Israeli Poker Players Come Under Scrutiny Of Tax Authority

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Friday, November 10th, 2017 | Written by Charles Washington

Israel is currently undertaking a number of measures to tackle the issue of unreported income and tax evasion, which are problems very prevalent in the country. In the past, the Israel Tax Authority has targeted people heavily invested in the real estate sector, examining the bank accounts that they hold both inside and outside the country. Next in the line of fire, however, is the gambling industry, with tax authority suspicions raised after several Israeli poker players appear to be enjoying luxury lifestyles that are far beyond their reported incomes.

Investigation and Arrests

Israeli news sources have received information from tax sources that suggest several poker players are already under investigation. These initial investigations reveal that a number of poker professional are amassing millions of shekels each year from taking part in online and live poker tournaments based outside of the country. As a result of the investigation which started two weeks ago, tax officials have now begun arresting players after gathering sufficient evidence on their earnings to suggest tax evasion. Authorities have already arrested the director of the Israeli Poker Academy, as well as another player suspected of helping to organize poker games.

Income Tax on Poker Earnings

While many poker players have attempted to evade paying higher taxes by stating that their income was mostly derived from lotteries and gambling, authorities have rejected such claims and requested that they classify their poker earnings as a business income, instead.

The classification is a significant one, too, considering lottery and gambling income is taxed at 35% in Israel, whereas income from businesses is subjected to a higher rate of 50%. Tax authorities had previously accommodated an earlier request by poker players to not impose taxes on the expenses they incur as part of their poker “business,” such as flight and hotel bookings. Many Israeli poker players subsequently started filing their poker income with the accompanying correct receipts.

Nevertheless, tax officials were not prepared to recognize a request to include tournament participation fees as part of their expenses. These type of buy-ins will add up to tens of thousands of dollars per annum, with some poker players only able to raise funds by taking out loans, or securing financial backing from investors willing to lend them the money in return for a percentage of their winnings.

Players Possibly Facing Backdated Taxes

Tax sources have relayed information to news sources about an ongoing disputes between themselves and a poker player referred to as “A”. The professional poker player has apparently competed at a number of tournaments throughout his career, including one held in Cyprus back in 2010.

As the story goes, instead of paying a participation fees of $25,000, “A” agreed with the tournament organizer to play for free, but only collect 10% of any money he might win minus taxes, with the rest of the money going to the tournament organizer.

Player A accepted the offer and after winning around $207,000, he subsequently walked away with just $17,000 thanks to the agreement. Player A said that he then gambled away this money, along with a further $1,500 of his own bankroll. Nevertheless, Player A is now being asked by Israeli tax authorities to consider his winnings as business income, and pay the higher tax rate. Player A remains unconvinced, however, and has been arguing that while it sounds like he won a lot of money, his actual returns amounted to practically nothing.

In August 2015, the Tel Aviv tax office then accused Player A of failing to report the money he won from the tournament, as well as his salary income, and of failing to submit proof for the expenses he claimed to have incurred between 2010 and 2012.

Online Tracking Sites

The Israeli Tax Authority has little trouble tracking revenues earned by the country’s poker players as their winnings are reported on numerous websites, such as the Hendon Mob. In the meantime, several news reports have emerged claiming that Israeli poker players may soon be subjected to backdated taxes, and having to pay back taxes based upon their past poker winnings.

As Israeli criminal taxation attorney Sharon Fishman explains: “There are now international websites that report who won international tournaments, who plays on the Internet, and who is traveling to overseas tournaments. They publish the names of the winners, where they come from, and how much money they earned, so the tax authorities suddenly have abundant evidence, and you can’t tell them that you weren’t there and didn’t win.”