An Osaka court has ruled in favor of a horse-racing punter seeking to wipe ¥810 million from his tax bill in a civil case, finding that his losses from buying failed betting slips should count as deductible expenses.
The decision by the Osaka District Court on Thursday was consistent with rulings in the 41-year-old plaintiff's criminal case over alleged income tax evasion, which is pending in the Supreme Court.
Accordingly, the district court annulled the part of the tax on his income now deemed excessive.
The former company employee from the city of Osaka had sued the state to seek the reversal of the taxation, claiming that unsuccessful bets should be considered expenses, and that he should not be taxed more than he has the ability to pay.
According to the lawsuit, the plaintiff spent ¥3.50 billion on betting slips online and collected ¥3.66 billion in winnings over a period from 2005 to 2009.
As expenses, however, tax authorities deducted from his income the ¥150 million he had spent on the winning betting slips, levying ¥680 million in income tax, plus a ¥130 million penalty tax for failing to declare income.
The man was indicted by Osaka prosecutors in February 2011 on charges of tax evasion in connection with his winnings over a three-year period to 2009.
The Osaka District Court ruled last year that the unsuccessful bets were necessary expenses in a profit-making activity, a decision upheld by the Osaka High Court in May. These courts ruled that the man had evaded around only 10 percent of the tax burden alleged, and handed him a suspended prison term.
Prosecutors have appealed the criminal case to the Supreme Court, which is set to rule on the taxation of horse-racing winnings for the first time.