Taxation can impoverish as well as replenish, overturn empires or elevate kings. It is getting the balance right that counts. Last Wednesday 400+ members of Kenya’s running nobility gathered in Eldoret, the center of Kenyan running in the North Rift Valley, to unite in opposition to an imposition, an imposition of a direct tax on their athletic earnings.
In one voice the athletes said, nay! we already pay indirect tax via the local levies on holdings, businesses, and the like. (Athletes are the Republicans in this scenario, the trickle down, job-creators.) On the other side sits the Kenyan Revenue Authority (KRA) which says the law is simple, all Kenya citizens must pay (30%) tax on all earnings.
But as always in Kenya, there is the law and then there is the policy. For years Kenyan athletes have been seen as ambassadors for their country, elevating its world standing by their superb racing exploits. What’s more, their income was considered an engine of commerce as they poured their earnings back into their local economies. And since those businesses and investments were always subjected to taxation, the athletes say the imposition of a direct tax on earnings would not only stifle future economic development, it would double tax them as their earnings are already taxed in the countries in which they race.
But there’s more to it than that. Just 50 years free from British colonial rule, Kenya remains a young nation, and the ties that bind a nation together are not as developed as one might assume. What further underlies the athletes’ opposition to the new policy is the duplicity they see as coming from the government.
Kenyan Parliamentarians are among the highest paid in the world in a nation whose citizens earn an average $1800 per year. Last summer the MPs succumbed to public pressure and agreed to drop their salaries by nearly 40%, but from $120,000 a year to $75,000! Then they voted themselves exempt from paying any tax! That’s good work if you can get it.
The argument from the KRA vantage point says that the policy of not directly taxing the athletes’ income was initiated decades ago when there was just a trickle of men running overseas. Today, that trickle has become a torrent, and the time for such a lenient tax policy has long since passed, and the athletes must now be treated like any other citizen. Thus, what we see is one side looking to overturn tradition, while the other wants to maintain its legacy.
In response to the governments’ new policy the runners have formed their PAAK – the Professional Athletic Association of Kenya – the first such athletes union in Kenyan history. At the same time in Nairobi, Athletics Kenya (AK) head Isaiah Kiplagat told Capital Sports that he had written to all the accredited athlete agents and managers requiring them to submit information on incomes earned by their clients to assist in computing taxes owed to the Kenyan Revenue Authority (KRA) within the coming month.
Besides some of the biggest names in Kenyan running, the athlete best positioned to assist his colleagues, one would think immeasurably, is Wesley Korir, the MP from Cherangany who is also the 2012 Boston Marathon champion. Korir, who won his seat in parliament last year, told Standard Media that athletes would rather boycott international competitions, and even defect to other nations rather than submit to what they considered onerous taxation.
“We would rather invest in countries that appreciate us and would rather have us represent them than in a country where earnings from our sweat are taxed,” said Korir, noting that the majority of the athletes are also civil servants, and/or have invested heavily in local real estate and other businesses which attract taxation. Thus, further taxing would be detrimental to the development of athletes. He also noted that athletes have received little assistance from the government in developing their talents.
While Kenyan athletes are among the highest paid and highest profile citizens in their East African nation, the amount of earnings they receive publicly is rarely the amount they take home. Korir did a breakdown of how an athlete’s winnings are divided.
“30 to 35 per cent (withholding tax) for the country of origin, 15 per cent for the agent, 10 per cent for the manager, and now the KRA wants to add salt to injury by slapping a 30 per cent tax of that amount,” he said. “That is exploiting us.”
KRA spokesperson Maureen Njongo said they would ensure athletes do not pay the same taxes in two countries.
“Sportsmen should furnish us with details of their taxation abroad to be factored in our records,” said Njongo.
Kenyan runners found welcome support from former Kenyan Prime Minister Raila Odinga.
“It is not a secret that with hardly any meaningful government-run youth soccer or athletics programs and no government initiatives to help them land deals abroad, these young Kenyans have stood out against monumental odds. They are thriving on their God-given talents, which they nurture through discipline, hard work and heavy investment of their hard earned money in health and fitness.”
PAAK spokesman Wesley Korir, and newly-elected PAAK Chairman Wilson Kipsang, the marathon world record holder, said that KRA had no mechanisms to determine the amount to be taxed. PAAK Assistant General Secretary Gilbert Kiplom sent the following list of interim PAAK officers:
Chairman; Wilson Kipsang
Vice Chair: Moses Mosop
Secretary: Milcah Chemos
Asst.Gen.Secty: Gilbert Kiplom
Treasurer: Geoffrey Mutai
Public Relation Officer; Ben Chebet
Organizing Secretary; Bisluke Kipkorir
Spokesman: Wesely Korir
According to Mr. Kiplom, “PAAK is working for the welfare of all athletes and we are not taking the responsibilities of Athletics Kenya (Kenya federation).”
This battle, you can bet, has only just begun.