Malta features in poker giant’s €300 million tax avoidance route

The managing director of PokerStars in Italy, a leading online poker brand, has been accused of fraud and tax evasion of some €300 million by Rome’s finance police on Wednesday.

Investigators analysed the real value of transactions linked to Halfords Media Italy, the Italian branch of the group, and tracked down €300 million of undeclared revenues.

Halfords is a wholly-owned member of the Rational Group which offers online poker to players through two of the world’s leading poker brands, PokerStars and Full Tilt Poker.

In Malta, the Rational Group has several subsidiaries with beneficial ownerships also held in the Isle of Man. Rational was taken over by Canadian firm Amaya Gaming for $4.9 billion in 2014. Amaya also holds an Isle of Man subsidiary.

According to the finance police, Halfords hid its taxable income by decreasing the worth of services performed for its parent company Pokerstars and, by so doing, managed to move the taxable income produced in Italy to Malta, and then to the Isle of Man to benefit from a more favourable tax status.

PokerStars.com and PokerStars.eu operate worldwide under licenses from the Isle of Man and Malta governments, respectively.

In a statement, Eric Hollreiser, PokerStars Corporate Communications Manager, said that PokerStars has been working with Italian tax authorities since they launched an audit several years ago.

"We have operated in compliance with the applicable local tax regulations and have paid €120 million over the period covered by the audit. Like many other global e-commerce companies, we vigorously dispute the stance of the tax authority regarding the local establishment. The audit is ongoing and we hope to resolve the issue in our favour soon. Our operations continue as usual on www.pokerstars.it; we remain focused on delivering the most popular online poker service in Italy."

The tax avoidance scheme is known as transfer pricing, and aims at minimising a company’s tax exposure by moving around revenues and profits to countries with favourable tax systems.

Transfer pricing is one of the most important issues in international tax.

Transfer pricing happens whenever two companies that are part of the same multinational group trade with each other: when a US-based subsidiary of Coca-Cola, for example, buys something from a French-based subsidiary of Coca-Cola. When the parties establish a price for the transaction, this is transfer pricing.

What makes transfer pricing illegal is if the price is manipulated so that costs are brought drastically down so that incur the least amount of tax possible.