The Britain's tax officials have decided to tax the income of Pakistan's cricket team earned during its ongoing tour to United Kingdom (UK) for playing five one day international (ODI) and three test matches there.
On the other hand, Pakistan had not imposed any tax on the English cricket team's tour to Pakistan last winter under the convention of Avoidance of Double Taxation and Fiscal Evasion, signed between the two countries.
Presently, Pakistan team is on official tour to UK to play a series including test matches and one-day internationals under the 'summer 2006 series'.
Sources told this corespondent on Monday that Pakistan Cricket Board (PCB) has lodged a protest with the government against the Office of the H M Revenue and Customs United Kingdom terming this taxation measure as unjustified. It suggested proper interpretation of the convention by the British tax officials for equal exemption treatment to the players of both sides.
Pakistan Cricket Board has informed the officials that in connection with the ongoing tour of Pakistan cricket team to England, the UK Tax office has conveyed to the PCB its intention to tax in UK under direct tax law, the income of the individual Pakistani cricket players earned during the period of the UK tour, regardless of where it is paid.
In support of the contention that no exemption from UK taxes is available to these players, the British tax officials have referred to the Article 18 of the agreement for avoidance of double taxation inked between Pakistan and UK (AADT), which is reproduced hereunder:
"Notwithstanding the provisions of the article 15 and 16 of this convention, income derived by a resident of a contracting state as an entertainer, such as a theatre, motion picture, radio or television artiste, or a musician, or as an athlete, (emphasis added) from his personal services as such exercised in the other state.
Where income in respect of personal activities exercised by the entertainer or an athlete in his capacity as such accrues not to the entertainer or athlete himself but to another person that income may, notwithstanding the provisions of article 7, 15 and 16 of this convention, be taxed in the contracting state in which the activities of the entertainer or athlete are exercised".
The PCB pointed out that a plain reading of the article, as reproduced above suggested that the officer is categorising the individual players as athletes. But, it is PCB's understanding that cricketers do not fall in the category of athletes, a position that is reinforced from a reading of paragraph 5 of the commentary on the relevant article of the model OECD convention, reproduced below:
"Whilst no precise definition is given of the term sportsmen it is not restricted to participants in traditional athletic events (eg runners, jumpers, swimmers). For example, it also covers golfers, jockeys, footballers, cricketers and tennis players, as well as the racing drivers."
In article 18 of the AADT, the expression agreed upon is athletes, and thus in our view is not applicable to the income of cricketers which is not covered by this article and must therefore be dealt with under other articles of the AADT including article 7 relating to business profits.
Under these circumstances, the PCB has approached the Pakistan government on behalf of the individual players, to take up the matter with the department of Inland Revenue, UK, in accordance with article 25 of the AADT for resolution.
The PCB has said that the position of Pakistan in the matter is very clear as is evident from the English cricket team's tour to Pakistan last winter when no tax was imposed in Pakistan on the income of any English crickter in respect of income attributed to the period of their tour to Pakistan.
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