Paco Vallejo Wins Bizarre Battle With Spanish Tax Authority

A bureaucratic battle that lasted five years finally came to an end for GM Francisco Vallejo Pons. The Spanish grandmaster emerged as the winner in a bizarre game with the Spanish tax authority, who sent him a notice last week that they no longer hold a fiscal claim over his poker earnings.

The story was first covered here on Chess.com almost two years ago when Vallejo left the European Individual Championship after five rounds and was forced to go public with the situation. In reality, this battle had been going on for years.

Now 37 years old, the grandmaster from Menorca (one of the Balearic islands) was approached by the Spanish tax authority in early 2016. They tried to seize an amount of over half a million euros for unpaid taxes over his poker earnings in 2011.

The fiscal claim was based on an old Spanish law that ceased to exist in 2012—a year after Vallejo stopped playing poker online—under which any online "gambling" earnings are subject to 47 percent taxes, while any losses couldn't be deducted. In the new law, they can.

The tax authority started to investigate Vallejo in 2016 and looked back at a period of five years, just enough to decide that his earnings still fell under the old law. In Vallejo's case, he had actually lost more than he had earned; his net loss was about 5,000 euros in 2011 when he quit playing.

Vallejo says he is one of several hundreds of unlucky Spaniards who got involved with the tax authority even though the new law had already come into effect. "And I suspect there are more. Many people hide the fact that they play poker, or gamble, online. It can be unpleasant to go public with this."

He explained that if he had been summoned to pay a smaller amount, he might have actually paid.

"They claimed such a crazy amount that I had to fight. If they had claimed 10,000 euros, probably I would have paid. It's probably smart, although unfair," Vallejo says. "So you see, all this leads to stupid scenarios. You're sure they're doing something totally incorrect but still people pay."

All this leads to stupid scenarios. You're sure they're doing something totally incorrect but still, people pay.
—Francisco Vallejo

A few similar cases recently ended in favor of online gamblers which made Vallejo believe that he was going to win his case as well. "Especially because mine was super clear. I hadn't taken a single penny from my online account, so it was very easy to see that I made no profit, but a loss instead."

He called his treatment by the authorities "disgusting" as the administrators were aware that he actually made a loss, but nonetheless they claimed almost all of his savings. "Nobody is responsible for such craziness."

Speaking to Chess.com, Vallejo says that the whole situation had a big effect on both his professional and private life. "I was so sad, so sensitive. It was very difficult to play chess. It damaged my game for sure, for some time."

Having to leave the European Championship in 2018 was a low point also because his mother was in a coma for about a month during that period. She has almost fully recovered.

Vallejo even stopped playing for the national team at some point, because he was so angry with his country and didn't feel he should represent it any longer. "I couldn't stand the pressure; in more than one game, I almost had tears in my eyes," he wrote on Facebook two years ago.

"In more than one game I almost had tears in my eyes."
—Francisco Vallejo

However, since he went public it's going better, he says. "After that, it was much easier to handle, somehow." Last year he returned to play for the Spanish team at the European Team Championship in Batumi. He plans to return to the Olympic team as well this year.

Although the claim for half a million was dropped, the tax authority did take almost a hundred thousand euros from Vallejo. Now that the claim is released, this money should return to the chess player's account.

Vallejo says he will now have to fight for this as well and plans to consult his lawyer on other actions, such as trying to earn back his legal costs or claim compensation for reputational or emotional damage.

On social media, he wrote: "This is not the end of the game, but it's a big step."

Editor's note: the article has been corrected, now saying that Vallejo is from Menorca, not Mallorca.

Related post:

• Hunted By Spanish Tax Authority, Vallejo Leaves European Championship