Olympics: tax dodge?

July 17, 2012

I’ve had an interesting email from the 38 degrees organisation asking me to sign a petition against an “Olympic tax dodge” and then another, excitedly explaining that McDonalds had already agreed not to take advantage of the so-called dodge.

So, I thought, what’s all this about then?

I had already vaguely heard that a country wasn’t able to apply to host the Olympics unless it also agreed to include a tax exemption, essentially so that athletes could go to the country where the games were held without having to worry about a tax grab over things like image rights that they might already have in place.

How did this, I wonder, apply to corporates like McDonalds?

Well, there’s an interesting article here from the Ethical Consumer which sets out their understanding of the “dodge” – that explains there’s also an exemption from corporation tax for “certain non-resident companies”.  Leaving aside the question of why would the Olympics be using non-UK-resident contractors in the first place, it seems not unreasonable to legislate so that the simple fact of working on the Olympics wouldn’t make a non-resident company into a resident company, doesn’t it?

The relevant legislation seems to be The London Olympic Games and Paralympic Games Tax Regulations 2010 (No 2913) (which can be found here, if you speak legislative-ese).  Let’s have a look, I thought, at the TIIN – the Tax Information and Impact Note, the impact assessment which would let you know the costs and benefits of the legislation.

Ah.  There isn’t one.

Look instead at paragraphs 10, 11 and 12 of the Explanatory Memorandum (the “plain English” explanation of the legislation)  First of all the explanation of where the Impact Assessment might be:

10. Impact

10.1 An Impact Assessment has not been produced for the Regulations as they have a negligible impact on business, charities or voluntary bodies.

10.2 The impact on the public sector is negligible.

Ok then, what do we mean by “negligible”?  The answer is to be found in the TIIN instructions which I obtained via a Freedom of Information Act request and published here.  The relevant limits are £100,000 or £3 million (presumably annual costs or benefits of £100,000 or overall cumulative costs/benefits of £3m):

“NEGLIGIBLE IMPACT (that is below £100k/£3m) then DO NOT commission analysis but instead explain what analysis has already been done e.g. any sectoral impacts or populations already known.”

So we conclude that no analysis was commissioned to support this piece of legislation because it was already known/assumed that its costs or benefits would be below the “negligible” threshold.

And then there’s:

12. Monitoring & review

The Regulations implement tax commitments made by the UK in bidding to host the Games. The tax commitments given are unique and for a time limited period. No monitoring and review of the Regulations is therefore planned.

So there we have it.  The government doesn’t think there’s any significant tax at stake, and it isn’t going to go back and check, so there.

The ethical consumer article (in its “read more” tab) has some interesting comparative figures from the 2006 FIFA World Cup in Germany which suggest the “negligible” figure is wildly inaccurate.  A Freedom of Information act request to see the data on which the decision not to commission analysis was founded might be interesting…

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