“Absurd and impossible to implement”

A new law is designed to let gamblers deduct their losses from taxes owed But the gambling industry says the Kafkaesque rules are unworkable

Bingo winners should keep a receipt and declare their winnings to the tax authorities, like with all games of chance.
Bingo winners should keep a receipt and declare their winnings to the tax authorities, like with all games of chance.CARLES RIBAS (EL PAÍS)

Canoe, a bingo hall on Madrid's Paseo de la Castellana, was buzzing with activity at 11pm on a recent Wednesday. A young woman began calling out the numbers. The house had sold 238 cards at two euros each for this game alone. Just four minutes later, someone yelled "Bingo!" from the back of the hall. His takings: 276 euros.

Shortly after, two men walked out of the establishment. "We haven't been lucky," one of them said.

And what would have happened if they had? "Then they give you the money and a little receipt. You rip it up, and that's that."

Technically, the winners should keep the receipt and declare the winnings to the tax authorities, like with all games of chance. As a matter of fact, players could even demand to get a document accrediting the amount of money they lost, in order to deduct it from the prize money and only pay taxes on the net winnings. So says the new legislation, which bingo halls are already describing as "absurd and impossible to implement."

Citizens should declare all gambling winnings, says a Treasury spokesman

Citizens should declare all the money they make on gambling and games of chance, says a spokesman for the Treasury. "It has to show up in the tax return as capital gains."

It does not matter whether it is a cash prize at the local bingo hall or a car on a television game show. "This is not new, it's always been that way," says the spokesman.

The only change is the way of declaring it: before, taxes were owed on the entire amount of the prize; now, it is possible to deduct losses, and pay only on net profit from a single game. For instance: someone goes to a bingo hall on a given day and spends 26 euros on bingo cards, then wins 1,000 euros. To be perfectly legal about it, this taxpayer should declare capital gains of 976 euros (after deducting the 24 euros spent on the losing cards).

The problem with that is that the taxpayer will have to produce documents proving both the gains and the losses, and these documents simply do not exist, even though the law was approved in December and is already in effect.

Now it is possible to deduct losses, and pay only on net profit from a single game

How can the player prove that he or she has lost money? In a digital interview with EL PAÍS readers, Ángeles Fernández, an official at the tax agency, said that "taxpayers can accredit their losses through the documents provided by the operator for these purposes."

Meaning that the player must ask the casino, the bingo hall or the owner of the slot machine to issue a receipt.

"That's impossible," says one industry professional. "We can't be running after all the players in a room to know how much they are gambling. It's impossible to make a receipt with the amount they lost."

Gambling companies such as Cirsa and Egasa insist the new rules work with online gambling, but seem surprised at the possibility of having to justify the losses of their clients at their physical locations. Both operators say the logistics are nearly impossible: how to justify how much an individual lost in front of a slot machine or poker table?

One woman says that if she had to declare her winnings, she would stop gambling

The situation is like something out of a Kafka novel in two ways: first, the law is retroactive for all of 2012, meaning that individuals who were physically present at gambling establishments are now forced to come up with documents that did not exist. Second, the tax agency has not come up with a model receipt that is considered acceptable to prove a period of bad luck. "It will have to be something similar to a receipt," warns a spokesperson at the agency. "If we feel it does not provide sufficient justification, the gambling loss will not be admitted."

Only games like the National Lottery, the Red Cross lottery or the ONCE lottery, which have their own tax rules, are left out of this confusing legislation. The Treasury admits the new laws were drafted "with online gambling in mind." And transferring that to real-life gambling creates complex, even unfair, situations.

As for internet gambling, it is obvious that nobody can escape the watchful eyes of the Treasury: every transaction can be traced, since it takes a credit card and a bank account. In June of last year, online gambling companies operating in Spain underwent a regulatory process - until now, they were all based in other countries. Then came the new regulations for taxpayers, honoring a long-held demand by online poker players that they should be allowed to deduct their losses, as is the case in other countries.

It is far from a minor issue: Spaniards plunked down four billion euros last year at virtual poker tables and other online games, according to an estimate by the secretary of state for the Treasury, Miguel Ferré, based on data from the last two quarters of 2012, when the sector's new operating licenses were already in effect. On March 20, 2013, there were 1,162,000 registered online players in Spain.

But what makes things easier in the virtual world makes no sense in traditional gambling halls. For starters, how many people who win at bingo actually declare the winnings? The tax agency will not reveal such information, though it says all the winners should.

Inside Sala Universal, on Madrid's Calle de Carretas, Elena (not her real name) does not take her eyes away from the slot machine. "The only thing the government wants is our money... What a nice little government we have," she says, adding that she has no intention of asking for any certificate stating what she wins or loses. In fact, if she had to declare her winnings, she would simply stop gambling.

Three ladies sitting on plush sofas inside the same establishment feel the same way. "The government wants to rob the poor," they say. They haven't had any luck this evening, but they will try again. One of them confesses she was forced to stop gambling for a while after sustaining heavy losses. She never told the authorities about that, either.

José María Mollinedo, secretary general of the Gestha tax inspectors' union, feels the notion of compensating people for their losses on their winnings is based on a fundamental mistake: gambling is not a productive activity that creates value in an economy. This new measure, he says, is above all a lure to attract new players and a potential breeding ground for the problems associated with this industry, most notably gambling addiction. "The only way to view this [law] is as an answer to the demands of online gambling associations," he says.

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