7 November 2012

Kenya: Exodus of Top Athletes Imminent As KRA Tightens Noose

Photo: The Star
Kenya's Hellen Obiri competes during the women's 3000m final at the 2012 IAAF World Indoor Athletics Championships at the Atakoy Athletics Arena in Istanbul on March 11, 2012.

An exodus of Kenyan athletes is likely as the taxman is on their case over unpaid tax. Athletes could change citizenship and run for other countries if the Kenya Revenue Authority continues to demand tax arrears from athletes.

Athletics officials and coaches have warned that the sport would suffer a serious talent drain if KRA follows through the demand for its share in the athletes' foreign earnings.

Double world long distance champion Abel Kirui on Sunday said the move by KRA to slap him close to Sh13 million tax arrears was tantamount to punishment for doing good work for the country.

"We (athletes) make this country proud and help place Kenya on the world map even without the support of the government. By introducing tax, they will be discouraging us," he said.

Kirui, who is an Administration Police officer, said he was shocked when he received letters from KRA asking him to clear a five-year tax arrears a few weeks ago. "All this time I have never received any communication from KRA and this made me wonder where it was all that time," he said.

He says the money he has won in several races have been invested and KRA is already taxing him indirectly. "I have invested this money. It is no longer in my account or in cash. It is all in assets," he said.

He said the move by KRA may force many athletes to change citizenship and move to 'athlete-friendly' nations.

The athletes received letters from the Kenya Revenue Authority two weeks ago, which required them to pay tax from their race earnings abroad.

World championships 5,000 metres silver medalist Sylvia Kibet has also been asked to pay about Sh2 million which has not gone down well with her colleagues who have asked KRA to reconsider the move.

World 800m record holder David Rudisha wants KRA to reconsider their move to tax athletes' race proceeds. He says the move is tantamount to subjecting athletes to triple taxation.

He said besides paying taxes on their investments in Kenya, they are also taxed heavily whenever they win races abroad. Rudisha says countries like the United States take 36 per cent in tax from the athletes' cash prizes while the agent chops another 15 per cent.

He said being subjected to a 16 per cent tax by the government will leave them in an even worse state. "Our athletes have several investments ranging from buildings, schools and companies and are paying taxes. If they are to pay tax on their prize money, I think this will be unfair," he says.

"This thing has been troubling me for some time and I feel it will be unfair for the government to subject us to this kind of treatment," Rudisha said.

"It is because of the athletes that the national anthem has been sang numerous times at different forums abroad. It is therefore wrong to discourage the very true ambassadors who continue to portray the country in good light," he added.

Coming to the athletes defence, Athletics Kenya chairman Isaiah Kiplagat said he will do everything possible to ensure the government shelves its plans to tax athletes.

"We also feel pain when the government wants to tax them (athletes) because we already know they are paying taxes," Kiplagat added.

The AK boss said some athletes have received letters from KRA demanding they pay taxes amounting to over Sh10 million. "I am against the move and let KRA know that athletes are already paying taxes. We all know KRA are taxing their investments," Kiplagat said.

Mosop MP David Koech said it is a shame that the government is even considering taxing athletes who struggle in their training to bring glory to the country.

"The government has done nothing to improve training facilities for athletes hence taxing them is shameful," he said. "I will stand with athletes and ensure that the government drops its plan to tax them," Koech said.

Already a number of Kenyans are running for other countries. They include world record holder and former Kenyan gold medallist in the 3,000m steeplechase at the 2002 Commonwealth Games, Stephen Cherono, also known as Saif Saeed Shaheen. He was among the first athletes to be lured away to Qatar while several others decamped to Bahrain. They include Albert Chepkurui, the 5,000m runner who joined him in Qatar, changing his name to Abdullah Ahmed Hassan, Bernard Lagat, the 1,500m runner, who is now a US citizen, Wilson Kipketer (Denmark), Wilson Kirwa (Finland), James Kwalia (Qatar), Leonard Mucheru (Bahrain) and Abel Cheruiyot (Bahrain).

Sports minister Ababu Namwamba says KRA should do extensive consultations before rolling out the move to tax athletes' race proceeds.

Namwamba says athletes are heavily taxed abroad when they win races and the tax authority should carry out wide consultations on how to tax them.

"The tax man should consider all the factors concerning athletes and tax. These are our gallant heroes who have put Kenya on the sporting map and we should not hurry in imposing taxing on them. They are already paying taxes and taxing their proceeds may not go down well," Namwamba said.

He said KRA should involve Athletics Kenya and athletes themselves on the best way forward. He said while the government is in a hurry to tax athletes, the minister acknowledged that nothing has been done to reward them in terms of availing the necessary training facilities.

KRA said they are targeting only athletes who have paid less than 30 per cent in taxation in the countries where they have won the money, but some of the runners said they have been ordered to pay a hefty amount in tax arrears.

John Njiraini, the Kenya Revenue Authority commissioner-general, said the tax demand is part of the renewed focus on rich Kenyans to help raise the revenue needed to finance rising government obligations.

Speaking to Business Daily, Njiraini said the athletes are only being asked to pay tax for money earned abroad based on the difference between the rates applicable in countries where they compete and the rates applicable in Kenya.

When an athlete wins a race in the US, if he pockets Sh2 million prize money, for example, he pays pays tax at the rate of about 35 per cent. It means the athlete will have to part with Sh700,000 with managers taking another 15 per cent (Sh300,000)

Should he be asked to pay another 30 per cent in Kenya, an athlete will only be left with 20 per cent of the money, which amounts to Sh400,000.

"You have not put in consideration the costs of accommodation, air tickets and other expenses; we will have nothing remaining for us," Abel Kirui said. "Sometimes one can borrow money when he is injured during training and when he wins he has to repay the money. I wonder of what value athletics will be in Kenya," he lamented.

Vivian Cheruiyot, who is a long distance runner, said she is pained to see that the government is not appreciating their good work.

Cheruiyot says out of her earnings, she has employed many people who pay taxes to the government. "This is very unfair. We have used much of our earnings to contribute to the Kenyan economy. We bring money home to put up investments, which are already heavily taxed by the government," said Cheruiyot.

Athletics marketer Martin Keino says it is unfair to tax the athletes more than once."Of course I don't think they should have their earnings double taxed. It's not fair!" said Keino, "the government should address the issue in a sober manner."

But on Thursday last week, Kenya Revenue Authority moved in to quell the stand-off between them and Kenyan international athletes over taxation.

In a statement, KRA explained: "It is important to note that the law requires Kenyan residents to pay taxes on their income regardless of its source or country of origin. Income from participation in sporting activities is no exception. Therefore, taxes on such income should be paid in the required installments and declared under self assessment."

The tax collector further clarified that they are only interested in taxing any money that does not meet the local tax provisions despite being taxed abroad.

As far as the athletes are concerned, the KRA explained that they are only interested in 'tax credit', which means the difference in tax percentage between the country of source and Kenya.

"The main complaint aired by a number of athletes regarding taxation of their overseas income is the perceived double taxation. It is claimed that they are expected to pay taxes in countries in which they compete. This may be true depending on the tax laws of those countries. However, such income is still subject to tax in Kenya. In this regard, the law provides for tax credit to the extent that tax has been paid on such income," read the statement.

The statement signed by Benson Korongo on behalf of Commissioner of Domestic Taxes (Medium and Small Taxpayers) added that the department is committed to enhancing compliance through informed awareness. "It is against this backdrop that the authority has put in place an elaborate educational programme targeting existing and potential taxpayers. We plan to facilitate awareness forums for athletes starting this month in Eldoret."

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