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Punters V Tax Man In Japanese Legal Battle

Thursday, 8th May 2014

Horse racing punters and tax authorities in Japan are engaged in legal disputes that could have a significant impact on the country's multi-trillion-yen gambling industry, reports ajw.asahi.com. The issue being considered by Japan's courts is whether money spent on losing horse racing tickets should be regarded as a deductible business expense. One case involves a civil servant in Hokkaido who won 7.84 billion yen (US$77 million) from horse racing bets over a six-year period through 2010 but spent 7.27 billion yen (US$70 million) on betting tickets. The punter declared the balance, about 570 million yen, as "miscellaneous income," after counting as business expenses the money used to buy tickets that turned out to be losing bets. But the Sapporo Regional Taxation Bureau refused to certify those losses as deductible expenses and said he failed to declare more than 400 million yen in income. The tax bureau determined the money from the winning tickets was "occasional income." The Income Tax Law in Japan defines occasional income as money earned from a one-time activity, such as gambling. The only deductible expenses allowed for such income is the amount "directly spent to earn the income." Thus, only the amount spent to buy winning tickets is considered deductible. The man recently filed a lawsuit with the Tokyo District Court, demanding that the tax bureau's decision be overturned. He argued that the total amount he has been ordered to pay in taxes exceeds the profit he made through his bets on horse racing. In court, the man claimed that "unless the tax authorities recognize losing bets as expenses, those who continuously purchase horse-racing tickets will become taxed even when they lose money or will be obliged to pay more tax than they earn."

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