US won't name Irish official in JP McManus gambling row
Published 06/06/2016 | 02:30
US authorities are refusing to name an Irish tax official who responded to their queries about the tax affairs of businessman JP McManus.
Mr McManus claims he is not liable to pay tax on $17.4m won during a game of backgammon because he had paid a flat charge of €200,000 to the Irish government that year.
The horse racing owner and philanthropist is seeking the refund of $5.2m (€4.7m) in taxes taken from his gambling winnings in 2012.
JP McManus claims he's not liable to pay tax on the winnings because of a double taxation treaty between the US and Ireland. This means he should only be taxed in one of the two countries, and he had been taxed in Ireland.
Lawyers for Mr McManus have argued that Mr McManus can't be liable for US tax because he paid a "domicile levy" to the Revenue Commissioners in Ireland in 2012.
That is a flat charge of €200,000, which is paid by a person whose permanent home is in Ireland, whose worldwide income exceeds €1m and who holds Irish property worth at least €5m, and whose liability to Irish income tax in a relevant tax year was less than €200,000.
But in a written motion to the United States Federal Claims Court, the American Internal Revenue Service (IRS) argued that the "domicile levy" paid by Mr McManus in Ireland does not mean he gets the benefit of the cross border double taxation treaty. The businessman was not tax resident in Ireland in 2012, they say, he was not liable to Ireland for any income tax on his worldwide income during that year, filed no Irish income tax return that year and paid no Irish income tax during that year.
"Accordingly, he did not qualify as a 'resident of a Contracting State' whose gambling income was exempt from United States tax under the Treaty," lawyers for the IRS claimed.
The US court papers show that Irish tax authorities told their American peers that the Limerickman has not been registered for income tax or capital gains tax in Ireland since 1995.
The IRS told the court that Irish tax authorities share their understanding, that payment of the domicile levy does not entitle Mr McManus to benefit from the double taxation treaty.
The American tax authorities also rejected a demand from lawyers for the Irishman to name the Irish Revenue official who had provided details about his tax status, in response to their formal request.
The letter from tax officials here included in the court evidence was partly redacted, meaning Mr McManus could not see the name and signature of the sender, case numbers, dates and other information.
The redactions meant the court should give the letter no weight, Mr McManus argued, saying he needed to "investigate and take the deposition of the persons in Ireland who claim to have written" it. The IRS refused, saying nothing would be served by disclosing the name.
The case continues. It dates back to $17.4m Mr McManus won from businessman Alec E Gores playing backgammon.
Mr Gores withheld 30pc of the total and paid it to the US government, reporting that Mr McManus had an address in the Swiss resort of Crans Montana.