Israeli Tax Authority Probes Israel Poker Players’ Winnings

Saturday, November 11th, 2017 | Written by April Bergman
Israeli Tax Authority Probes Israel Poker Players’ Winnings

The Israel Tax Authority wants to recoup back taxes on poker winnings, so its auditors have begun investigations of pro poker players. The ITA appears to be using websites like Hendon Mob, WSOP.com, and Global Poker Index to check the players’ documented earnings.

For years, the Israeli government did not tax poker winnings, but that policy appears to have changed. The Tax Authority began looking at top poker professionals for the unreported capital and tax evasion.

Many Israeli poker players have hundreds of thousands of dollars in winnings from their overseas competitions, while a few have won millions of dollars.

In an article by Ela Levi-Weinrib on Israel’s business news websites, Globes, Israeli criminal taxation attorney Sharon Fishman said, “The tax authorities did not deal with poker players for many years. An administrative decision was recently taken there to zero in on this segment of professional poker players.”

Sharon Fishman on Poker Player Earnings

Sharon Fishman — who works out of the Doron, Tikotzky, Kantor Gutman, and Amit Gross law firm — said the situation changed when employees of Israel’s tax agency learned there were gaming sites which “celebrated” Texas hold’em players’s earnings.

Using those resources, the ITA plans to double-check reported earnings on past taxes.

The Israeli tax expert added, “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.”

Israeli Tax Authority Investigations

The Tax Authority appears to be comprehensive probe of Israel’s gaming community. The data consists of top players’ winnings, along with travel expenses that come along with playing in pro tournaments.

In the past few weeks, Israeli authorities have begun arresting those players suspected of tax evasion as well as issuing non-criminal tax assessments for some others. The director of the Israeli Poker Academy apparently was arrested for not reporting income. The Poker Academy’s shareholders also were under investigation, while one organizer of poker events has come under suspicion.

Ela Levi-Weinrib: Poker Lawyer

Globes reported that players have disputed both the nature of the tax, as well as the way tax auditors assess their winnings. According to Globes, Israeli tax lawyer Ela Levi-Weinrib has represented players for years. Levi-Weinrib argues that taxes are not assessed correctly, because expenses are not considered properly.

Poker players tend to report their income under “lotteries, prizes, and gambling”, which is taxed at a 35% rate. The ITA believes winnings should be categorizes as “business earnings”, since gambling is their profession. Under the business earnings standard, some players would be taxed at a rate as high as 50%, so they would owe significant back taxes.

If a new standard is required, the players’ lawyer said they can better report expenses. Since gambling and overseas tournaments is seen as their business, the Israeli Tax Authority has agreed to allow them to deduct certain expenses from their taxes, including money spent on flights, hotels, and entry fees.

One question is whether all the entry fees can be deducted. Top players often have sponsorship deals and the player’s sponsors pays some or all of their tournament fees. In other cases, players are bankrolled by one or more contributors, often through online crowdsourcing websites. Debate between players and Israeli officials centers on whether fees that are not directly paid by the player are deductible. Players say such considerations are a part of their business deal, while assessors argue some other entity paid the fees.

Merit Crystal Cove Tale

The Globes article mentions an unnamed professional poker player who lost his battle with the tax authorities. In 2010, the poker player participated in a series of professional tournaments in Northern Cyprus, the Turkish-controlled part of the island.

The fee to enter the Cypriot tournament was $25,000. As they often do, the tournament organizers offered to waive the entry fee. Under the deal, if the player won the event, he would keep 10% of the amount won. He also would have to pay the 3% tax to the Turkish Cypriot tax authorities. If he won nothing, he would owe nothing for the tournament.

In this particular case, the casino asked him to participate, due to his popularity and the low number of participants they had registered for the tournament. The unnamed poker pro decided to accept the casino’s offer. His winnings came out to $207,000.

Promotional Deals Undermine Players’ Tax Assessment

But since he could only take home the 10% minus the taxes he owed to the Northern Cypriot government, his total came to $17,000. He played the remainder of the tournament’s events, losing his winnings. The player claims that he lost all his profits, plus $1,500 more that he brought with him into Turkish Cypriot. That argument did not impress Israeli officials, though.

The story goes to the heart of Israeli poker players’ argument: they have a lot of expenses and a lot of losing events. If you track only winnings, you are only seeing half of the picture. Players believe their winnings for the year should be weighed against their losses and expenses for the year, to determine their taxable earnings.

Israeli Poker Tax Hearing

In August 2015, Tel Aviv tax assessment office issued an assessment for him claiming that he had not reported his income fully. Authorities stated he had several unreported winnings from prizes he won in casinos and tournaments in various countries during 2010-2012.

The player reported expenses for tournament entry fees and overseas stays financed by the casino overseas, but these were not recognized. The player filed an objection to the investigators, claiming their calculations did not reflect what his actually earnings were. The player provided documents for all three years, along with a statement by the owner of the casino confirming the information he had provided, regarding their arrangement.

The Tax Authority rejected his arguments and assessed a large tax bill. They elected not to recognize the statements, then disputed the casino owner’s confirmation of the agreement. Even though the poker player claims he never received the winnings, the authority suggests he did. The ruling states that he now owes taxes on 100% of his advertised winnings from the poker event.

How Much Did Chris Moorman Win?

The case of Chris Moorman was cited in a separate article on Calvin Ayre. Citing a PocketFives article on his $14 million of earnings in online poker, the UK tabloids reported that Chris Moorman won $14mil playing at various online card rooms.

As the article states, PocketFives does not deduct the entry fee from Chris Moorman’s prize winnings, nor does it report the buy-ins, rebuys, and add-ons that Chris Moorman paid for tournaments in which he busted out before winning cash.

Those who read Chris Moorman’s autobiography are aware of the lost expenses from flight costs, hotel accommodations, and credit card roulette competitions he entered. Even more, Moorman admittedly mishandled his backing stable, whom he had to pay back along the way.

In short, Chris Moorman never saw anything like $14 million from his online poker career, yet it’s reported on a prominent gaming site and the published prize pool backs up PocketFives’ numbers. Moorman — and many other Israeli gamblers — have to explain that to a team of skeptical government tax assessors.