PokerStars Italy Settle Tax Dispute For €5.9MJanuary 13, 2016 3:42 pm
Last year, Amaya was accused by Rome’s Financial Guard of moving €300 million ($317m) in revenues abroad in order to avoid paying a higher tax liability. The disputed period took place between 2009-2014, with the Italian tax regulator estimating that PokerStars’ Italian network owed around €85 million in back taxes to their country. Almost a year later, and the dispute has now been resolved after Amaya Inc agreeing to pay a settlement of €5.9 million from an escrow fund set up following the purchase of PokerStars in August 2014.
PokerStars had been accused of trying to avoid paying higher taxes through a process known as “transfer pricing”, in which income produced in Italy was subsequently transferred to Amaya’s other subsidiaries based in regions with lower tax rates, such as the Isle of Man, and Malta. Italy’s tax police even threatened to level fraud and tax evasion charges against the Managing Director of PokerStars Italy.
At that time, Eric Hollreiser, head of corporate communication at PokerStars, tried to dispel any suggestions that the situation would escalate, stating that he was confident that the matter would soon be resolved. Hollreiser also pointed out that:
“We have operated in compliance with the applicable local tax regulations and have paid €120 million over the period covered by the audit.”
Reflecting wider trends, PokerStars is the most dominant operator in the Italian online poker market, with three quarters of all online tournament players, and two-thirds of cash game players having registered accounts with PokerStars.it. Nevertheless, Italy operates a ring-fenced iPoker market, which has resulted in declining fortunes for the industry, with the number of people playing the game having fallen by 17% in 2014, compared to the 247,000 that did so in 2013. As DLA Piper gaming lawyer Giulio Coraggio explains:
“The online poker market is facing considerable difficulties worldwide and in countries like Italy, Spain, and France the impact of such crisis might be even higher given that they are closed loop markets. But if poker international sharing liquidity will be allowed, the scenario might considerably change.”