Yesterday, British Chancellor George Osborne announced a tax amnesty for athletes competing in the London Grand Prix, a track and field event, this summer. Non-British athletes are typically taxed on money they earn from prizes or appearances in the UK as well as part of their income from global endorsement deals.
The British tax rules on non-resident athletes have been a sticking point for athletes and conveners of international sports events since 1986, when the taxes began. An athlete like Bolt, who reportedly made $20.3 million last year, could end up paying more in taxes to British coffers than he would make appearing at an event. “It’s like me asking you to come to work today and pay me three times what you’re getting,” Bolt’s Ricky Simms told the Telegraph, describing the tax system as “completely crazy.”
Indeed, the system is a little crazy, if permissible under international law. Article 17 (pdf) of the OECD model convention on taxes gives the country where a non-resident athlete performs the right to tax income made from the athlete’s stay there. The US also taxes foreign athletes on income from US sources. However, the UK also taxes an athlete’s global endorsements in proportion to the number of appearances he makes in the UK. Moreover, British taxes on athletes are sometimes higher than that of their host countries because the UK doesn’t account for as many deductions from an athlete’s income as his home country does.
For London, the revenue must be hard to resist. Between 2009-2010, the UK collected £68 million ($105 million) from the taxes on non-resident athletes. The government gets about £7 million from taxing endorsement income, according to accountancy and advisory firm RSM Tenon.
Still, these amnesty grants are occurring with more regularity. Non-British athletes got tax exemptions during the 2012 summer Olympics and Paralympics. Foreign athletes will also be eligible for waivers of the tax in the 2013 Football Champions League Final at Wembley as well as the 2014 Commonwealth Games in Glasgow.