Paul L. Caron

Tuesday, July 31, 2012

Olympic Athletes Get Special U.K. Tax Break

London-olympic-logoForbes:  Olympians Get a Free Pass on Taxes at the London Games, by Kelly Phillips Erb:

Olympians at the games are getting a nice tax break under an exemption passed just for the London 2012 games. If not for the exemption, those at the games might have to pony up some pounds for the Queen.

You see, the Brits, like the U.S., have a tax system that attempts to tax global income. Under British tax law, the amount of tax due is pro-rated based on the number of events that an athlete competes in inside the country; this is in addition to a 50% tax rate on appearance fees. If, for example, an athlete participates in ten athletics events in 2012 and one of those events is located in the UK, the Brits take the position that they are more or less entitled to 1/10 of that athlete’s worldwide income (some exceptions apply but you get the idea). The tax is imposed even though the athletes may not live in Britain.

The law has kept big names like Spanish golfer Sergio “El Nino” Garcia and Rafael Nadal out of the country for a number of events. Those omissions made sports news but didn’t make many waves beyond their individual sports. The Olympics, however, is on a completely different scale: you can’t have a competitive Olympics unless athletes from all over the world actually show up – and attendance was threatened by these tax laws. Last year, Jamaican über sprinter Usain Bolt famously declared “I am definitely not going to run [in London]” until the Olympics because of what he viewed as punitive tax laws. His declaration sent the country into a tizzy, worrying that other athletes might make similar proclamations – or not show up for the 2012 Olympics at all.

In order to stem any controversy, the British taxing authorities agreed to a limited exemption to the tax rule. The exemption covers those athletes who are visiting the UK in order to compete in the Olympic Games and a limited number of people who are visiting the UK to work on Games-related activity. It does not apply to those working on construction of the Olympic venues

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It is a good thing that they acted quickly and allowed these exemptions. The olympics are about countries sending their best athletes to compete against the other elite athletes of the world. That is on top of how much money London would forfeit if the best of the best shunned the games.

Posted by: Todd | Jul 31, 2012 1:03:22 PM

Kelly Philips states, "You see, the Brits, like the U.S., have a tax system that attempts to tax global income". However, if I'm not mistaken, I believe that the U.K has moved to a territorial tax system. Unlike the U.S., where you would be subject to tax on all your foreign earned income, the U.K. is apportioning that share of income supposedly earned within its borders (regardless of whether you're a citizen of the U.K.). These are two very distinct tax systems, though I do understand the point she was trying to make.

Posted by: Al | Aug 1, 2012 7:24:24 AM