In these times of austerity, sporting entertainment can be an enjoyable way to relieve the pressures of making ends meet. But I’m afraid the taxman has already got that covered. To inspire our next generation of sporting and cultural heroes, our many great national events endeavour to attract the best and most celebrated athletes to astound and exhilarate, yet our authorities seem to do their best to scare off this talent.
Yesterday Usain Bolt announced to an international media that he would not be participating at next month’s Aviva London Grand Prix. An injury perhaps? A tiresome season? No – just Her Majesty’s Revenue and Customs (HMRC) doing their best to deter the world’s best talent from the British stage. With Britain’s current tax laws, Bolt would stand to lose more money than he would receive for participating at the event. These new regulations now mean that our enthusiastic youngsters and dedicated athletics fans will now not have a chance to see Bolt on British soil in action until the Olympics in 2012.
Since HMRC won a court case brought against them by Andre Agassi in 2006, they now have the power to tax a proportion of a sport star’s marketing, sponsorship and image right income on top of the 50 percent rate on the appearance fee. For Bolt, whose main income stream is through worldwide sponsorship deals, this would be a considerable amount. This regulation does nothing more than add further bureaucracy to an already over-complicated system and – as demonstrated by Usain Bolt – creates unintended consequences that are undesirable. Instead of HMRC receiving the taxable amount of the appearance fee, by adding further distortionary taxes they stand to receive nothing from Bolt, while losing out on the top star of the Grand Prix event.
This is not the first time the taxman has scuppered a big sporting event. The FA lost out on both European cup finals for 2010, with Arsenal’s Emirates Stadium being beaten by Hamburg’s Volksparkstadion for the Europa League, and Wembley being beaten by Real Madrid’s Bernabeau for the Champions’ League Final. Uefa President Michel Platini admitted that it was the UK’s tax system to blame for losing such events. The FA have now managed to convince HMRC to waive the regulations so that the 2011 Champions’ League showpiece can take place at Wembley – worth a possible £30 million pounds to the local economy according to a leading sports professors Dr Simon Chadwick - while the London Olympics in 2012 will be completely immune to the regulation.
Dr Chadwick, of the Coventry University Business School, stated:
“It seems to make sense we waive the tax rule on player earnings and look at the much bigger picture. The country as a whole will benefit from staging the final, especially as the income generation will have a multiplier effect as it will continue to reverberate for some time as new tourists return. Successfully staging events such as the Champions League final not only improves our standing in the world, it enhances the country's self-esteem and generates valuable revenue for the economy.”
But there shouldn’t have to be special dispensations for one-off events. A thriving economy and inspired generations of Britons would be the benefactors from a simpler system of fewer and lower taxes - and the taxman would ruin far fewer days out.
By Duncan Monteith