Tempting Sport With Tax Breaks

Dutch tax expert Dick Molenaar is amused that countries are ignoring tax treaties they’ve signed in order to give themselves a better chance of attracting major sports competitions.

He says the UK and Canada have agreed to follow the guidelines on withholding tax laid down by the Organisation for Economic Co-operation and Development – the organisation that frames international tax treaties – but appear to overlook it when it comes to luring top sporting events like the Olympics and the European Champions Soccer finals scheduled for London’s Wembley Stadium in May.

Article 17 of the OECD’s charter recommends member countries apply withholding tax at whatever is their national rate, usually about 15 percent of gross but 22 percent of net in the UK.

“If a country won’t waive Article 17 and let the athletes off paying withholding tax, then I wonder if that would hurt its chances of holding the games,” Molenaar told Pollstar at Eurosonic-Noorderslag Jan. 15.

It’s not something that bothers him beyond being amused by governments that sign treaties but ignore them when it comes to staging the Olympics or a big soccer tournament.

The OECD isn’t a regulatory body and can’t do anything when a member country decides to bait a sporting event by allowing tax breaks.

Molenaar, like his German colleague Dr. Harald Grams, has done much to standardise European tax laws relating to musicians and level the tax playing fields.

Neither is in favour of Article 17 or withholding tax in general. The Dutch government scrapped it as of 2007 and urged the OECD and other EU countries to do the same. It decided the tax revenue stream it was producing in Holland was hardly commensurate with the cost and aggravation of collecting it.