QCOSTARICA JOURNAL – As legislators continue their work on “modernizing” the tax on motels that was established 43 years ago, let’s look back at how this tax came to be.
It was in November 1972, in the middle of the last government of Don Pepe (Jose Maria Figueres Ferrer), when three pro-government legislators presented a bill to tax motels, the type of accommodation that was scandalous politically.
The tax, a flat 30% of turn-over (revenue on room rentals) , 43 years ago was proposed by Catholic Church priest Armando Alfaro, then president of the Joint Institute for Social Aid (Instituto Mixto de Ayuda Social – IMAS), to finance, at the time, the fight against poverty and contain “binge drinking, sex and drugs”.
The irony to Alfaro’s proposal is that today the IMAS is one of the major retailers of alcohol in the country, operating the duty-free stores at the country’s airports.
The flat rate tax didn’t work out so well for the government and IMAS coffers, thanks to the wiles of motel operators who were able to hide their revenues, in part or full, from the authorities. Thus, what was to have been a cash cow to finance social programs became a bust.
In 2002, the Abel Pacheco administration (2002-2006) repealed the old law and established a new, almost to the original, with the same impossibility of collecting.
Meanwhile the motel industry grew, beyond the few of the “motel row’ in the area of San Francisco de Dos Rios. Now, in 2015, there are thousands of motel rooms.
Also, the stigma of the past, of going to a motel, is gone.
Going to a motel was seen as “dirty”, invoking images of “sexual escapes” – encounters with a secretary, a lover, having an affair, etc.
In the past, many visitors looking for a sexual encounter with a sex social worker (prostitute) the motel was the only way, since, in many cases hotels did not allow prostitutes to accompany their guests to the rooms. Today, many hotels charge an “extra person” fee for that. Heck, former legislator, Justo Orozco, is an alleged frequent user of motels, where his latest sex scandal began. See story here.
Motels in Costa Rica are different from motels in North America.
Many motels rooms are equipped with a jacuzzi and offer room service (food and liquor), a perfect romantic environment that can include porn on the flat screen monitors and a king sized bed.
The experience starts typically with driving up (in your own car or a taxi) to an open garage door, closing the door and entering the room adjoining. Through a portal you pay for the room, order your special needs (condoms, food, a bottle wine, a meal, etc) and enjoy your time.
Unlike hotels and pensiones (short-term hotel rooms), there is no registration, no face-to-face contact with anyone. The number of peopel is unimportant, doesn’t affect the rate, which is typically for up to 12 hours of use.
New tax rules
The new legislation, approved last week in first debate (that only needs second debate and signing by the president to go into effect), changes the rules: motel operators will be required to pay a tax of 5% to 13% (depending on the number of rooms) monthly for each room, based on a the monthly base salary of a judicial employee (currently ¢403,000).
This change is expected to provide the IMAS with some ¢700 million colones annually to continue with its social programs.
But, how will this affect the motel operations? As the tax cuts into profits, speculating, of course, we can see one or both things happen: higher room costs and/or the lowering of services and amenities.
Will it reduce the use of motels? Probably not.
