The PokerStars Italy network has been accused of fraud and tax evasion by Rome’s Financial Guard. Halfords Media Italy, a wholly owned subsidiary of the Rational Group, provides both PokerStars and Full Tilt to Italian residents.
Regulators on Wednesday accused the media group of transferring some €300 million ($317 million) in revenues to offshore Rational affiliates to reduce its tax liability in Italy.
According to finance police, Halfords hid its total taxable income by moving monies it received from PokerStars in Italy to Malta’s PokerStars.eu network. Once the income was transferred to Malta, it was then moved to PokerStars’ Isle of Man headquarters, a self-governing British island with much more favorable corporate tax laws.
The Guard said in a statement that its undercover “ALL-IN” operation discovered “significant tax evasion” that occurred “between different companies part of an international group.”
PokerStars.com and PokerStars.eu operate in various countries around the world through its licenses issued in the Isle of Man and Malta, respectively. In the past, Amaya Gaming, the parent company to PokerStars, paid the European Union’s value-added tax based on the locations of its networks, however, a recent change to VAT now imposes tariffs based on where the service, which in this case is poker, is received.
Instead of incurring the Isle’s 20 percent and Malta’s 18 percent tariff, PokerStars now must pay Italy’s 22 percent rate. But Italian authorities allege the company’s main motive wasn’t to avoid VAT, but to receive Malta’s generous zero percent corporate income tax rate. That’s a significant savings considering a company’s gross revenues are taxed at 27.5 percent in Italy. By moving $317 million off the Halfords Media books, the company could have significantly lowered its tax obligation.
“PokerStars has been working with Italian tax authorities since they launched an audit several years ago,” Eric Hollreiser, head of corporate communication for PokerStars wrote on his blog.
“The audit is ongoing and we hope to resolve the issue in our favor soon. In the meantime, our operations continue as usual on www.pokerstars.it and we remain focused on delivering the most popular online poker service in the Italian market.”
PokerStars Isn’t Alone
PokerStars isn’t the only international company being targeted by Italian authorities. Up north in Milan, regulators are trying to find out whether Google violated any of its tax laws. The country’s investigation into Google’s financial reporting has been ongoing for years dating back to 2008, but prosecutors said this week the Financial Guard was in talks with the US company to debate a possible settlement.
According to Italian newspaper Corriere della Sera, investigators are accusing Google of failing to pay on 800 million euros ($846 million) of taxable income since 2010.
Italy’s Financial Guard is much different than the Securities and Exchange Commission (SEC) in the United States. Although it’s under the country’s Ministry of Economy and Finances, the organization is basically a law enforcement agency. With over 68,000 employees complete with an arsenal of weapons and special utility vehicles, the guard combats everything from tax evasion to drug trades, smuggling of goods, and even the patrolling of Italy’s territorial waters.