Archive for the ‘International’ Category

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Israeli Film Mogul Charged with Tax Evasion

Wednesday, February 20th, 2013

Yoram Globus is perhaps best known for being behind Cannon Films. With his cousin Menahem Golan, Cannon produced such films as American Ninja, Superman IV, Delta Force One, and a long, long list of others in the 1980s. Now, Mr. Globus is making news a bit differently: He was accused by the Israel Tax Authority of evading tax on NIS 27 million (Israeli New Shekel), worth about $7.3 million.

The alleged tax evasion dates back to 2005. Mr. Globus supposedly withdrew the NIS 27 million from two of his companies…but the withdrawals apparently didn’t make his tax return. Oops.

Mr. Globus’ response was, according to the Los Angeles Times, “Ask my accountant.”

Mr. Globus was released on bail of NIS 1 million (about $270,000) and ordered to remain in Israel for six months.

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Spain Targeting Poker Players

Wednesday, December 19th, 2012

Governments are looking far and wide for revenue, and high-profile poker players are certainly a target. I’ve previously reported on efforts by Germany; it appears Spain is joining the action.

The Spanish tax agency, La Agencia Tributaria, has reportedly looked at online databases of poker players to find individuals who have not reported all of their income. The agency supposedly used the Hendon Mob Database to find Spanish poker players who weren’t forthcoming with the agency.

No names were noted in the brief report on Spanish language poker website poker-red.com. Of course, if you happen to have been a winner and are a citizen of Spain, I’d talk to a profesional de impuestos soon.

Hat Tip: PokerNews

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Sweden Goes After Poker Players…For Real

Wednesday, November 21st, 2012

The Swedish tax agency, Skatteverket, sent police into some poker players’ homes across Sweden on Tuesday. Under Swedish law gambling winnings within the European Economic Area are not taxed; however, gambling winnings from outside the European Economic Area are taxable. It appears that many poker players were not filing their income tax returns. While some online poker sites are not taxable, many others are. It also can get confusing with some sites: PokerStars.com is outside of the EEA while PokerStars.eu is within the EEA. PokerStars.eu wasn’t formed until 2012, so many Swedish players playing on PokerStars likely owe back taxes.

This should not have been a surprise to any Swedish players. Back in 2008 I reported on Skatteverket’s use of “spiders” to find poker players. Governments move very slowly, so the fact that it took four years for results is not surprising.

Skatteverket sent a letter to poker players; a copy of it was published in Swedish in Poker Magazine. Players were given until December 10th to respond with documentation for 2008 – 2011.

Hat Tip: Pokerfuse

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Bad News for German Poker Players

Friday, November 2nd, 2012

Is poker a game of skill or chance? Personally, I believe it is a skill game where there is an element of chance. For German poker players, this is more than an interesting debate; it’s a vital question that impacts their taxes.

German tax law is such that games of chance (e.g. roulette) are not taxed for players. If you are German and hit a lucky jackpot on a slot machine, you won’t owe German income tax. However, games of skill for professionals are taxed.

As I first reported on back in August, a German court was considering this. The decision came down on Wednesday in Cologne. Eduard Scharf has been an airline pilot with Lufthansa by profession. When he’s had time off, he’s become a pretty good poker player; he has won over $1.2 million, including two World Series of Poker bracelets. Mr. Scharf apparently didn’t include his poker winnings on his tax return. The German Tax Office stated he was a professional and needed to include the income on his return.

The 12th Senate Finance Court of Cologne agreed with the tax office that skill predominates over luck. That’s what most poker players believe, but it’s bad news for German players. While it appears that Mr. Scharf is appealing to the Federal Finance Court in Munich, the days of tax-free play in Germany appear numbered. The German articles I read note that other tax cases are pending.

