nedelko

The Costa Rican government has confirmed plans to create a new gaming authority under forthcoming legislation that will also subject all gaming companies – online and offline – to tighter licensing and taxation requirements, the country’s finance minister has announced.

The government’s plans to address Costa Rica’s worsening fiscal situation include tighter regulatory control over gambling and an extra 2 percent tax on the gross revenues of all gaming operators established in the country, finance minister Guillermo Zuñiga announced earlier this week.

Speaking at a press conference in Costa Rica’s capital, San José, Zuñiga stated that the government would introduce a new gaming bill for discussion in the country’s parliament, perhaps as early as this August.

Zuñiga said the 2 percent gaming tax on gross gaming revenues would allow the government to generate US$85m per year in new revenues. The proposal comes as Costa Rica attempts to address a fiscal situation that has seen government revenues drop eight percent during the first-half of the year, with expenditure rising by more than 20 percent. Projected GDP growth for the year has also been lowered by the country’s central bank. Under the fiscal plans, the government will also introduce US$112m worth of public spending cuts.

The finance minister said the gambling bill would include steps to establish a new gaming regulator under the control of various government departments. The regulatory body would be charged with issuing licences to gaming companies and ensuring their compliance with legislation. The new regime will apply equally to online betting operators, and the country’s 35 terrestrial casinos, according to local newspaper reports.

Zuñiga refuted any notion that Costa Rica’s move to tax and regulate gaming was related to the country’s inclusion alongside Uruguay, Malaysia and the Philippines on a list of countries that failed to meet international tax standards that was published by the Paris-based Organisation for Economic Co-operation and Development (OECD) in April 2009. Zuñiga this week described the Costa Rican government’s gambling plans as falling within a “global tendency” to regulate gambling activities.

Costa Rican casinos were made subject to more stringent licensing requirements just last year. However, an April 2009 report from global anti-money laundering (AML) watchdogs the Financial Action Task Force (FATF) criticisd the Costa Rican government over a failure to apply more effective AML controls to its gaming sector.

The report said such protocols “appear to be lacking in Costa Rica, El Salvador and Nicaragua despite recent attempts by their respective governments to better control and regulate the industries”.

Costa Rica has also played a central, if controversial, role in the development of the global online gaming sector. A number of the most prominent names in the remote gambling industry have at one time or another installed offices or call-centres in the Central American country, despite the fact that the activity has never been formally regulated under Costa Rica’s gambling laws.

There are currently around 250 internet gaming firms registered in Costa Rica, according to the US State Department. At present, these companies are not subject to either gaming taxes or specific licensing fees, although they are forbidden from accepting bets from Costa Rican residents.

Several previous attempts have been made to establish tighter controls over online gaming in Costa Rica.

A temporary law passed in 2003 required all internet gambling companies to be formally registered with the government’s finance ministry, while several other bills proposed by politicians to impose stricter regulations on Costa Rica-based operators have stalled in the country’s legislative assembly.

Zuñiga said he was confident that the government’s latest initiative would receive parliamentary backing, though he acknowledged that the government had yet to sound out its Libertarian Movement coalition partners over the gambling plans.

Costa Rica’s stock as an online gaming jurisdiction has fallen significantly since the United States’ clampdown on US-facing gaming websites that has encompassed both the 2006 passage of the Unlawful Internet Gambling Enforcement Act (UIGEA) and the collapse of Costa Rica-based and London-listed operator BetonSports just a few months later.

BetonSports’ former-chief executive David Carruthers has now pleaded guilty to violations of US gambling law following his 2006 arrest in Dallas in transit between London and his home in Costa Rica, while the company’s founder, Gary Kaplan, is due to stand trial before a federal court in Missouri later this year.

A number of gaming companies, such as Sportingbet, have also moved their principal operations away from offices in Costa Rica as they have withdrawn from the US market and come to favour bases with closer links to the online gaming industry’s core markets in Europe and, in particular, the UK.

How Costa Rica’s new rules will be applied to those internet gaming firms still based in the country is not yet clear. According to local media reports, they could see the Costa Rican government mimic tougher restrictions that have been put in place in Antigua & Barbuda in recent years. Antigua was admitted to the UK government’s ‘white list’ of approved online gaming jurisdictions in November 2008.

Representatives from Costa Rica’s land-based sector are said to broadly welcome the plans to impose stricter licensing and regulatory controls on gambling businesses. However, a spokesman from the Costa Rican Casino Association questioned the wisdom of hitting casinos with higher tax burdens when casinos, too, were suffering as a result of the country’s economic difficulties. The government’s plans to limit casino opening hours were shelved earlier this year on operators’ concerns.