Over the last several years, Manny Pacquiao has earned his way to becoming one of the most successful boxers in the world. In fact, he was listed as the 14th highest paid athlete in 2013 by Forbes. Of course, these earnings aren't without sizeable tax liabilities.
Even though Pacquiao has gone to significant lengths to plan out the financial and tax aspects of his life, he is currently facing a challenge from the Internal Revenue Service. Tax officials say the boxer owes the U.S. government a massive $18 million in back taxes. These accusations come at the same time Pacquiao is dealing with a tax debt claim from his native country, the Philippines.
Earlier this year, officials from the Philippines said that Pacquiao owed them $50 million in taxes from income he earned in 2008 and 2009. He responded by saying that he paid taxes during those years in the U.S., and a treaty between the two countries prevents double taxation. Officials from the Philippines countered by freezing his assets.
Interestingly enough, more than half of the back taxes claimed by the IRS are from 2008 and 2009, the years Pacquiao indicated that he had squared away. It's not hard to believe that a person who works in several countries could have difficulty working through the patchwork of tax laws.
To compound Pacquiao's tax issues, he could have difficulty paying back taxes to the IRS if their claims even hold water, because his assets and accounts have been frozen by another national government.
As this case shows, it is very important -- and complicated -- to sort through relevant tax laws in order to solve disputes. The hope is that this world-class athlete is able to resolve this dispute and continue to be a force in the ring.
Source: Forbes, “IRS The Latest To Send Manny Pacquiao to the Mat: Boxer Reportedly Owed $18 Million,” Tony Nitti, Dec. 11, 2013