Summary of Story in English
Newspaper Reports in German: Spiegel Online, WDR

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Partouche Poker Tour Will Honor Guarantee

Friday, September 7th, 2012

After my last post on the Partouche Poker Tour electing to ignore a published guarantee, the people in charge either decided that the horrible publicity was bad or their attorneys let them know that French law on false advertising might lead to a term at ClubFrance. No matter, I’m happy to pass on the news that the 5 million Euro guarantee will be honored.

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Flying 5,400 Miles and Finding an $882,000 Shortfall in a Prizepool Isn’t a Good Thing

Wednesday, September 5th, 2012

There’s a major poker tournament going on in France: The Partouche Poker Tournament Main Event. It had a €5 million guaranteed prize pool. Based on the actual number of entrants, the prize pool ended up being around €4.3 million. Normally when a prize pool is guaranteed, the host must cover any shortfall in the guarantee. Reports out of France are that’s not happening. The €700,000 shortfall is equivalent to $881,961 at today’s exchange rate.

In the United States, host casinos almost always make good on their word. Casinos are heavily regulated, and gaming commissions look askance when a casino starts lying. For example, the Commerce Casino in Los Angeles is running a tournament series right now. The second event of that series had a $250,000 guarantee. When the number of entrants caused the prize pool to not meet the guarantee, Commerce Casino added the $46,000 so that the guarantee was met.

Sometimes guarantees have to be removed. A couple of weeks ago a tournament series in Biloxi, Mississippi was running when Hurricane Isaac came calling. Clearly, people who were planning on traveling to Biloxi had to make other plans so the guarantees were dropped. An event like that is usually covered under a force majeure clause (basically, an act of God). Most casinos cover themselves by inserting a phrase in their advertising, “Management reserves the right to alter or cancel the tournament at any time.” (In the end, the Biloxi tournaments were cancelled because of Isaac.)

As for the situation in France, as of last report none of that is happening. The advertising clearly states a €5 million guarantee and there is no disclaimer. The prize pool has been announced at €4.3 million. Now the question becomes legal: Do the players who appear to be the victims of fraud have any recourse?

Well, the tournament is in France and presumably subject to French law. I’m not an attorney, and know just enough about US gambling law to be dangerous (and know less on French law). So can a lawsuit be filed? Maybe, but it likely has to go through the administrative side of the French regulatory agency, Française des Jeux first. (Unfortunately, French is not one of my languages so someone else will have to tell me about the regulatory rules on casinos in France. My understanding is that under French law a casino might be limited to adding €250,000 to the prize pool. Well, if that’s the maximum allowed, Partouche should do that and let the players know why they can’t do any more. It’s always the cover-up that gets you. But I digress….)

There is one other course of action player can take, and that’s already happening. Name players are rightfully annoyed with a company advertising a guarantee and then reneging on it for no reason. There are tweets and a thread on the poker website 2+2 complaining about this. While Partouche may think that all publicity is good publicity, trust me when I say that the bad words circulating in the poker community on Partouche will definitely have a future impact unless they restore the €700,000 to the prize pool.

UPDATE: This morning the head of the Partouche Poker Tour, Patrick Partouche, announced that this will be the last tournament ever in the series. Additionally, Mr. Partouche apparently denied that the tournament was ever guaranteed. (Here’s a helpful hint for Mr. Partouche–actually two helpful hints: First, if you deny something, make sure no one can prove you wrong within one minute. Second, it’s always the cover-up that gets you.) I don’t know what the laws on fraud are in France, but I suspect that Mr. Partouche and his legal staff may want to quickly investigate them.

For poker players, this does bring up some issues. Be careful regarding operators who are not well known or are in jurisdictions that aren’t well regulated. A tournament in the United States will rarely have any problems; American casinos are highly regulated. If someone duplicated the events of the Partouche debacle in the US, they’d likely be facing fraud charges. If you are playing online poker, make sure the company you play with is reputable.

