The beguiling question that is if I win some money gambling online, do I need to declare it and pay tax on it? has two answers. In order to answer the second, we must first answer the first. The first is: in which country to you live?
Depending on the laws of the country you call home, you may or may not be required to pay tax on any winnings accumulated through playing online. In the United Kingdom for example, no tax is asked for in the event of a big win online. The reason for this is simple: most bets placed will lose and they more than make up for the rare events in which someone walks, or rather in this case logs out with a fortune. On top of this, the government would be expected to provide tax-based relief for the scores of punters losing money on bets every day if they were to tax on winners.
Yet another reason why the British government, and so many others all over the world, chose not to charge tax on online casino gaming wins is because of the complications which would arise in trying to enforce payments. Can you imagine how tough it would be? It would essentially rely on the good will and instant honesty of the winner, even then it might cost more money than it accumulates.
Even those who make their living from gambling online are often able to avoid tax payments as a result of the difficulties which arise when a governments attempts to differentiate between those who gamble frequently for recreation and those who see it as their primary income.
Most governments world-over make their money from this growing multi-billion dollar industry by taxing the bookmakers and gaming companies as opposed to the gamers who win.