Having already paid taxes in the US for the $18m he received after his most recent bout, the champion boxer's bank account has been frozen by the authorities in his native Philippines.
Taxman proves a tough opponent for Manny Pacquiao
Manny Pacquiao received US$18 million for defeating Brandon Rios by unanimous decision in Macau last month. But the legendary boxer won’t be celebrating just yet because within hours of the fight finishing it emerged that the Philippines government had frozen his bank account because of an ongoing tax dispute.
According to the Bureau of Internal Revenue, Pacquiao has yet to prove that he paid taxes in 2008-09, a period in which the eight-division world champion registered stoppage wins over Oscar De La Hoya and Ricky Hatton, earning a guaranteed $6m for the former fight and a guaranteed $12m for the latter.
Those figures would have been boosted by a cut of the pay-per-view sales with Pacquiao vs De La Hoya generating 1.25 million buys and bringing in an estimated $70m in revenue. The equivalent information for Pacquiao vs Hatton was never disclosed but was reliably reported to be in the region of 850,000 PPV sales, bringing in around $50m.
It means that, instead of the hero’s welcome to which he would normally be entitled after such an emphatic win, Pacquiao returned to the Philippines to be greeted by news that the Bureau of Internal Revenue had, temporarily at least, rendered him financially insolvent.
Pacquiao was forced to borrow $22,700 to fulfil a pledge to donate to victims of the recent typhoon, but his shock at having his bank account’s frozen is understandable given that he paid a comparatively high rate of tax on his earnings during the period in question.
Top Rank Promotions deducted a percentage from his purses for both the De La Hoya and Hatton fights to fulfil tax obligations in the US where the bouts took place and the company’s founder andchief executive, Bob Arum, stated last month that: “For each of Manny’s fights that occurred in the United States, including those in 2008 and 2009, Top Rank withheld 30 per cent of Manny’s purses and paid those monies directly to the Internal Revenue Service via Electronic Funds Transfer. Top Rank has deposit confirmations for each payment.
Top Rank has done the same for all US endorsements it has facilitated on Manny’s behalf.”
Pacquiao is under the impression that there is a treaty in effect which prevents double taxation from being exacted and Mr Arum claims that assurances were given that this is indeed the case,
“Filipino authorities confirmed that Manny is not required to pay double tax. If Manny paid US taxes for fights and endorsements that occurred on US soil, he is not required to pay double taxes in the Philippines.”
The issue of taxation in the US is particularly relevant because Pacquiao’s fight on November 23, which attracted a sold-out crowd of 13,101 to the Cotai Arena in Macau, was the fighter’s first to take place outside of the US since 2006.
In the intervening years, Pacquiao established himself as one of the most marketable fighters in the sport and is currently the 14th highest paid athlete in the world, according to Forbes.
His career earnings are estimated to have surpassed the $300m mark once the Rios payday is taken into consideration.
The top rate of taxation in Macau is 12 per cent, less than a third of the recently introduced 39.6 per cent federal rate that Pacquiao’s purses would be subject to in the US. Mr Arum has gone on record as stating that this was the major factor behind his decision to start holding marquee fights away from the traditional boxing destination of Las Vegas.
“It all comes down to money. Manny can go back to Las Vegas and make $25m, but how much of it will he end up with, $15m?” Mr Arum asked.
The big question for Mr Arum will be whether Pacquiao’s fight with Rios generated the same sort of revenue it would have done in Las Vegas.
The Venetian in Macau, which is the casino resort containing the Cotai Arena, was expected to take about $150m in gaming and retail over the course of the weekend and there was not a spare seat in sight inside the venue.
Tickets to view the fight on closed circuit television inside The Venetian were also completely sold out; so in many respects Pacquiao vs Rios was a smash-hit success. But the key criteria for judging the financial health of any marquee fight is the pay-per-view sales.
These figures have yet to materialise, so we still don’t know whether or not the “Clash in Cotai” constituted a financial success for Top Rank, which will pay out around $24m to the two protagonists with Pacquiao receiving the lion’s share of the purse.
The most expensive fight to have ever been held in Asia before this was Mike Tyson’s matchup with James “Buster” Douglas in 1990, which earned the headlining heavyweights $7.3m, less than a third of what Rios and Pacquiao will take home.
Interestingly Mr Arum had initially claimed that Pacquiao, who is the biggest earner in the Top Rank stable, would never fight in the US again, but he has subsequently backtracked and admitted that his protégée’s next fight will probably be in Las Vegas in April.
With Pacquiao about to celebrate his 35th birthday both the boxer and his long-term promoter know that the multimillion-dollar paydays must be coming to an end. Ongoing tax issues make it even more essential that the Filipino, who also has political aspirations, maximises his earning potential in the twilight of his fighting career.
Whether we ever see Pacquiao fighting in Macau again will probably depend on those all-important pay-per-view figures, but Asian resorts and casinos are slowly but surely starting to establish themselves as viable venues for big money boxing matches with Top Rank targeting shows at Marina Bay Sands in Singapore as well as the Cotai Arena next year.