Earlier this week I posted on the tax bite that the top nine finishers at this year’s main event of the World Series of Poker faced. This year’s winner, Peter Eastgate, hails from Denmark. Assuming he is subject to Danish taxation he faces an effective tax bite of 72.27%.
I’ve been told that he has since moved to England, and as a citizen of the European Union (E.U.) he is now subject to British tax law. Others have told me that Britain doesn’t tax professional gamblers, and that Mr. Eastgate will only have to pay tax on the first $900,670 of his winnings.
There are several flaws in this argument, though. Mr. Eastgate was a Danish citizen (and resident) when the tournament began. Couldn’t SKAT, the tax agency of Denmark, argue that he moved simply to avoid the tax, and that he still owes the tax? Another argument that could be made is that it’s the date he entered the tournament that matters, not the date of completion.
My suspicion is that Mr. Eastgate will get a bill from SKAT, and it’s going to be big. The likely outcome is that this will end up in court. There’s precedent for tax litigation involving the winner of the World Series of Poker; Joseph Hachem won the event in 2005 and had to fight the Australian Tax Office to avoid Australian tax on his winnings (he won).
Finally, if he doesn’t owe tax in Denmark he likely will owe tax in Britain. The United Kingdom does tax professional gamblers on their winnings. I’ve received a couple of emails stating that Inland Revenue hasn’t been enforcing tax on professional gamblers’ winnings. Given the high profile nature of Mr. Eastgate’s victory it’s hard for me to believe that Inland Revenue won’t notice if Mr. Eastgate ignores the British taxman. Still, the tax rate in Britain (about 40%) is far less than the 72.27% Mr. Eastgate would owe in Denmark. This may be a case where the taxman rings the bell twice.