A few months ago Costa Rica passed legislation directed to attracting digital nomads through a special visa. The tourism industry was heavily impacted by the Covid-19 pandemic and this Central American country was faced with the question of how to maintain the attention of international travelers.
The intention behind this law was clear, Costa Rica wanted to encourage long-stay visitors to work from its territory to increase local spending of resources originated abroad. The proposal was straightforward and presented clear benefits for Costa Rica, which would be able to attract money otherwise unavailable. However, the law received steep opposition from different from fronts.
The Costa Rican case is not unique. In spite of the obvious benefits of digital nomadism for both individuals and receptive countries, not everyone is on board with the idea. The phenomenon behind digital nomad visas is usually covered through the lens of a globally-minded audience. But how do local communities, business leaders and politicians see the issue?
There are dozens of digital nomad visa schemes across the world, so the answer to the previous question is not homogenous but here are three key cultural and economic issues that define how digital nomad visas are perceived within the countries they’re established in.
An essential part of the digital nomad visa pitch is the tax waivers. Receptive countries do not want to boost their tax collection; they want digital nomads to spend their money. Individuals working as digital nomads have to spend in accommodations, living expenses and public services. They usually travel quite often even if they establish a home base in a specific location, that is more money entering the economy and particularly the pockets of private services providers.
During the legislative debate in Costa Rica, the ministry of finance raised the issue of taxation as a concern for the implementation of this law. Costa Rican digital nomad visa holders do not have to pay income taxes and are also exempt from the payment of import taxes on basic personal computer or telecommunications equipment.
These concerns have been replicated across various jurisdictions that established digital nomad visas during the Covid-19 pandemic. Somehow the idea that digital nomads are cheating local tax systems has become an influential perception. Those who oppose digital nomad visas point out the ‘unfairness’ of these differentiated tax regimes.
In reality, even when the matter of taxation for highly mobile individuals is a complex one, digital nomads usually pay taxes either at their country of origin, residence or based on the services they’re providing. But the notion that digital nomads, who can stay for longer periods than tourists, are not fully contributing to local economy has become prevalent.
A lifeline to small businesses
The effects of the pandemic on small businesses has been catastrophic in many countries. Even when governments increased their national debts and fiscal spending to support their populations, many businesses won’t be able to recover. This is particularly true for businesses dependent on the tourism industry.
For the world economy, travel and tourism has become an essential indicator of health and growth. In this context, many small businesses around the world became reliant on the yearly fluctuations of travel and visitors. The pandemic radically changed these patterns and ended the options of services providers that exclusively targeted tourists.
According to the United Nations World Tourism Organization (UNWTO), the pandemic has put 100 million jobs at risk, many in micro, small, and medium-sized enterprises that employ a high share of women, who represent 54 percent of the tourism workforce.
“Tourism-dependent countries will likely feel the negative impacts of the crisis for much longer than other economies. Contact-intensive services key to the tourism and travel sectors are disproportionately affected by the pandemic and will continue to struggle until people feel safe to travel en masse again,” reads a report by the International Monetary Fund (IMF).
Digital nomadism has been elevated to a more intimate form of tourism during the pandemic. Digital nomads’ spending habits can be different than tourists’, but at the same time digital nomads have served to substitute the affluence of tourists in certain areas.
Real estate is a prime example of that. Airbnb recently changed its homepage to highlight accommodations that offer month-long stays during the pandemic. Local Airbnb hosts in countries that offer digital nomad visas have been able substitute their main client base. The fact that digital nomads have been able to moderately replace tourists in certain countries have become an essential part of how local communities perceived the issue as well.
Digital nomadism is an exciting concept for traditional tourist destinations. It is a more resilient practice than tourism and many countries can embrace it partly because it presupposes adding large numbers of visitors to a population.
Tourists usually stay for days or weeks; very few for months. But with digital nomads, countries can easily expect to have them for extended periods of time, partially assuming the responsibility of their wellbeing, including the security, healthcare, transportation and physical infrastructure, but at the same time, countries immediately see the benefit of the presence and spending of these individuals.
In many ways, this is how digital nomads are perceived, as long stay-tourists who in most cases hold the spending capacity of traditional tourists. This is particularly well-suited for smaller countries where the population density is low but resources are good.
Interested in Being a Digital Nomad or looking for your Next Stop?
Jürgen Pretsch is a professional researcher and consultant, but first and foremost, he is a "serial expat" and contemporary "digital nomad". Having lived in nearly a dozen countries, Jürgen has produced extensive research for major private institutions and governments. At the moment, Jürgen is pioneering work relating to expatpreneurship, and will continue to provide resourceful articles in the global mobility space.
Explore Digital Nomad Visa Destinations further.