March 19, 2006
André Agassi v. British Taxman: 3rd Set
Interesting English tax case involving André Agassi, as reported in today's Telegraph: Tax on Stars Is Unfair, Says Agassi as £500m Battle Goes to Lords, by Adam Lusher:
It is the match that pits Gordon Brown against André Agassi supported by Britney Spears, Tiger Woods and the Williams sisters. Tony Blair may not be taking sides (yet) but for Spears, Agassi and friends all eyes, surely, will this week turn to that great sporting arena: Committee Room One of the House of Lords. It is here, with £500 million at stake, that Agassi and his lawyers will contest the final set in the biggest match of their lives: Agassi v Robinson (Inspector of Taxes). Victory means Agassi will escape paying £27,500 to the British taxman. More important, Team Agassi estimates its stand could result in a whole galaxy of stars demanding the Inland Revenue return a total of up to £500 million in taxes, paid since 1988....
"This covers all the overseas entertainers who come to the UK to perform: sportsmen, football players, pop stars," explained Mike Warburton, a senior tax partner at Grant Thornton, the global financial consultancy. "All their agents will be looking at this, Britney's included." As Spears may, or may not, know, this is all because of section 555(2) of the Income and Corporation Taxes Act 1988… and Thriller by Michael Jackson. "It's all Michael Jackson's fault," explained Mr Warburton. "He started this. The law was introduced following a series of Michael Jackson concerts. "Overseas entertainers were making vast profits in the UK, and the British taxman wasn't getting enough." Hence the 1988 Act, section 555(2) obliging promoters and sponsors to deduct tax before paying stars for work in Britain.
For a while, the taxman was happy - very happy, because he wasn't just getting money from deals with British-based companies. If, say, a certain American tennis star had sponsorship deals with Nike, an American sportswear company, and Head, an Austrian sports equipment manufacturer, the British Revenue was entitled to some of that cash too. Why? Because, Mr Agassi, for a proportion of the tax year you were earning your sponsorship money while playing at Wimbledon. (Time spent in leather catsuits at Wembley Arena was taxable too, Britney.)
So Agassi took up the fight for multimillionaire entertainers. He had a disastrous first set, his arguments smashed all over the High Court by Mr Justice Lightman in March 2004, but recovered brilliantly in the Appeal Court. Now, it's all down to the third set, the House of Lords appeal by the Revenue. Dispensing with serve and volley, Agassi is relying on the old "principle of territoriality" tactic. If "territoriality" applies, he owes Mr Brown nothing because Agassi Enterprises, his company, and his sponsors Nike and Head are all outside British territory with no "tax presence" in the UK