COMMISSION FOR TAXATION REPORT: There are serious concerns that some of the country's best players will leave for foreign fields if tax breaks are abolished, writes Johnny Watterson
THERE ARE fears in Irish rugby circles that top end international players will leave Ireland and play abroad if the Commission for Taxation abolishes the tax break for athletes. The Commission’s report is due on Monday.
In 2002 Finance Minister Charlie McCreevy introduced a scheme in his Finance Bill that allowed players claim back 40 per cent of the tax they paid during their 10 best sporting years once they retired. All of the professional rugby players currently contracted to the IRFU through the provincial teams will be affected if the scheme is withdrawn with the higher earners likely to find themselves significantly out of pocket.
More serious is the concern that the best players will be encouraged to leave to countries such as France where there is no salary cap and where clubs, many of them sponsored by millionaire business men, are market leaders in wage scales. France also has a favourable taxation scheme for foreign players coming in to play for French clubs.
Even with the Irish scheme in place national team captain Brian O’Driscoll had looked at options in France prior to signing his most recent contract with Leinster, while this summer Wallaby winger Lote Tuquiri made a move from Australia to Bayonne for a reported salary of €765,000 a year.
“There is serious concern in the sport. We’ve heard bits and pieces of what might be in the bill but we’ll have to wait and see the whole thing when it comes out on Monday,” said chief executive of Irish Rugby Union Players Association (IRUPA) Niall Woods. “I’ve spoken with the players and they are seriously concerned about the proposed changes to the relief. Some of the offers they have been getting recently (from outside Ireland) would now be looked at much more closely. And some of those offers may be too good to turn down.”
As the scheme stands now, if a player earned €1 million over 10 years, he would pay about €400,000 at the 40 per cent tax rate. On retirement he is entitled to claim relief of 40 per cent on the €400,000, which would work out at a total payout of around €160,000 on his retirement from the sport. Over the 10-year span, it would work out that the players would pay an annual tax rate of between 15 per cent and 16 per cent.
Currently players are entitled to claim tax relief only from earnings on the pitch and are taxed at normal rates for sponsorship deals or any media work in which they engage throughout their professional careers. The biggest claim so far for a rugby player has been €150,000, although given that the scheme has not yet been in place for 10 years, claims worth much more than that are certain in the unlikely event of the scheme remaining in place as it is.
The top 20 professional players in Ireland earn an average of around €200,000 per year. If those top performers departed, it would represent a €4 million euro salary loss, or, over €1.8 million in tax. “The money revenue have to pay out to players is Mickey Mouse given the situation the country is in,” said a player’s representative. “But look at what they would lose out on. Overseas players such as Felipe Contepomi, Rocky Elsom and Doug Howlett are all paid through the system. They pay PAYE. If top Irish players leave there is no way big name foreign players will come in and play here.”
It was calculated that Elsom’s stay with Leinster for just one season would have yielded enough tax revenue to pay for the relief of a number of Irish players. Contepomi, who at 31 was given so much money to move to France that Leinster’s increased offer to him was not even in the same ball park, would have contributed even more.
The potential knock-on effect of a possible player’s exodus is even more troubling at a macro level for the sport with concerns focusing on the ability of Munster, Connacht and Leinster, who regularly attract 15,000 plus to the RDS, to fill their stadiums for Magners League, European Challenge Cup and Heineken Cup matches (Ulster are not in the system as they are UK tax-based). With marquee names disappearing from team line-ups, the fear is that crowds would diminish and provinces would be forced to trim their staff and still expect to bring home trophies.
It has also been pointed out to the Tax Commission that successful rugby teams are large revenue generators for local economies. The Ireland match against England in the 2007 Six Nations Championship grossed €90 million for the economy, while Munster’s game against the Ospreys in the Heineken Cup last season generated an estimated €10.5 million for the Limerick locality.
The players have already been briefed about the financial consequences of abolition the tax scheme, while the Commission has been lobbied by both the IRFU and IRUPA.
“The damage on the field and off the field would be immense and this has all been documented by us in our submission to the Tax Commission,” added Woods.
Most of the players in Ireland are not in the same wage bracket as O’Driscoll or Paul O’Connell and, elite internationals aside, would earn €50,000 to €60,000 a year.
