Tax Makes Boxing in US a Bad Bout for Pacquiao
by Terri Eyden on
By Teresa Ambord
Filipino Manny Pacquiao is a superstar among professional boxers. In 2010 he was named the "fighter of the decade" by the Boxing Writers Association of America. The eight-division titlist isn't one to run from a challenge, but one bout he's had enough of is the one with the US taxman.
Recently, he visited New York to promote his upcoming fight with Brandon "Bam Bam" Rios. But it won't take place in the Big Apple or anywhere the IRS can reach him. This November, the match will be held instead at the Cotai Arena in Macau, China.
United States too taxing
Pacquiao's adviser, Michael Koncz, told the Wall Street Journal the boxer will avoid bouts held in the United States. It's a simple question of money, and the fact is, the IRS takes 39.6 percent of his purse off the top. Then, depending on the location, state tax may take another bite.
According to Koncz, the tax situation makes fighting on these shores a "no go." Koncz told Yahoo Sports once the tax rates rose to 39.6 percent, Pacquiao would shun working in Vegas, which is one of the cheaper places for him to fight in the United States.
Pacquiao's promoter, Top Rank CEO Bob Arum, told reporters, "Manny can go back to Las Vegas and make $25 million, but how much of it will he end up with – $15 million? If he goes to Macau, perhaps his purse will only be $20 million, but he will get to keep it all, so he will be better off." And bear in mind, Nevada has no state tax. If the fight were held in New York City, the state would take another 8.82 percent.
CPA Robert A. Raiola, who heads the Sports & Entertainment Group for the New Jersey–based accounting firm of Fazio, Mannuzza, Roche, Tankel, LaPilusa, LLC pointed out, "Pacquiao is not a resident of the United States nor a citizen, so he will not owe any US tax on money he earns in Macau where the top tax rate is 12 percent. That's a tax savings of nearly 28 percent in his pocket, in addition to state tax which might be owed, depending on where the fight is held."
"He'd have to be a lunatic . . . "
Arum said of his client, "He'd have to be a lunatic" to fight here and let his winnings be emaciated by state and federal taxes. He's fully capable, having won bouts in California, Tennessee, Texas, and Nevada as well as Japan and the Philippines. But he's learned the hard way. When he was in New York recently, he said he would not fight in Barclays Center or in the Garden again.
"It all comes down to m-o-n-e-y" Arum said, though Pacquaio himself said he might consider fighting in Las Vegas again. "I can fight anywhere. I can still fight here."
Tax smart? Sort of
Pacquaio is either well versed about tax strategy or he has great tax advisors. But there may be a disconnect between his tax knowledge and his understanding of where the tax originates, because while in the United States, he campaigned for politicians proud of their reputations as tax hikers, including US Senator Harry Reid (D-NV) and California Democrat Governor Jerry Brown.
Thirty-four-year-old Pacquaio estimates he has two or three more years in the ring before he retires from boxing. The November 24 match in China will be his first fight outside of Las Vegas or Texas (both no personal income tax states) since 2006. This is a critical match for him to show he can still win after two harsh losses. Last December he suffered a knockout loss to Juan Manuel Marquez, and before that, a "controversial decision" loss to Timothy Bradley in June 2012.
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