Wednesday 8 February 2023

Costa Rica’s Taxman Sets Sights On “Escorts” Who Avoid Paying Taxes

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8 February 2023 - At The Banks - BCCR

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From The Girlfriend Experience, a Non-Judgmental and Hard to Pin Down Depiction of High-Class Escorting
Image for illustrative purposes, via Starz from “The Girlfriend Experience”.

(QCOSTARICA) The business of “escorts” is common and lucrative in Costa Rica, varying people paying a woman or a man to accompany them to social activities or event and the covenant sometimes, not always, includes the payment for sex.

Contacts are made by phone, messaging applications, or other media leaving no trace, the transactions are always in cash, with the provider the service pocketing it. Some estimates, according to several polls by Crhoy.com, the “escorts” can earn up to US$1,000 per night, tax-free.

Not all escorts are prostitutes, while all prostitutes are “escorts”.

And that has gotten the attention of the tax man, the Ministry of Finance, who is looking to uncover these people avoiding to pay taxes.

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Crhoycom reports that “…Being socially reprehensible activities, people who perform these actions do so hidden and often in different locations, receiving only cash,” said Fernando Rodriguez Deputy Minister of Revenue, who reported that they are people who handle large sums of cash.

According to Rodriguez, the escort business is not the only lucrative activity that is avoiding the taxman. In the country there are many “informal activities” that bypass the payment of taxes, such as self-employed professionals working from home or don’t have a need for a physical location.

All lucrative activities in Costa Rica must pay taxes
All lucrative activities in Costa Rica must pay taxes

Their commonality is receiving payment in cash and with no paper trail. This includes professional like escorts, but can also be a repairman, fixing a refrigerator or washer, for example, offering a lower price in return for a cash payment. In the latter, some will even offer a warranty and a written receipt, but not in an ‘official receipt’, that is a receipt registered with Taxation under the “Facturas y Recibos Timbrados por Tributación Directa”.

The official explains that the only way they can identify some of the people who earn large sums of untaxed cash is when they decide to make a large purchase, such as a car or a house, and that information reaches the Tax Department.

Rodriguez said that it is for this reason, among others, proposals have been made to find ways to reduce the use of cash in the Costa Rican economy.

Experts say, that although all lucrative activities must pay taxes, the Ministry of Finance fails to uncover informal activities, leaving a gap, allowing for the avoidance of payment of taxes on earnings.

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