Does the mean that all poker tournaments in France should be avoided? It certainly puts a black light on French poker, but the answer is no. For all of the issues that I have with Caesar’s, there is no way they would ever do anything like this with the WSOP-Europe (which will be in Cannes in October). Reputable operators–thankfully, most poker tournaments are run by reputable operators–would never do this.

UPDATE-2: The Partouche Poker Tour announced on Friday that the guarantee will be honored.

Posted in Gambling, International | 2 Comments »

German Court to Decide Whether Poker Is Taxable for a Professional

Thursday, August 23rd, 2012

In 2011, Pius Heinz of Germany won the main event of the World Series of Poker and a nice tax-free $8,715,638. Well, maybe it’s not tax-free.

Via @Taxdood and @Taxnews1 comes word that a German court in Cologne will be hearing the appeal of a former professional poker player. The German tax agencies are claiming that the player was in a “commercial activity” and thus owes taxes on the approximately $1 million that this player won. The news story alludes to other German professional poker players receiving tax notices so the verdict in the test case will matter.

As Taxdood noted, “Ironically, in order to prevail the taxpayer must demonstrate success in poker relies mainly on luck, not skill.” Hopefully for German poker players the German court will not see the recent court ruling in New York that found poker to be a game dominated by skill, not luck.

Current German tax rates range are 14% (€8,005 – €52,881), 42% (€52,882 – €250,730), and 45% (€250,731 or greater). If Mr. Heinz owes tax on his winnings that would shave €2,993,502 off his winnings (he would have netted about €3,710,835, or $4,824,085). That’s not bad, but clearly $8.7 million is better.

I’ll report on the decision when it’s announced.

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Another FATCA Consequence: Sending 1042-S’s With No Withholding

Thursday, July 19th, 2012

One of my clients who played in the World Series of Poker asked me to prepare his Form 1042-S’s to show the required withholding for some of his backers. The 2012 form is available, and it looks identical to the 2011 form. I always look at the instructions just to make sure that nothing has changed. Well, I noticed this instruction:

You must file a Form 1042-S even if you did not withhold tax because the income was exempt from tax under a U.S. tax treaty or the [Tax] Code, including the exemption for income that is effectively connected with the conduct of a trade or business in the United States, or you released the tax withheld to the recipient.

While there are exceptions for reporting, gambling proceeds subject to a treaty exemption is not one of the exceptions.

Let’s look at how this plays out. Suppose Russ is backed by Jon in a poker tournament. Jon is a resident of the United Kingdom, has an ITIN, and has provided me with a correctly completed Form W-8BEN. I play in the poker tournament and do well; Jon’s share of my winnings is, say, $100,000. While there is no withholding required under the US-UK Tax Treaty, I must still complete a Form 1042-S and submit that to the IRS. The 1042-S is due by March 15, 2013. It must be submitted with a Form 1042-T (Annual Summary and Transmittal of Forms 1042-S); the 2012 Form 1042-T is not yet available.

This appears to be yet another consequence of FATCA. Under FATCA, the IRS wants international banks and tax agencies to send information to the IRS on Americans. Well, turnabout is fair game; other countries want data on their taxpayers, too.

This is yet more paperwork being sent for no particularly good reason, and yet more work for tax professionals. Well, I keep telling my friends I have lifetime employment–this is yet another example of why.

Posted in Gambling, International, IRS | 1 Comment »

If Only He Had Driven a Yugo Instead of a Ferrari

Sunday, July 8th, 2012

Sometimes it’s best to be inconspicuous. That’s definitely the case if you’re doing something that’s illegal. From Bergamo, Italy comes the story of an unidentified Italian man who loved his Ferrari F131. Even in Italy that’s a car that will get you noticed. Unfortunately for that Italian, members of La Guardia di Finanza (the Italian Finance Police) happen to see the car one day this past January. They traced the license to the man and pulled up his tax return.

It was all zeroes.

Needless to say, the Finance Police wondered where he got the money for such an expensive car. It turned out the man was a director and legal representative for various companies. And those companies had very high costs and very low revenues from 2007 to 2010. That allegedly cost the Italian government something like €3 million.

