Kenya's sports professionals dodging Kenya Revenue Authority

By NAIROBIAN REPORTER

Is it likely that Kenya’s sportsmen and women have eluded the taxman’s net?

With the Kenya Revenue Authority increasingly concerned with how to raise more than Sh1 trillion to meet the country’s budget needs, it has emerged that the sports industry has largely been overlooked.

The Nairobian has established that KRA is missing a chance to collect billions of shillings every year from Kenya’s sports professionals.

Although most Kenyans largely perceive sports as a poor man’s profession, with scores holding the opinion that clubs are mere welfare associations, recent trends show the economics of the industry is changing fast.

Earnings for local players have increased massively and foreign players – attracted by reasonable salaries and perks – have joined Kenyan clubs. Many more local sportsmen and women plying their trade overseas are earning millions of shillings.

The earnings of an average footballer in Kenya ranges from Sh30,000 to 100,000 per month with some clubs in the Kenyan Premier League paying daily training allowances of Sh200 to Sh300.

Recently, Football Kenya Federation raised the daily training allowance for Harambee Stars players while in camp from Sh4,000 to 10,000 which sums up to hundreds of thousands considering the national team camping sessions last more than a week or two.

Then there are other sporting disciplines like volleyball, field and track athletics, where participants rake in millions in allowances and prize money.

With the continued sponsorship deal from Kenya Airways, a Kenyan rugby player can now earn more than Sh5 million a year, making the game the best-paying sport in the country.

Since independence, it has not been clear how the sportsmen and women in Kenya are taxed by the Kenya Revenue Authority, and how much they contribute to the economy.

Yet in developed economies, sportsmen and women – even those from Kenya – pay taxes and some even negotiate higher pay to cover up for taxation.

Kenyan athletes – who globetrot every year for dozens of races where they come back with the big bucks and glory – are taxed between 30-60 per cent by hosting countries especially in Europe and North America.

Most of them also remit around 15 per cent to their agents or managers who organise the races, accommodation and air tickets.

For example, Mary Keitany who won the lucrative $500,000 (Sh43.5 million) World Major Marathon (WMM) series jackpot last year took home at least Sh28 million after the deductions.

The case is similar for Kenyan football stars in Europe.

The recent move by Harambee Stars captain Victor Wanyama to Southampton, England, from Scottish Premier League, where he played for Celtic, has locally become a subject of discussion over his pay which is reportedly Sh4.2 million a week.

UK recently announced a 50 per cent income tax in contrast to other top footballing countries like Spain where the rate is 27 per cent. This means Wanyama is likely to be paying around Sh2.1 million a week as tax.

Perhaps the only time in Kenya’s history that sports and taxation has become a subject of public debate was in 2012 when KRA demanded that Kenya’s athletes pay tax at the top rate of 30 per cent.

The proposal sparked a furore from athletes who warned that they would be taxed twice – locally and abroad – if KRA had its way. Most host countries for big game events tax the athletes.

The debate is still on and even Chereng’any MP Wesley Korir, who won last year’s Boston Marathon, has said the taxman should not demand taxes from sportsmen and women since they do not have a steady income.

The law does not exempt anyone from paying taxes. Taxation varies depending on one’s income. Ordinarily, it is pegged at 30 per cent of gross income but those with very low incomes enjoy some relief.

The senior deputy commissioner in charge of marketing at KRA Kennedy Onyonyi told The Nairobian: “Football in Kenya is treated more as a peripheral occupation for many people. You find that one is a doctor, police officer or engaged in other platforms on professional grounds where they end up paying tax. As such, whatever income that they earn from the clubs is an additional income which they should file tax returns on individual basis.”

Collection of taxes appears to be KRA’s key problem because of the nature of the sports industry.

A spot check into several local premier league clubs revealed that they do not have proper books, records of finances and even salary and allowances systems for players.

“Most clubs are registered as either welfare societies or community based outfits. Years ago, players were mainly paid allowances. The structures have largely remained the same except for a few clubs and as so, the Kenya Revenue Authority has not deemed it fit to raid them,” Joseph Bonyo, the KTN business editor, said.

It appears that most sporting units have not had any proper and sustainable financial records through which the taxman can follow up on taxation.

“Arrangement for sporting units like football clubs which are mainly registered as non-profit making bodies are different in terms of tax returns but a club like Kenya Revenue Authority FC pays direct tax and in fact each player in KRA FC pays taxes and all deductions are up to date,” KRA’s Onyonyi said.

But even as taxation of local sportsmen and women remain contentious, the question of how Kenya can benefit from its increasing number of local players has not been explored.

According to the records obtained from Kenyan Premier League, there are 43 foreign football players who ply their trade in Kenya. While some are not paid well by their clubs, their earnings are inconsistent which may make it difficult for KRA to find how to tax them.

A player in one of the KPL clubs told The Nairobian: “I haven’t been paid a salary for the last three months. All we get is some handouts occasionally from the chairman.”

Bonyo said: “Professional football is a new phenomenon to our clubs and as it is, most of them would be from countries within the East African Community. As such, the integration laws that govern free movement of labour and services within the community would be applicable. Suffice to say, the Kenya Revenue Authority must, going forward, look at how sports can generate revenue as it happens in the developed economies.”