Wednesday 22 March 2023

Government proposes collecting tax on illegal lotteries

It intends to extend the grabby hands of taxation on informal games with a 25% tax on prizes over ¢462,000

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22 March 2023 - At The Banks - BCCR

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QCOSTARICA – The Government on Thursday changed its bill for the collection of a 25% tax on lottery prizes and, in this new version, it intends to extend the taxation arm on illegal lotteries.

The Minister of Finance argued that, with the new proposal, the illegality or legality of an activity is not being recognized.

The new text establishes that the tax would apply to any type of lottery or game of chance, regardless of who the organizer of the draw is.

The previous version imposed the tax only to the games of the Junta de Protección Social (JPS), the state lottery.

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This change is to avoid an “inequality” acknowledged the Minister of Finance, Elian Villegas.

“It has to remain open if in the future there will be other games or if, eventually, it (the tax) can be charged to those who are operating in informality mechanisms; So, you have to keep that in mind.

“What we are looking for is the issue of lotteries and others so as not to create inequality with the JPS, to have openness in that sense,” Villegas explained.

According to Villegas, it is not intended to combat the famous town raffles, since these “are irrelevant material for the tax issue.”

However, the minister argued that, in the illegal lottery business, a lot of money is moved, so that eventually Taxation could generate some mechanism to collect taxes on these draws.

“It remains open, at this time as it is, the proposal is not limited to the JPS,” emphasized the head of the Treasury.

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According to the new version of the project, the withholding and declaration of the tax would fall on all (person or legal entity) organizing or promoting the game, who must file affidavits indicating the amounts withheld for tax.

The promoters of the game or lottery must withhold and pay the tax no later than the tenth day of the month following the one in which the draw was carried out.

The finance minister argued that, with the new proposal, the illegality or legality of an activity is not being recognized.

The tax proposed in the bill is 25% applied to winnings of ¢462,000 or more, instead of ¢ 225,000, as initially proposed.

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Cruz Roja (Red Cross) games, casinos and electronic gambling would be exempt from the tax, since they are already under another tax regime.

With the tax on lottery prizes, the Government seeks to generate income of about ¢41.8 billion colones annually, equivalent to 0.12% of gross domestic product (GDP).

This measure is part of the fiscal adjustment program agreed with the IMF.

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