The Impact Of High Taxes On Athletic Competition

Yesterday’s Wall Street Journal posted an article about the impact of Britain’s tax policies on athletic competition in that country.

The article reports:

…After Jamaican sprinter Usain Bolt won his third gold in London last week, reporters asked him why he doesn’t compete in the U.K. more often. “As soon as the law changes I’ll be here all the time,” he said.

What aspect of British tax policy causes this sort or reaction?

The article explains:

The British government has granted an exemption to income linked to Olympic and Paralympic competition. But normally Britain takes a cut of an athlete’s worldwide endorsement earnings—that means overseas sponsors in addition to those in the U.K.—proportional to the time spent in Britain. By comparison, the U.S. only taxes nonresident athletes on endorsement fees paid by American sponsors. France does the same.

The article explains that since Mr. Bolt‘s contract with Puma is worth $9 million, any time spent competing in Britain could cost Mr. Bolt a very large sum of money. Because of these tax laws, many top athletes simply do not compete in Britain.

For example:

Rafael Nadal excused himself from this year’s Aegon Championships, the traditional warm-up to Wimbledon, on fiscal grounds: “I am playing in the U.K. and losing money. I did a lot more for the last four years, but it is more and more difficult to play in the U.K.” Mr. Nadal competed in the Gerry Weber Open in Germany instead.

Because of the tax policies, the quality of athletic competition has suffered in Britain, the fans are less likely to attend, and there is less economic activity in the area of sports competition for the country to tax. Everybody loses.

Pay attention, American Congress!

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