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Posts Tagged ‘Olympics’

Usain Bolt Serves the UK an Olympic Hangover

August 16th, 2012 No comments

Usain Bolt sprinted out of the United Kingdom as quickly as he sprinted in the sovereign state.

Today the Wall Street Journal is reporting that the Jamaican sprinter will forego future races in the UK in order to avoid a large tax bite on potential future winnings there.

The UK is unappealing to foreign athletes because of its tax base. Not only does the base include any winnings earned by nonresident athletes on UK soil, it also includes their worldwide endorsement earnings. Multiply the tax base by the proportion of days spent in the UK to days spent elsewhere, and that’s the tax bill.

Considering Bolt currently has a $9 million annual endorsement deal with Puma, I can’t say I blame him.

The UK tax base is not standard. Here in the States, the tax base includes endorsement earnings paid by American sponsors only. Endorsement monies paid by non-American sponsors aren’t included. France’s base mirrors that of the U.S.

This isn’t the first time we’ve seen an athlete limit appearances in the UK because of taxes. Rafael Nadal, for example, had said he would not play at the 2012 Aegon Championship at Queen’s because of its tax base formula.

I suspect Nadal had little to no reservations with his decision, as there’s an abundant number of other major opportunities to participate in each year. Not quite sure whether we can say the same about track and field. But if Bolt will continue to ink major endorsement deals without having to set foot in the UK going forward, it’s the UK’s loss in the end.

(Hat tip: TaxProf Blog)

Olympic Winnings Subject to our Worldwide Tax System

August 9th, 2012 No comments

People ask me all the time, “Why is the tax code so complicated?”

My one sentence answer: “It’s riddled with countless exceptions and exemptions.”

Sen. Marco Rubio (R-FL) has proposed the winnings earned from medals by Olympians should be exempt from federal income tax.

We often see politicians spending far too much time advocating for measures that would ultimately have at most a marginal impact on a select few. Rubio’s suggestion is a perfect example.

I’m not looking to take away from the spectacle that is the Olympics. But millions of Americans work hard for their paychecks despite knowing a large cut is going to Uncle Sam.

Standing against the proposal, the Tax Foundation points out a far more significant policy issue with the current tax code:

[W]hy is the U.S. taxing this foreign earned personal income in the first place? The United States and Eritrea stand as the only countries to enforce a world-wide taxation system for personal income.

America’s worldwide income tax system combined with increasing foreign interest reporting is why we are seeing the expatriation rate significantly increase.

Expatriation is a very involved process. So involved that this 5,000+ word blog ”Why people expatriate” is merely a starting point for those considering.

And yet, more and more of those considering are actually following through.

But Senator Rubio won’t spend time addressing the issues raised by our worldwide tax system. Those are too important too think about how to tackle.

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