NCPA - National Center for Policy Analysis

U.K. Tax Causes Athletes to Think Twice

November 30, 2011

A U.K. tax levied on endorsement income and appearance fees of foreign sports and entertainment figures working in the country yielded a mere £68 million in 2009-2010.  While this might simply be accepted as another form of revenue for the United Kingdom's government, the people of the country recognize the adverse effects that the tax has on domestic sports events.  Rafael Nadal, for example, will prepare for Wimbledon in Germany instead of preparing at the traditional facility in London.  Usain Bolt, the Jamaican Olympic sprinter, avoided competing in the United Kingdom altogether last year.  Numerous sports stars avoid UK events if at all possible in order to avoid losing money, says Bloomberg.

  • In addition to the paltry receipts from 2009-2010, the Foreign Entertainers Unit of Her Majesty's Revenue & Customs collected only £56 million from the tax in 2008-2009 and £58 million in 2007-2008.
  • According to a report by London-based accountancy and advisory firm, £7 million are collected annually from sports stars alone.
  • The ATP Finals tournament (men's tennis), which is on its third year of a five-year contract in London, may be moved upon completion of its term, taking with it £100 million of annual economic stimulus, as estimated by a 2009 report commissioned by title sponsor Barclays Plc.

Tax officials at the government's treasury have been quick to defend the tax, pointing out that players' taxed income will not be taxed again by their home countries, increasing the fairness of the policy.  Yet this argument does not seem to resound with players: athletes continue to avoid U.K. competitions, as the tax is structured such that each additional U.K. event greatly increases an athlete's tax burden.

Many of those who lobby for the abolition of the law point out inconsistencies between sports.  While individual sports are subject to the full force of the tax, team sports such as soccer are exempt.  For those who see little difference between stars of various sports, the tax seems arbitrarily applied and significant in its impacts on the country's sports scene.

Source: Danielle Rossingh, "U.K. Tax that Pushed Rafael Nadal to Germany Brings in $105 Million a Year," Bloomberg, November 25, 2011.

For text:

http://www.bloomberg.com/news/2011-11-25/u-k-tax-that-pushed-rafael-nadal-to-germany-brings-in-105-million-a-year.html

 

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