- The Italian Guardia di Finanza put out a press release to announce that they had discovered tax evasion in the amount of €300 million by PokerStars.
- Amaya and PokerStars have confidently denied any wrong doing—but the Guardia di Finanza, which is the equivalent of the UK’s Serious Fraud Office, was strident in the accusations made in their press release.
- The €300 million claimed as tax evasion is a calculation based on the Guardia di Finanza’s interpretation of the law—PokerStars and its lawyers dispute their interpretation.
- Only a court can decide who is right, and that is why PokerStars is innocent of the charge
Like a teenager who has found a discarded copy of Playboy and can’t wait to tell his friends, the Italian Guardia di Finanza put out a press release to announce that they had discovered tax evasion in the amount of €300 million by PokerStars.
Charges have been filed against the sole director of Halfords Media Italy Srl, which together with Reel Italy Limited—owner of the PokerStars.it brand—manages the Amaya subsidiary’s online poker room in Italy. An immediate statement from Eric Hollreiser, Amaya and PokerStars Director of Communications refuted the allegations.
Amaya and PokerStars Respond to Accusations of Wrongdoing
“We have operated in compliance with the applicable local tax regulations and have paid €120 million in local taxes over the period covered by the audit,” Hollreiser wrote on the PokerStars blog. “Like many other global e-commerce companies, we vigorously dispute the stance of the tax authority regarding local establishment. The audit is ongoing and we hope to resolve the issue in our favour soon.”
The following day, Amaya put out its own press release to reassure investors.
“The tax dispute relates to operations of PokerStars dating from before the acquisition of the company by Amaya in August, 2014,” said the statement, immediately exonerating the Amaya management from any wrongdoing.
Money from the Purchase was Held Back Just in Case
“The merger agreement,” continued the statement, “related to that transaction provides remedies to address certain income tax and other liabilities that might occur post-closing but stemming from operations prior to the date of acquisition, including monies held in escrow as initial sources for indemnification.”
In effect, the statement reveals that the situation was known about prior to the acquisition of Rational Group by Amaya and that funds are being held in escrow to rectify the situation in the event of an adverse tax ruling—meaning that the company is protected. Amaya shares rose almost 9% on the news.
Amaya and PokerStars have confidently denied any wrongdoing, but the Guardia di Finanza, which is the equivalent of the UK’s Serious Fraud Office, was strident in the accusations made in their press release.
Exactly What is PokerStars Accused of Doing Wrong?
Subsequent to its original press release, Lieutenant Colonel Pasquale Arena has made the accusations explicit. In a televised interview he said that Halfords “should have exclusively provided customer service. In fact their activities … went beyond assistance, from software management and the signing of contracts with the players to the organization of poker tournaments both online and physically in casinos of our country.”
However, none of these things are against the law—the legal issues arise because of the differing legal interpretations of national laws concerned with “transfer pricing.”
International companies often bear the costs of a service in one country while the revenues come from another. They properly establish the taxable profits in each country requiring the company to account for costs and revenues according to the national legal requirements—these are often not well defined, especially when dealing with services. Basically, Halfords is accused of performing too many activities which are considered expenses that can be written off against profits earned in Italy.
The €300 million claimed as tax evasion is a calculation based on the Guardia di Finanza’s interpretation of the law—PokerStars and its lawyers dispute their interpretation.
Only a court can decide who is right, and even in Italy which ranks 69th in the Transparency International corruption rankings —the worst among all Western European countries—the accused is still innocent until proven guilty.
