Usain Bolt tax bill: why sports stars won't compete in Britain

Aug 14, 2012

Should we feel sorry for Usain Bolt - or should he help repay cost of putting on Olympic Games?

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WITH HIS three sprint gold medals, Usain Bolt was the undoubted star of the London Olympics. But anyone hoping to see more of the Jamaican on these shores in the future could be waiting a long time. After winning his final Olympic medal - in the 4x100m relay - Bolt was asked why he didn't compete in Britain more often. Bolt replied: "As soon as the law changes I'll be here all the time."

Like most other countries, the UK charges tax (currently 50 per cent) on the appearance fees and prize money of sportsmen and women when they compete here. But unlike most other tax authorities, Her Majesty's Revenue and Customs also demands a cut of an individual's money from sponsors such as sportswear manufacturers, watchmakers and purveyors of shaving products.This is worked out by dividing the number of days a sportsman competes in the UK by the number of days he competes elsewhere.

It depends on your point of view, but, as the BBC reports, for someone like Usain Bolt, who earns an estimated £10m a year and only competes on about 10 days, the tax bill could be disproportionately high. As a tax expert from Deloitte told the Today programme this morning, Bolt's appearance fee is £100,000 - a sum that would be dwarfed by his tax bill if he competed here.

Yes. In 2010, the organisers of the London Grand Prix at Crystal Palace were hoping to put together a three-way clash of 100m titans between Usain Bolt, Tyson Gay and Asafa Powell. But Bolt refused to take part and his agent, Ricky Simms, confirmed it was a "tax situation". (In the end, Paris hosted a sprint showdown between Bolt and Powell.) This year, Spanish tennis star Rafael Nadal refused to play at the pre-Wimbledon Queen's tournament for tax reasons.

Any city bidding to host the Olympic Games has to agree to waive tax on the event. Essentially, London is a tax haven for Olympic athletes between 30 March 2012 and 8 November.

Yes. Last year, the Champions League final at Wembley enjoyed tax-free status.

The government faces a conundrum. Public opinion is currently very much against the idea of letting rich people pay less tax. Yet, in the warm afterglow of the Olympics it is under pressure to do more to encourage participation in sports. Seeing more international sporting stars compete here would undoubtedly help. A fierce debate seems inevitable.

The New Statesman's Staggers blog has already called for the athlete tax to be kept. "Given the revenue it would lose from those athletes who do grace us with their presence, it is understandably reluctant to [change the tax law]," it says. "Instead, it is Bolt who should reverse his stance and accept that it is legitimate for him to pay a proportion of his worldwide earnings to the British government. After all, after spending £9bn on the Olympics, we could do with the money."

But the tide has already turned. In the Budget this year, Chancellor George Osborne announced that in future, 'training days' will be taken into account when calculating how much sponsorship money will be taxed.

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Most countries tax the fees of stars appearing in their country. This is fair because: (a) the star earns the money in the country of appearance, not his home country; (b) in his home country, the star may set off the tax paid in the country of appearance; so (c) the effect is tax neutral unless the star lives in Monaco or some other tax haven.

The issue under discussion is whether the UK tax authority should tax part of the sponsorship fees, which are much more lucrative to a sportsman, and how that part should be calculated. This should not concern the star, as any tax paid in the country of appearance can be set off against tax paid in the home country. For the star the question is where they pay the tax, not how much.

The fact that these stars are complaining about paying UK tax on their sponsorship suggests that they may not be paying full tax on this income in their home countries. Perhaps Nadal does pay tax fully in Spain as he claims: There may be legitimate ways of directing sponsorship fees to be paid where no tax is payable, e.g. the British Virgin Islands. Alternatively there may be legitimate ways of substantially reducing tax on those fees.

If this is right, the reason that the stars are complaining about paying UK tax on their sponsorship is because they would otherwise pay little or no tax. I doubt many sympathise with these crocodile tears. But journalists tend to listen to those who shout loudest and not have the time or resources to analyse such issues fully.

Doesn't the UK collect taxes on ticket sales to events? They might forgo taxes on competitors for the benefit of increased ticket sales.