US athletes who won medals at the London 2012 Olympics are in for a disappointment: They will have pay taxes on their prize money. But some question if the Olympic medal should come with prize money at all.
According to the US legislation earnings made by a US citizen abroad are liable for both local tax and US tax. Most countries have a “territorial” system of tax and apply that tax just once – in the country where it is earned.
Some think the US athletes are being punished for their success. Florida Senator Marco Rubio introduced a bill earlier this week that would eliminate tax on Olympic medals and prize money.
“Athletes representing our nation overseas in the Olympics shouldn’t have to worry about an extra tax bill waiting for them back home,” said Rubio.This, he said, is an example of the “madness” of the US tax system.
The US Olympic Committee awards prize money amounting to $25,000 for gold, $15,000 for silver and $10,000 for bronze.
This money is considered taxable income by the US Internal Revenue Service (IRS).
So an athlete on the highest rate of tax (35 per cent) could face a tax bill of $8,750, according to the advocacy group Americans for Tax Reform (ATR). The value of the medals themselves could be subject to tax too.
That adds a further $236 for gold, $135 for silver and $2 for bronze.
So, US swimmer Michael Phelps, who has already won two gold and two silver medals in London, would have to pay roughly $28,000 in tax.
Not all athletes get prize money along with an Olympic medal – it depends what country you come from.
The decision whether to offer money is made by the national Olympic Committees in each individual country, who also set the sum.
For instance UK medal winners get no prize money. Instead they are honored by appearing on a postage stamp. Whereas Singapore is offering $800,000 for a gold medal.
“Americans are focusing on the wrong issue“, says John Hoberman, a sports historian and expert on doping at the University of Texas. “Cash incentives are just an incentive to cheat.” The real question, he believes, is whether athletes should be awarded prize money at all at the Olympic games.
ref : www.rt.com