Israelis who own casinos overseas, and gamblers who turn a profit at the tables, will have to pay tax in Israel on their profits overseas when the transition to personal taxation is implemented on January 1, 2003, attorney David Goldman said yesterday.

Goldman, a tax law specialist, said that the legal issues surrounding gambling were irrelevant with regard to taxation of gambling profits from casinos overseas. Under the personal taxation system all revenues overseas, even if they are derived from activities that are illegal in Israel, will be taxable, he explained.

Hundreds of Israeli businessmen are believed to own shares in casinos in the US, Greece, and Eastern Europe.

Goldman added that tax authorities also could collect taxes from casino operators in Israel and gambling profits, even though these activities are illegal, because these revenues are taxable as business revenues. Thus, the law could be applied to casino operators in Israeli territory and to the operators of the floating casino off the shores of Eilat, he said.

According to state lottery operator Mifal Hapayis, some NIS 14 billion a year is spent on illegal gambling in Israel; in comparison, lotteries and the football pools bring in around NIS 3.5 billion a year. Taxation of revenues from illegal gambling would bring in an estimated NIS 3-5 billion in taxes per year.

Mifal Hapayis claims that if it were allowed to operate a casino in Israel, it would generate revenues of around $2 million a day or NIS 3 billion a year, which would be plowed back into the community.