A Tax on Sport

Posted on May 28th, 2012 in Sport

The excellent Matt Slater had a recent story on the BBC about the fact that sport’s events in the UK are taxed differently from other countries.

I was surprised to learn that the HMRC only recently included training days as part of the calculation of working; if you’re in the Uk for 3 days for asports event, and are working – to have done otherwise is clearly unfair (imagine saying actors are only deemed to have been working for the length of the film or TV show, and not the rehearsals, unused footage etc).

But the wider points are both ultimately places I don’t think we should go.

The first issue is that this notion that we’re losing out on seeing great sportpeople because we tax in a way that over countries don’t. This is the same race to the bottom bankers and their ilk use. It might be that unlike bankers, it’s actually true that these athletes will race or perform elsewhere, but – to be blunt – so what?

I’m offended that the Olympics have taken up loads of taxpayers money, and taxpayers can’t reclaim any of it. The idea that we should be craven enough to kowtow to these athletes’ desires to perform here without contributing is actually demeaning to us as sports fans and taxpayers.

Usain Bolt is quoted saying “It’s pretty sad that I can’t compete at the London meeting because they are pretty much all Jamaicans there” as if he were being actively prevented, rather than because he doesn’t want to pay the fair tax on his earnings here.

He could please his fans tomorrow – if he were to put pleasing them before earning as much money as possible.

The second issue  is the argument that the taxman is being short-sighted and for the want of trying to get some small amounts of tax from sports men and women, the exchequer is losing out to a much greater extent.

The idea that sporting events and facilities are in any any way good for the economy is an idea that is used time and time again. It underpins nearly every new stadium ever built in OECD countries in the last 40 years. It underpins every sports governing body making a pitch to government for support, and underpins the political case for state support for mega events, like the World Cup, or the Olympics.

The problem is that actual evidence for this claim is actually scant to the point of being non-existent. It’s not that these events aren’t actually associated with spending, and thus VAT, jobs and so on, its that its awfully difficult to work out how much of this spending is extra, and how much of that extra is due to sport, and how much the staging costs detract from that.

Repeated studies of the business case for new US sports stadia simply take a bunch of economic activity at the new stadium and posit it as new activity, when its just the same activity which was taking place in the current one – people travelling to the gas, buying hot dogs, beers etc. New hot dog sales jobs are created on this side of town, to replace the jobs lost at the old stadium on the other side of town.

Of course, when you build a new facility, there is some new money generated, but much of this new money isn’t actually available to the taxman.

South Africa’s taxpayers paid for new World Cup stadia that generated a load more money than what they replaced – but the four weeks in which they did so saw all the money be extracted by FIFA tax-free.

Indeed, the arguments about sporting mega-events miss the fact that the governing bodies awarding them do so on a strict condition of them being as extractive as possible for them, and thus much less lucrative for the host. The word itself is apposite; there’s a sense of a body being invaded for its resources, before moving off to do it again to someone else.

On a micro-level, an athletics meet like the ones Usain Bolt would wish we would host tax-free (or tax-freer) doesn’t generate that much extra cash, when the vast majority of the new spending is people buying tickets to watch, money which goes to the athletes. Who don’t want to pay the tax. And have lawyers and accountants to minimise that as much as possible, much like the ones Matt’s article quotes, I suspect.

I also suspect that much more than academic and consultants, HMRC can actually measure the real economic impact of sports events in an area, and that they don’t see see the argument that they’re cutting off their nose to spite their face because they know that they actually aren’t. And they also know that when it comes to stimulating economic activity, there’s a lot more economically useful ways to do it than giving a tax-break to a global sports star.

 

 

 

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