Following a recent civil tax audit of Playtech in Israel, the online gambling tech company now has to pay a further $32m in taxes to the Israeli taxation authority.
The bill covers the period spanning from 2008 up to 2017. The two parties came to an agreement on the amount on 31 December.
The reason given for this additional payment is adjustments of transfer pricing for business Playtech conducts inside Israel. In basic terms, this is for transfers between different subsidiaries of Playtech.
Not out of the blue
When it comes to taxation and accounting, companies must do their utmost to ensure that they meet their tax obligations. While mistakes can happen, many companies try to minimize their tax obligations as much as possible by employing various techniques.
A lot of companies will exploit loopholes in the system to try and legally minimize their tax bill. There have been numerous high-profile cases in recent years on this issue involving the likes of Google and Apple.
While the audit of Playtech is fairly standard, the company will not be welcoming the news. It already had some previous concerns with regards to its tax obligations.
In December 2018, Playtech issued an earnings warning to investors for 2019 as a result of increases in taxes in the areas in which it operates. It estimates that this would add up to $28m to its yearly tax bill.
This is mainly down to tax rises in Italy. The coalition government is severely clamping down on the sector and has already brought in a blanket ban on gambling advertising and sponsorships. It is also actively increasing taxes on gambling operators. Playtech’s share price took a hit when the news broke in December.
Playtech is in agreement with the Israeli authorities and will not have to pay any penalties on this sum. The payment will be part of the company’s accounts for 2018 and will be listed as an exceptional item in the accounts.
Moving into Poland and Sweden
While the increasing tax obligations for Playtech are not a positive, it has a lot of other things to be happy about.
The company is now entering into the recently opened-up Swedish gambling market after receiving a license for its Quickspin subsidiary. It is also part of the launch of the first licensed online casino in Poland.
Playtech is a strong, worldwide company that will have no trouble dealing with future issues such as tax obligations, as in this case. Playtech is in a phase of continuous growth and eyeing up new markets to jump into.
Israel’s gambling scene
Israel has long been a strict enforcer of tight gambling regulations. For the most part, gambling in the country is illegal, with only sports betting and the lottery being legal. The legal status of poker will soon receive clarification. Companies that have operations in the country are not able to run online gambling platforms.
A number of gambling companies, however, keep certain parts of their operations in the country. Playtech’s marketing and technical support subsidiaries are based in Israel. Its fellow London Stock Exchange company, 888 Holdings, was originally set up by Israelis. It has its development and marketing subsidiary in Israel.
Others that have marketing operations in the country include William Hill and Ladbrokes Coral.
In recent times, the Israeli authorities have clamped down on illegal online gambling sites that target Israeli players. However, because they are only blacklisting the domains and not the owners of the domains, once one site is blocked, another can pop up with a different domain name and continue where it left off.
After a long-running debate and confusion as to whether poker is a game of chance or a game of skill, a new bill is coming in 2019 that will clarify the status of poker in the country. If the bill is successful, then poker will be legally defined as a skill game in the region.