The man, who also piloted high-speed racing boats, had two other expensive cars that he leased: a Hummer and a Dodge luxury vehicle. All-in-all it was a lot of conspicuous consumption without paying taxes. He’s been arrested. If the allegations against him are proven, he’s looking at spending some time in prison, fines, and paying the back taxes.

Sometimes it’s best not to flaunt it.

News Story: English (UPI), Italian

Posted in International, Tax Evasion | 2 Comments »

When an Agent’s Fees Are Not Deductible

Thursday, July 5th, 2012

Suppose you are a professional athlete and you hire a sports agent to negotiate with you. Those fees are, in the United States, generally deductible as an “ordinary and necessary” business expense. However, the same is not true in Canada.

The Canada Revenue Agency ruled several years ago that agent’s commissions are not deductible. Given that most athletes hire agents (who typically receive 3% to 5% of a player’s salary), this can be a significant issue. This impacts all four major sports leagues (there are several hockey teams in Canada, along with the Toronto Blue Jays of Major League Baseball and the Toronto Raptors of the NBA; additionally, the NFL’s Buffalo Bills play three home games a year in Toronto), and sooner or later some “lucky” athlete was going to be audited by the CRA.

That happened when Michael Caruso, a defenseman with the Florida Panthers, was audited. He lost, so he appealed his decision to the Tax Court of Canada. In Caruso v. Queen, Canada’s Tax Court ruled against Mr. Caruso.

Canadian tax law is similar to, but not identical to, American tax law. In the US, any business expense that is both “ordinary and necessary” is generally allowed. However, Canada’s Income Tax Act states, “Except as permitted by this section, no deductions shall be made in computing a taxpayer’s income for a taxation year from an office or employment.” It would seem that an agent’s fee would be deductible, given that Paragraph (8)(1)(b) states a deduction can be taken for, “(b) amounts paid by the taxpayer in the year as or on account of legal expenses incurred by the taxpayer to collect or establish a right to salary or wages owed to the taxpayer by the employer or former employer of the taxpayer;”

So are an agent’s fees legal expenses? Not in Canada:

In this case the services rendered by the agent were the services in negotiating the contract that was entered into between the Appellant and the Florida Panthers. When the Appellant was asked about the services provided by the agent, he referred to the additional $60,000 in signing bonuses that the agent was able to obtain for him…

To the extent that any of the services provided by AKT Sports Management Consultants Inc. (or MFIVE SPORTS) could be regarded as legal services, the services were not to collect salary or wages owed to the Appellant (the services were rendered before any contract was signed) nor were such services rendered to establish a right to salary or wages. The services were rendered to negotiate the contract. There was no right to any salary or wages until after the agreement was signed, which was after the services in question were rendered by the Appellant’s agent.

While there is a proposed amendment to this part of Canada’s Income Tax Act that would change the law, the judge in the case stated it would still not apply to agent’s fees:

As well, not all legal services will qualify. Only amounts paid for those legal services provided to collect amounts owed to the taxpayer or to establish a right to such amount will qualify for the deduction under this paragraph. Therefore even if such amendments were now effective the proposed changes would not result in the amount that was paid to the Appellant’s agent being deductible.

Now, decisions of this court can be appealed; however, based on this news story it appears that won’t be happening in this case. That said, this decision impacts every hockey player and many other athletes. Mr. Caruso did not earn a huge salary; I suspect some highly salaried player, such as Roberto Luongo of the Vancouver Canucks, will end up fighting this issue if he gets audited. (As an aside, Mr. Luongo will be competing in the main event of the World Series of Poker which begins on Saturday. Mr. Luongo’s $10,000 buy-in is being paid for by the British Columbia Lottery Corporation.)

Hat Tip: Robert Raiola

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Posted in Canada, Gambling, International | Comments Closed

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