Usain Bolt Posing
Usain Bolt has announced that he will not take part in any athletic events in the UK until their income-tax policy is reworked. His outspoken disapproval of the UK's athlete income tax is nothing new, and he is not alone. For the past two years, Bolt has not attended the London Aviva Grand Prix in protest of the tax. In 2011, tennis player Rafael Nadal announced his decision to skip 2012's Aegon Championships at Queen's Club in the UK in response to the tax. Similarly, golfer Sergio "El Nino"Garcia, opted out of competitions in the UK for the very same reason. Put into effect in April 2010, the tax includes a top rate income tax of 50%, which requires a segment of an athlete's worldwide sponsorship payments. The UK's policy makes it possible to owe more in taxes than an athlete wins from direct earnings in their respective competitions.
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The State of the Tax
According to Nexia.com, if a marathon runner races the average of two competitions a year and one of them takes place in London, half of their worldwide sponsorship money will be taxed by the UK. By taking half of the runner's global endorsement income, the tax owed to the UK more than doubles. For comparison, the US currently charges a top income tax rate of 35% on worldwide endorsement deals. The friction seems to be caused not by taxation on direct earnings, but by the UK's insistence on taxing endorsements, specifically Usain Bolt's sponsorship deal with Puma in this case.
Bending the Rules
The UK Athlete tax was suspended to attract talent to the 2012 Olympics, a practice which has spilled over into the 2014 Commonwealth Games in Glasgow. Danny Alexander, the UK's chief secretary to the Treasury announced the exemption, stating:
"Everyone wants to see the best athletes compete at Glasgow 2014 and this exemption will make that more likely...it's clear that Glasgow will be an outstanding venue for the Commonwealth Games which showcases the best of UK and international sporting talent."
While there is no indication that the tax will be repealed any time soon, it is clear that the UK is willing to discount their rules for their most prestigious sports events.