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Osaka man wipes away millions in owed taxes by deducting losing horse race tickets

19 Comments

It’s often said that nothing in life is certain except for death and taxes, but for one Osaka resident, that maxim was little more than an old wives’ tale.

One day, the taxman came calling to the tune of 816 million yen over years of unreported winning horse race bets. However, in a game where the house always wins, this guy managed to flip the script and knock down the money owed to a relatively modest 67 million yen.

The amount of 816 million yen in taxes alone might suggest that this man had made an absolute killing on the ponies. That was the first mistake the tax office made. Of course, in gambling you tend to lose quite a bit as well but in this case the taxes were only applied to his winnings.

That’s standard procedure though. If you had a winning lottery ticket and tried to deduct all of your previous losing tickets from its taxes, you would probably just get a blank stare or chuckle. Even if you were anal enough to have saved each and every ticket as proof, each one before was an individual game of chance and completely unrelated to that one winning ticket.

However, this man’s situation was judged to be different. As testified in both Osaka District Court and appellate court, from 2005 to 2009 he had used a scratch sheet (horse race odds) software which would help him make his picks and automatically place bulk bets for him.

Thanks to the record on the software it could be easily seen that he had bought about 3.51 billion yen worth of tickets in the five year period. Of that he won 3.665 billion yen for an actual profit of 155 million yen or about a fifth of what the tax office was demanding of him.

Again, that usually shouldn’t matter but Osaka District Court presiding judge Kenji Tanaka ruled that because the man’s betting was so heavy and consistent it was considered one continuous action to make a profit. As such Judge Tanaka felt it should no longer be considered gambling and declared it as “other income” from which the losing bets could be deducted as expenses.

This is the first judgment of its kind in the country, and as you’d expect, the government intends to take this to the Supreme Court of Japan. You can bet they won’t rest until they get the money they feel they deserve.

Source: Sankei West

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19 Comments
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Nice little earner!

Talk about lottery winnings and having to pay tax in the article made me wonder if that is so in the USA. I believe lottery ticket winnings in Japan are tax-free, no?

1 ( +1 / -0 )

I thought both horses and lottery as well as Pachinko were tax free here in Japan.

Big gambling in the states is taxed immediately.

0 ( +0 / -0 )

Once a gambler, always a gambler.

He knew when to hold them, knew when to fold them. Knew when to walk away, knew when to run.

-1 ( +1 / -2 )

Well here in the USA and each state you have to pay taxes if it is the lottery or the casino and horse race .you will pay taxes. you can't get out of it.

0 ( +1 / -1 )

Gamble with your head, not over it.

0 ( +0 / -0 )

In the UK you pay tax when you buy a lottery ticket, so you're taxed win or lose.

2 ( +2 / -0 )

I don't know about the lottery in the UK, but with bookmakers in the UK, I think the bookmaker itself has to pay a special gambling levy, while the customers/punters don't pay tax on their winnings.

With the internet, people have been able to follow gambling "systems" more easily, which involve them making large numbers of bets over a long periood of time, hoping to get a profit margin of even just 5-10% or so in a year over all. I'm glad the judge was able to see logic in this case and allow him to deduct his losses, otherwise it would have been completely unfair.

What suprises me more is the fact he is paying 43% of his winning in tax? (67m tax on 155m profit) Sounds a bit steep. There goes my dreams of finding "the system" and still living in Japan.

p.s./e.g. Backing manchester united at home and not to win away on every league game this season with the same bet amount will porbably get you 5-10% profit over the year.

0 ( +0 / -0 )

Who wants to bet he and the judge were ol buddies?

-2 ( +0 / -2 )

Congratulations to this clever man, and thank you to him for paying so much money in tax. He ought to be declared a national treasure.

shonanbb, I believe winnings from gambling are indeed taxable here if they are a nose over the standard limit of 200,000 yen during the year. Hence why the tax men went racing after him.

0 ( +0 / -0 )

Who wants to bet he and the judge were ol buddies?

I would. The odds of this are extremely slim, and almost definitely would have already come out if it were true.

2 ( +3 / -1 )

So stock brokers should be taxed only when they make a profit, but can't offset gains against losses? Because stockbrokers are the biggest gamblers in the world and only make money by playing the odds.

-2 ( +1 / -3 )

Judge Kenji Tanaka I salute you. If only half of the judges in this world had your sense of justice and reasoning. If only...

May the tax man get slapped silly in the appeal.

2 ( +2 / -0 )

No doubt... a professional gambler should be able to deduct losses as long as he/she has receipts from a reputable establishment.

1 ( +1 / -0 )

Well THIS is going to affect the government's push for casinos. If you're allowed to deduct gambling losses from gambling winnings, the government's projected tax windfall on casino winnings will evaporate.

2 ( +2 / -0 )

DAMN that's corrupt!! Twisted on so many levels.

What legal firm was this? These guys speak Parseltongue?"

0 ( +0 / -0 )

reply to Fadamor:

Yes, i think it does raise that problem of where to draw the line between casual or habitual gambler and one doing it according to some system. I mean, many people can claim they are following a system when they gamble. In this case, I think the horseracing gambler could prove that he was placing the exact same kind of bet each time (ie following his system) with betting logs as proof, as opposed to in a casino where there will be no print out of your betting pattern over a year. So in that way it would be almost impossible to make that claim for profits versus losses.

I wonder what the law is if you win 5,000 dollars in Las Vegas and you are resident in Japan (given that a resident is taxed on global income regardless of where it is made). Are you supposed to declare that? In addition, if you "won" 10,000 one night, but "lost" 5,000 another night, would the Japanese tax authorities expect you to pay 20%-40% on the 10,000 or would they view it as "one continous action to make a profit" and just want tax from the 5,000 profit? I imagine that practically nobody would declare this, but is it technically tax avoidance?

General question:

On another note,is it illegal to gamble on internet web sites that are based in other countries (and that you had signed up for and used before moving to Japan), even if you are accessing it from a Japanese IP adress?

1 ( +1 / -0 )

Judging by amount that he was spending i would class his as a pro gambler, so yes all of his expenses should be taken into consideration , if this is the case he should have declared it as a business and payed his taxes like we all do at the end of each year. or the easiest this would be to tax it at source, i.e. one the winning ticket , they could deduct any tax, this would have been simpler and quicker.

0 ( +0 / -0 )

What I want to know is how do win that much with horse racing bets. Was he connected?

0 ( +0 / -0 )

I wonder what the law is if you win 5,000 dollars in Las Vegas and you are resident in Japan (given that a resident is taxed on global income regardless of where it is made).

In the case of casino winnings in the U.S., any winnings over $500 have 20% withheld at payout for Federal tax purposes. You are given a document from the cashier detailing what was withheld. When tax time rolls around, you include the total income won, but then include the document proving 20% was withheld which will reduce your taxes accordingly. Whether Japanese authorities would accept such proof of tax payment, I have no idea.

0 ( +0 / -0 )

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