James Packer's wretched pre-GFC foray into the US casino market has again come back to haunt him, with the Australian Taxation Office demanding Crown Resorts pay a $362 million tax bill relating to its failed Cannery casinos business.
Mr Packer, who owns 53 per cent of Crown, botched an attempt to capture a slice of the US market nearly a decade ago.
In 2007 he acquired Cannery Casino Resorts for $US1.75 billion ($2.4 billion), a portfolio of four casinos in Nevada and western Pennsylvania, but the global financial crisis hit and crunched US gambling revenues. Crown was subsequently forced into billions of dollars of write-downs.
The ATO is now chasing Crown over $362 million in income tax, split between $250 million relating to tax and interest for the 2009 to 2014 financial years and $112 million in penalties.
The casino operator promised to fight the ATO assessment with a possible court challenge if necessary.
"Crown considers that it has paid the correct amount of tax and intends to pursue all available avenues of objection including, if necessary, court proceedings to the amended assessments," the company said.
Crown shareholder Arnhem Investment Management said it was a complete surprise to hear about the hefty tax bill.
"It's definitely a surprise that after six or seven years this has come back basically from nowhere," said Arnhem partner Theo Maas. "The numbers in terms of the write-offs were material and in the billions of dollars so you can see that there is reason for a dispute given the materiality of the numbers."
Goldman Sachs sees negative
Goldman Sachs said it could be a negative for Crown given its existing capital commitments over the next few years on its Alon casino in Las Vegas and its Sydney casino at Barangaroo.
"If you divide it on a per share basis, its about 50¢ a share impact, but more importantly, if the entire amount has to be paid upfront, it exacerbates pressure on the balance sheet ahead of high capex period on Crown Sydney and Alon," said Goldman analyst Adam Alexander.
It is unclear if Crown is required to pay the disputed figure immediately to the ATO before it challenges the assessment. The ATO declined to comment citing taxpayer confidentiality.
Crown did not make any earnings or profits from Cannery in 2015 but wrote down the value of its investment in the casino group with a $61.8 million charge which also included legal settlement costs.
Crown declined to comment on the specifics of its challenge against the ATO, but released a statement underlining its tax payments in the 2015 financial year.
"Crown Resorts is a model corporate citizen and pays its fair share of taxes," said a Crown spokesperson. "In financial year 2015 Crown paid more than $640 million in taxes to all levels of Australian governments, which amounts to almost two-thirds of Crown's Australian normalised profit before tax."
Last week tax commissioner Chris Jordan vowed to take more companies to court in the coming year, rather than settling cases, in a bid to move more quickly to claw back revenue.
After the disappointment of the Cannery deal, Mr Packer initially said he was not "rushing to go back" to the US but last year committed to develop the Alon casino complex in Las Vegas as part of a joint venture.
Crown took an initial 73 per cent stake in the Alon Leisure Management entity controlling the Vegas casino and has spent the past few months talking to institutional investors in Asia about a sell-down of its holding to about 45 per cent.
Mr Packer's private investment vehicle Consolidated Press Holdings is also conducting talks with investors including private equity and pension funds over the potential privatisation of Crown.