Taxation: Athletes are victims of their success
Posted Thursday, October 4 2012 at 18:04
- Geoffrey Mutai is also in deep trouble as he must be ‘punished’ by KRA for winning the Berlin Marathon last Sunday
There is a Bill pending in the US Congress tabled by Republican Senator Marco Rubio which raised eyebrows: It proposes that athletes be exempted from paying taxes on their prize money won in the 2012 London Olympic Games, a proposal supported by President Barack Obama on his re-election campaign trail.
The matter became public following an expose by the American for Tax Reform lobby group after Internal Revenue Service (IRS) imposed tax on the $25,000 (Sh2 million) incentive paid by the US government for every gold medal won in London.
“Our tax code is a complicated and burdensome mess that too often punishes success, and the tax imposed on Olympic medal winners is a classic example of this madness,” said Senator Rubio.
“Athletes representing our nation overseas in the Olympics shouldn’t have to worry about an extra tax bill waiting for them back home.”
American for Tax Reforms further said that the US is probably the only developed nation that taxes “worldwide” income earned overseas by its taxpayers.
This fever has caught up with Kenya Revenue Authority (KRA) and it threatens to derail Kenya’s global athletics success.
Soon after the London Games, many athletes – including Olympic and IAAF World Championships heroes and heroines – were served with tax arrears demand letters from KRA, sending the industry into disarray.
One athlete, for instance, is required to pay a whopping Sh50 million in tax arrears!
Save for the lone voice of Athletics Kenya president Isaiah Kiplagat, the entire nation – including politicians, who are otherwise quick to ride of the success of athletes’ toil – have remained studiously quiet.
Athletes have nowhere to run to and the situation is tense.
‘Punished’ for winning race
This means Kenya’s two gold medallists in London must surrender to the taxman a percentage of their bonuses from that and other races, including Sh1.5 million from the government, backdated to 10 years.
Geoffrey Mutai is also in deep trouble as he must be ‘punished’ by KRA for winning the Berlin Marathon last Sunday – a contradiction to the KRA’s revised rules on the Double Taxation treaty it has signed with many countries, including Germany.
In 2008, the Ministry of Finance, then under Deputy Prime Minister Uhuru Kenyatta, passed a rule which said: “Kenyan sportsmen and artistes performing abroad are entitled to off-set tax on income earned abroad against tax charged in Kenya on such income provided they can prove that tax has been paid abroad.”
But when the issue of taxation on athletes’ agents arose on January 5 this year, Kennedy Onyonyi, the KRA Deputy Commissioner in charge of Marketing and Communication, said: “They (athletes) do much more than some cadres of civil servants who are tax exempt are doing.
“They deserve tax exemption, but certainly not their managers.”
Of many stakeholders on the Double Taxation agreements with various countries – including Germany, Britain, India and recently United Arab Emirates – are athletes and artistes.
The British agreement on this, “DT11218 – DT Kenya: Double Taxation Agreement, Article 19”, states: “Artistes and Athletes: Notwithstanding the provisions of Articles 16 and 17, income derived by public entertainers, such as theatre, motion picture, radio or television artistes, and musicians, and by athletes, from their personal activities as such may be taxed in the Contracting State (Britain) in which those activities are exercised.