Is poker a game of skill or chance? Personally, I believe it is a skill game where there is an element of chance. For German poker players, this is more than an interesting debate; it’s a vital question that impacts their taxes.
German tax law is such that games of chance (e.g. roulette) are not taxed for players. If you are German and hit a lucky jackpot on a slot machine, you won’t owe German income tax. However, games of skill for professionals are taxed.
As I first reported on back in August, a German court was considering this. The decision came down on Wednesday in Cologne. Eduard Scharf has been an airline pilot with Lufthansa by profession. When he’s had time off, he’s become a pretty good poker player; he has won over $1.2 million, including two World Series of Poker bracelets. Mr. Scharf apparently didn’t include his poker winnings on his tax return. The German Tax Office stated he was a professional and needed to include the income on his return.
The 12th Senate Finance Court of Cologne agreed with the tax office that skill predominates over luck. That’s what most poker players believe, but it’s bad news for German players. While it appears that Mr. Scharf is appealing to the Federal Finance Court in Munich, the days of tax-free play in Germany appear numbered. The German articles I read note that other tax cases are pending.