The Hindu Business Line : Tax sweetener for foreign players

Andrew Flintoff and Kevin Pietersen, who have got the best deal in the upcoming cricket mania, are going to be let off with a pittance by the taxman — a tax of 10 per cent under Section 115BBA of the Income-Tax Act, 1961 on the whopping Rs 7.5 crore or thereabouts that each would have earned after playing in the IPL cricket tournament this summer in India.

Differential tax treatment

The promoters of the team they would be playing for will have to deduct the tax at source in terms of Section 194E and deposit it with the treasury. The irony and inequity of the differential tax treatment cannot be lost on anyone who cares to read the section preceding this charging section — Section 115BB brings the entire weight of the income-tax law on the one winning a lottery, contest or similar windfalls by imposing the maximum marginal rate of tax, 30 per cent, on such winnings. Nobody can deny the fact that there is a huge element of bounty involved in the fees paid to cricketers participating in the IPL tourney.

Even otherwise, where is the need for subverting the normal law and indulging sportspersons only because they happen to be non-resident foreigners, the two prime conditions subject to which the huge tax reprieve is granted?

To be sure, the country of residence of such sportspersons might show no such tax indulgence and impose full tax with only the tax already paid in India mitigating the burden. But that is not the point. The point is whether this is a well-merited tax subsidy.

Foreign cricketers flock India enamoured by the huge moolah on the table just as FIIs throng the Indian bourses enamoured by profits. It is idle to contend that both would spurn India if tax concessions were not offered to them.

Tax sacrifice

The self-abnegation on the part of the Indian law is indeed astounding. The enormity of the tax sacrifice would be even more telling if one cares to read Section 115BBA fully — the hugely concessional 10 per cent tax is not only on the match fees earned but curiously and inexplicably also on advertisement fees earned, besides on the fees earned for writing articles in the media. Incidentally, the section leaves scope for a lot of hair-splitting, thanks to shoddy drafting that has come to characterise our laws.

Would an ex-foreign sports star featured in an advertisement be eligible for the indulgence shown by the section? Would an ex-foreign sports star writing articles in Indian media be similarly indulged with an apology of a tax?

The way the section has been couched, it seems even ex-sports star of foreign ethnicity would make the grade given the fact that once-a-general-always-a-general norm religiously enforced by servicemen is also by convention applied to sportspersons.

One wonders why the same indulgence hasn’t been shown to foreign sportspersons sitting in the commentary box. In the event, Tony Greg sitting in a commentary box in India may have the mortification of having to fork out full tax on the income he earns from commentating but savour the joy of being let off with 10 per cent on his contributions to media.

Legislature’s intention

Levity apart, it seems the intention of Parliament, right or wrong, was to indulge the sportspersons participating in sports events in India also when they wear the hats of models and writers. In other words, the primary condition that seems to have weighted with Parliament was a foreign sportsperson playing in India and dabbling in modelling and writing should not be taxed on income arising from any of these three activities at more than 10 per cent. It could not have been the intention to indulge them in perpetuity, that is, even after their shelf-life has expired.

The moot point is of course whether even foreign sportspersons in their prime should be indulged. Foreign technology should be indulged because there is altruism involved in this.

Similarly, there is justification for indulging foreign construction firms. But there is none whatsoever when it comes to foreign sportspersons.

(The author is a Delhi-based chartered accountant.)

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