A new Tax Stories episode has just been released!
Kaspars has scored 51
points in 81 games while playing for Latvia national ice hockey team. He has
been playing in NHL for Ottava Senators & Boston Bruins
(played for Boston at the Stenley Cup finals 10 years ago). Then he
played at KHL in Russia and Latvia. Currently Kaspars plays in the Swiss
National League for Bern, has scored 18 points in 26 games, 3+3 in the
last 3 games! The first ½ of the chat is more on life and business principles,
and then we dive into taxation in sports in the 2nd half.
Golf is like a game we
call life
Golf is something Kaspars
enjoys after a long season at an ice hockey ring. “It just makes me happy,” he
said. He also told a nice story on how he fell in love with golf back in the
US. We both came to a conclusion that golf is exactly like Bobby Jones has
said: “Golf is the closest game to the game we call life. You get bad breaks from
good shots; you get good breaks from bad shots – but you have to play the ball
where it lies.” Kaspars adds that it’s also like a mental training – how to end
up having a good result even from bad situations. But overall it’s all about
enjoying the game.
Talent confirms - focus
on work
I like the attitude of Kaspars
to his profession. He said there is no other key to success than a hard work,
even if you have talent. Nobody doubts that he is a talented player, but his
reply gives hope that everyone can achieve top of a mountain with some
dedication and work. Kaspars says that professional athlete career is so tough
he would never suggest it to his kids. One of his key drivers is being paid a
lot of bucks for doing what you really like.
Leadership in business
and sports
We spoke that Ted
Lasso series (one of the best series I’ve ever seen, btw) are quite good for
seeing how business and psychology principles are applied in sports. Kaspars
confirmed that indeed, if there is a problem inside the team, there is a
problem on ice. Bonding within the team, also with families of the team players
is a key as well.
Develop your strength,
not weaknesses
We also spoke about a training
I attended where a Belgium national field hockey team coach Alain Goudsmet[1]
said that he applies the same principles he used for coaching a team to leading
any business. For example, he says that a professional needs to be aware of
his/her talent and develop it. And Kaspars confirms that his coach was
confirming almost the same ~70% of one’s effort should be on the strengths. We then
had a laugh about his super-original shoot-out idea that was a big hit on youtube[2].
Motivation
Kaspars told his
motivation is always to win and have bigger goals of winning championships. Money
will come and go, but memories of such wins will stay forever. Winning a championship
in the American hockey league (he won AHL in 2011 with Binghamton Senators)
probably is the proudest moment of his entire professional career.
The power of debriefings
Nelson Mandela said: “sometimes
you win, sometimes you learn.” Kaspars told about his learning experience after
games. He not only watches videos after games, but also later at home before
the sleep thinks of good and not so good moments. Likewise in business a constant
debriefing is an important part of a learning curve. Are you before your sleep
thinking of good and bad moments you or your team had back in the office?
Comparison of taxation
in the countries Kaspars played
Russia stands out with
its low taxation. An interesting aspect of playing in NHL was the US Jock Tax - almost all the US states where
the game and pre-game practice takes place calculate a proportion of such days to
all the games and sends a tax bill, based on the player’s salary.
At the beginning every
penny counts
Kaspars started his American
career with ~62k $ a year, and the taxation was quite high in NY. Around ½ of
the pay-check was paid to the government. So for a young guy starting with ~30k
a year with an expensive housing and other costs, using all the possible
deductions was important, and in US at that time it was possible to have
sports-related deductions in an annual tax return.
Rough taxation in NHL
When Kaspars signed with
Ottava Senators his contract was ~630k $. But Canada was crazy expensive from
tax point of view. It was around 51% in taxes + 5% goes to the agent, but 16%
went to the escrow (NHL fund) that is shared back to players, if the big name
teams make it to the playoffs and thus the league makes enough money. So, it may
well be the case that players with a contract of ~1 mil. $ may receive just
~300k net!
Why do sportsmen have
agents?
At that point I thought
about agents – if we want to change the employer we just talk to another
employer. Should we better hire an agent as well? Nowadays LinkedIn often
does the job of an agent. Also, for example, the internet has changed how
the book market works – I don’t need an agent to publish a book on Amazon
anymore. Is it the right time to change the system in professional sports as
well?
Taxes ended Kaspar’s
career in NHL!
At some point Kaspars had
a choice – to sign with Ottava Senators for ~600k from which ~60% would go in
taxes, or a contract for 1.2 mil. $ from which only 13% are payable in taxes.
So it was not a rocket science choice. Also within NHL the taxation differs a
lot, depending if you play in Florida or Dallas (and pay less in tax), or the
LA or NY (and pay more), for instance.
Tax story of Sergio
Garcia and TaylorMade contract in the US
A few years ago, the professional golfer
Sergio Garcia (a Spanish citizen and a resident of Switzerland) was involved in
a dispute with the US IRS over whether he owed U.S. taxes on sponsorship income.
He had a nice deal with TaylorMade that allowed the company to use his image,
name, and voice. As part of the agreement, Garcia also delivered personal
services by using TaylorMade’s equipment in tournaments, appearing in
advertisements, and making personal appearances. The agreement with TaylorMade
stipulated that 85% of Garcia’s money was for royalties (for using his image,
name and voice) and 15% was for personal services (using TaylorMade
personally). The dispute with the IRS ended up in the Tax Court, which
allocated 65% to royalties (free of U.S. taxes due to tax treaties) and 35% to
personal services (subject to U.S. taxes).
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