The pride Kenyans feel when one of their athlete steps up onto the winner’s podium in Boston, Chicago, New York City, Seoul or Zurich might no longer be there if local authorities move to tax the national heroes earnings.

This glory might in future go to other countries if the athletes carry out their threats to change citizenships.

The Kenya Revenue Authority has said they might start taxing these national heros’ undeclared prize money, appearance fee, agent commissions, brand endorsements and other incomes that accrue to athletes when they participate in international events.

The tax man has already published guidelines that will require sports men and event organizers to file tax returns declaring what athletes earn, tax paid and in which country. Foreign agents are also required to declare what athletes in their stable earn and what is paid in taxes in the country when these athletes participate.

This onslaught by KRA is aimed at providing the national Treasury  with new avenue for collecting tax in the face a struggling economy in dire need of funds to finance its growth budget deficit that reached 7.9 per cent in the current fiscal year 2013/14 (July-June).

“There is this impression that athletes participating in races out there earn a lot. It is difficult to compute what athletes actually earn. For instance, how do you explain how an athlete who wins an international event and a prize money of $100,000 ends up with only $ 20,000 in the pocket,” David Okeyo, Secretary General, Athletics Kenya told AFKInsider.

According to athletes, they are already taxed in the country of origin and therefore should not be taxed again at the home country.

“When an Olympic champion or world record holder steps into the field, that person commands an appearance fee which the event organizers pay out to the athlete,” Moses Tanui, a former Olympic and World champion, told AFKInsider.

“Out of this sum, the country where this race is taking place takes away its tax. The next beneficiary is the athlete’s manager who also takes up to 15 percent of what is left as income tax.”

He added that when an athlete gets back to his home country, he or she deducts accommodation, flight, food and other personal expenses.

Breaking World Records

Tanui,  who is now a businessman in the north rift district of Eldoret’s former white highlands, insists that tax authorities should hold meetings with international event organizers and agree on the way forward. This is because of the confusion and different viewpoints held by both athletes and the taxman.

“In cases of product endorsements or advertisements, these are deductable expenses the company concerned pays withholding tax on behalf of the athlete. While athletes are supposed to pay tax, no one is talking about how to provide them with medical cover, adequate training facilities or any other infrastructure including training fields,” said Tanui.

Tanui recalls with nostalgia his yester years when running for the country was an honor bigger than proceeds going into one’s bank account.

“I still remember those days when I broke the world record. The Government of Kenya only gave me a passport, a document which I also paid for. I have never been honored by the same Government that is now after my investment earnings,” Tanui said.

Experts and policy analysts said signing of bilateral double taxation agreements between Kenya and other countries could help lift the tax burden from these national heroes.

“If prize money has been taxed in one jurisdiction, the same income should not be subject to tax in another partner state that has signed a double taxation agreement with it,” said Gerrison Ikiara, Economist at the University of Nairobi.

He argues that athletes earn an income and should therefore make their contribution to building the economy, a responsibility of all citizens.

“Kenya has been a home to these athletes, a country that has allowed them to compete under its national flag. Threats that some athletes could change citizenship to more tax friendly jurisdiction amounts to blackmail,” said Ikiara.

Several Kenyan athletes have already changed citizenship in the last few years including world record holder and former gold medalist in 3,000 meter steeplechase at the 2002 Commonwealth Games, Stephen Cherono, who switched sides to Qatar and changed his name to Saif Saeed Shaheen.

Othere are Albert Chepkurui, a 5,000 meter runner who joined Cherono in Qatar, changing his name to Abdullah Ahmed Hassan; Bernard Lagat, a 1,500 meter runner, who is now a US citizen; Wilson Kipketer (Denmark); Wilson Kirwa (Finland); James Kwalia (Qatar); Leonard Mucheru (Bahrain) and Abel Cheruiyot (Bahrain).

Double Taxation Agreements

The Government of Kenya has concluded Double Taxation Agreements (DTAs) with a number of countries and is currently expanding her treaty network.

DTAs are important since they help in alleviating double taxation where business is conducted in different tax jurisdictions and also assist tax administrations in preventing fiscal evasion.

Those ratified and already in force include Zambia, Norway, Denmark, Sweden, UK, Germany, Canada and India. Those signed but not in force include Italy, Tanzania, and Uganda, while those yet to be negotiated include Seychelles, Nigeria, South Africa, Mauritius, Finland Russia, United Arab Emirates and Islamic Republic of Iran.

Attempts to rope in athletes earnings to the tax net comes when a lucrative incentive scheme has now been put in place to award those who win international races.

“There is need for a roundtable discussion between KRA and athletes to discuss how to tax earnings from the sports fraternity. One solution is to only tax what the athlete invests back into the country after winning prize money. This process involves KRA auditing one’s investment income,” Kipchoge Keino told AFK Insider.

Keino is a former long distance runner, who set world records in the 1960s. Keino broke the 3,000 meters and 5,000 meters world records in addition to winning four Olympic gold medals.

“There is a danger of athletes changing citizenship or investing their earnings abroad, Kenya being the loser in all this,” said Keino.