Champion boxer Manny Pacquiao is in trouble with the Internal Revenue Service, according to recent reports. The boxer allegedly owes the IRS around $18 million in unpaid taxes. Mr. Pacquiao is among the highest paid athletes in the world at the moment and has participated in fights around the world, amassing millions in winnings and royalties. However, some confusion about earnings from the years 2008 and 2009 has led to tax debt allegations from both the United States and the Philippines, Pacquiao’s home country. The tax debt in the United States includes unpaid taxes from earnings during other years as well. 

This case is complex because it involves international tax law and treaties between the United States and other countries to prevent double taxation. Pacquiao denied the allegations by the government in the Philippines that he owed them anything, saying that he had paid his taxes in the United States for those two years. However, both governments continue to insist that he owes income tax for those years, leading to a majority of the $18 million in U.S. tax debt and the freezing of his assets in the Philippines by the government there.

As a result of these complexities and somewhat confusing laws on when to pay taxes and to which country, it is possible that Mr. Pacquiao made a series of mistakes that will now cost him a substantial amount of money in taxes and penalties. In many cases of unpaid taxes, the debt is often accrued as a result of a misunderstanding about the amount owed or an incorrect judgment about deductions.

Source: Forbes, “IRS The Latest To Send Manny Pacquiao to the Mat: Boxer Reportedly Owed $18 Million,” Tony Nitti, Dec. 11, 2013.