alexa Finally cornered by the taxman, athletes have nowhere to run - Daily Nation

Finally cornered by the taxman, athletes have nowhere to run

Saturday January 25 2014

PHOTO | JARED NYATAYA Elite athletes run on the University of Eldoret track after a meeting on Wednesday held to protest against the Government’s intentions to tax their earnings made outside the country. They threatened to boycott major world sporting events including the Olympic Games.

PHOTO | JARED NYATAYA Elite athletes run on the University of Eldoret track after a meeting on Wednesday held to protest against the Government’s intentions to tax their earnings made outside the country. They threatened to boycott major world sporting events including the Olympic Games.  NATION MEDIA GROUP

DAVID KWALIMWA
By DAVID KWALIMWA
More by this Author

When Lucky Dube released the hit song “Taxman” in 1997, he didn’t know how relevant the lyrics would turn out to be in Kenya.

Some 17 years after this song hit the streets and seven years since the South African musician’s death at the hands of gangsters in a Johannesburg suburb, Kenyan elite athletes are grappling with tax issues.

Their situation though may be different from that of the reggae crooner. Dube, in his song, suggested he doesn’t have a problem paying taxes, but rather “didn’t know what he was paying for”.

On the other hand, the Kenyan athletes believe it is unfair to be “taxed twice” - in the foreign countries they compete in and back at home. They also want to be exempted from paying taxes on earnings made outside the country.

By law, every worker in the Republic of Kenya is subject to pay taxes.

The same happens practically in every corner of the globe. What varies from country to country are the taxation rates.

With this, the Kenya Revenue Authority (KRA) has in recent times, perhaps after reading through the amount income in form of prize money, bonuses and appearance fees local runners earn from winning most of the money-spinning races across Europe, America and Asia, resorted to tightening the noose to secure what is due to them. This development obviously bore an angry reaction.

In a well-publicised meeting held in Eldoret town earlier this week, the athletes, a majority of whom are long distance runners who hail from various counties across the Rift Valley, discussed this subject and emerged with thinly-veiled threats towards the Government for targeting the income for taxation.

SENSITIVE SUBJECT

“We have worked hard enough to turn this country into a top sporting nation in the world and thus we would rather stay away if there’s no fair treatment from the Government,” the athletes said in a statement read by Cherangany MP Wesley Korir.

By hinting at staying away, the athletes were actually passing on a warning to the Government, to the effect that they would consider boycotting World Athletics Championship and Olympic Games if the administration failed to reconsider this stance.

So, with this declaration that they would rather stay away, the turf had been prepared for what turned out to not only be the topic of the week, but a sensitive subject as well that the athletes declared will be fought all through to the floor of Parliament and other justice forums.

But the taxman is not batting an eyelid in this battle, repeatedly saying the law must be followed to the letter.

“The law states that income accrued in or outside Kenya is taxable and therefore Kenyan residents are required by law to pay taxes on their income regardless of its source or country of origin. KRA is therefore implementing what is provided for in the Income Tax Act, KRA explained in a statement dated January 24.

Other grievances expressed by the sports personalities include the risk of double-taxation, an issue that the revenue team dispels. Chapter Eight of the taxation of artists and sports people document released in November 2012 states in part: “Where tax has been paid overseas, credit is allowed when computing the Kenyan tax liability. The credit is however only allowable if supporting evidence of tax paid overseas is published.”

Korir claims athletes are already heavily taxed abroad. The lawmaker illustrates with an example of an athlete who is poised to receive a sum of about $200,000 (about Sh17.2 million) as prize money for winning a marathon race in America.

“Of this amount about 30 per cent will be taken away by the Federal Government, another seven per cent by the State in which the race was competed. A further 15 per cent of the sum is paid to the athletes’ agents while some 5-10 per cent is for the coaching staff. 

“Kindly consider that one requires an average three-five years to prepare for such a race, and we can only compete in a maximum three marathon races annually,” Korir argues. James Ojee, a KRA official attached to the technical support unit and budget making process, however begs to differ, adding that the only challenge the organisation faces is reconciling the tax rates from abroad.

“We handle all the taxation issues on a case by case basis. In some countries we can obtain information where one had already paid taxed and in case we had also taxed the same person, the monies can be refunded or added to future payments.

“But we don’t have relationships or treaties with all the countries in which our countries compete in. We thereby request the athletes to furnish us with documentation that shows proof of tax deduction on earnings.”

CHANGED NATIONALITY
Athletics Kenya (AK), the body mandated to oversee and supervise all activities of the sport in the country, has urged athletes to co-operate with the tax scheme.

“Tax returns must be submitted annually to KRA as required. Please ensure that you make returns to all athletes under your management showing them how much tax was paid overseas to enable them make necessarily returns,” a statement, released earlier this week by AK chairman Isaiah Kiplagat, addressing the athletes’ management team read in part.

Korir is however coy on Parliament’s decision to repeal a section of the Vat Act 2009 last year, where sportspersons lost out on the privilege in which they were free to import vehicles duty free.

The revenue team has however preferred a diplomatic approach to this subject, saying: “There is a misunderstanding regarding taxation of sports persons and KRA will continue to sensitise all stakeholders within this sector to make them embrace tax payment for the good of all Kenyans.”

To escape the taxation some athletes have considered the option of switching nationality to countries that relax taxation on earnings and even reward their winning athletes handsomely.

Sports people do employ tactics to help them avoid paying taxes on their earnings.

English manager Harry Redknapp, currently attached to second tier league side Queens Park Rangers (QPR), was once charged with opening an off-shore account in Monaco, and wiring off some of his earnings in a bid to evade the notoriously high taxes in England.

Formula One ace Lewis Hamilton and long distance runner Mo Farah, have also opted to reside outside Britain in what has been seen as a move to avoid the high taxes in their home country.

As things stand, it seems athletes have nowhere to hide. Just like the rest of working Kenyans, who toil everyday to make ends meet, they will have to pay their taxes as the law dictates.

Advertisement