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Tax rise for foreign entertainers, sportspersons may affect IPL

Doubling of tax to 20% in Budget 2012-13 would dent the income of foreign actors, musicians and sportspersons

Varada Bhat  |  Mumbai 

Foreign actors, musicians, sports personalities including (IPL) players, and even producers may be part of a growing tribe that is attracted to the country’s booming But now they are set to see a dent in their earnings in India, after the Union government proposed to double their tax to 20 per cent.

“This will have implications on foreign sportspersons taking part in IPL, and other sports league which have started in the last few years,” said Rakesh Jariwala, partner & tax expert, M&E, Ernst & Young. “Even overseas artists who participate in TV shows, films and advertisement commercials will be burdened with this.”

This Budget proposal, which will come into effect from this July 1, says “income arising to a non-citizen, non-resident entertainer (such as theatre, radio or television artists and musicians) from performance in India shall be taxable at the rate of 20 per cent of gross receipts.”

* Analysts feel for sports like football and hockey leagues, the impact may be not high
* feels, the proposal will hit hard the companies, music labels, studios and brands that get artistes in India

Globally also, in countries like Germany, Sweden and the UK, similar tax rates exists for both entertainers and sportspersons, ranging from 10-30 per cent or the income being taxed under cultural tax.

According to several IPL team owners, as far as cricketers are concerned it will be up to the respective franchisees on how they pay salaries and how these deductions will be done respect to the tax. Said an IPL team official: “With some players, we have contracts for period of two-three years whose fees have already been fixed and salaries are paid in three to four installments during the year.”

For other sports like football and hockey leagues, the impact may be not high. “The earnings of these hockey players are not that high as of cricket,” said Harish Thawani, founder and CEO of Nimbus.

In the past few years, there has been a flurry of events in India which might have prompted the government to increase the tax rates. In the last three years, several sports events like IPL, Formula Race and WSH have come into the picture.

Also the has provided huge opportunities for foreign celebrities in terms of films, reality shows and music industry. In addition, the country saw the performances of American singer Lady Gaga, Akon, heavy metal band Metallica and house music producer and DJ David Guetta in the past one year.

However, entertainment industry officials feel more than artists and IPL players, harder hit will be the companies, music labels, studios and brands that get the artiste in India.

“Most of these artists and sportsperson have fixed fees or net amounts to be paid for an appearance or a performance,” pointed out Indranil Das Blah, COO at Kwan Entertainment and Marketing Solutions. “It will be up to various brands how they would pay these fees, as they will have to shell out more so the artists earnings do not have any implications.”

According to Devraj Sanyal, managing director (India), Saarc, of the Universal Music Group, most will now think twice before getting big international artists here. “The only way to get them here is by paying a higher gross amount,” he said. This would ensure that the net fees is not reduced or that one “just gets an artists who charges less or work with an Indian artist for gigs”. The company’s leading artists includes Lady Gaga, Bryan Adams, Metallica, Bon Jovi, Abba, Queen and Rolling Stones.

First Published: Mon, March 19 2012. 00:58 IST