For growing businesses with complex operations and lean teams, tax management can be challenging. Expanding rapidly into new markets with different tax regulations in each country can expose organisations to varying levels of financial risk, eat into margins and create long-term barriers to growth if not navigated with care.
The PGA European Tour has navigated many of these challenges. It operates in more than 30 countries, each with its own tax laws. Income sources, including broadcasting rights, sponsorship deals, ticket sales, merchandise and hospitality, are all taxed differently depending on the country of origin. Cross-border employment and the hiring of overseas contractors present further complexity. Withholding taxes on player winnings and appearance fees also fluctuate.
Sukh Dhillon joined the tour five and a half years ago as their first in-house tax specialist and has since been promoted to the newly created role of head of tax. His first act was to address challenges created by international expansion. He did this by optimising processes to quantify the risk and cost of doing business in new territories, which influenced decisions on whether to host tournaments in certain countries or not.
Transforming the tax narrative
Dhillon says relationship building is critical for leaders looking to change the narrative and position tax as a lever for growth. “You need to build relationships with senior leaders,” he says. “It’s important that the tax function isn’t seen as a blocker to the business. You need to communicate risks to leaders, but also propose solutions and actionable steps to address them.”
It’s important that the tax function isn’t seen as a blocker to the business
Over the past five years, the PGA European Tour has undergone a tax transformation. Dhillon has grown his team to five people and has also collaborated with tax advisors at EY. “I’ve worked really closely with EY to enhance our tax setup and create systems and processes to quantify and analyse risk, maximise our commercial opportunities and find areas for growth,” he says.
Early wins are often a vital first step in securing internal support along this growth journey. Opening lines of communication with tax authorities in different territories helped Dhillon and his team to gain a detailed understanding of the complex and evolving global tax landscape.
Turning tax into a growth tool
This information formed the basis of their taxation strategy. A good starting point for leaders to build their own is to create a system to quantify and analyse risk. “I’d recommend creating a red flag report,” says Dhillon. “This report highlights potential issues that could make it difficult to expand into a new territory, for example, withholding taxes. For us, this could be tax on player prize money or appearance fees – or the need to set up a company in a new country. This can be a lengthy process with cost implications. While there may be demand for your products or services in a new territory, you need to establish the true cost of doing business there, which also means understanding the tax implications.”
The next step is to identify green flags – avenues for potential growth. Dhillon says some territories offer sporting exemptions to support investment, such as tax breaks for tournament sponsors. These often encourage more sponsors to spend money and generate additional revenue for the tour. He also notes nations where the tour already has companies set up. This enables a smooth process to establish a competition with minimal extra cost to the business.
The company is now also maximising the value of commercial deals by proactively checking tax implications on agreements with sponsors. “We now step in at the contract stage with sponsors to make sure that if it says we’re getting a specific amount, we’re actually getting that,” he explains. “If commercial deals are subject to a large amount of tax, that really affects the margins.”
Tax and technology
Technology presents an innovative tool for small teams to save time and money and create new sources of revenue. Improving the quality of data, controls and processes within enterprise resource planning (ERP) systems can help drive efficiencies. Project management tools are another vehicle for tax teams to provide greater transparency and enable 360-degree communication with senior leaders. Cloud-based VAT platforms are also an option to bring compliance in-house and reduce costs.
All tax teams need to be constantly aware of changing international regulations
Tax and technology can also work in sync to unlock innovative new income streams. Businesses can earn tax credits for investing in research and development. It’s an area the tour has also sought to use. “Our IT team has developed their own scoring tool for our website, which is unique to the tour, and we’ve also invested in medical sciences,” says Dhillon. “This R&D is new to the market and can create new sources of revenue.”
This approach can help teams continuously improve their processes and demonstrate their value to senior leaders. “I’d recommend looking at lessons learned after every major project,” says Dhillon. “We do this after every tournament so we can improve from a tax perspective but also operationally. Internally, it’s a great way to communicate the progress and method behind your strategy.”
In the future, agility will be critical as businesses face an increasingly complex tax environment. “All tax teams need to be constantly aware of changing international regulations,” he says. “We may have to register in countries we didn’t have to before.” But with a robust strategy and processes in place – and the support of EY to lean on – Dhillon and his team are well-placed to use tax as a lever for future growth.
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For growing businesses with complex operations and lean teams, tax management can be challenging. Expanding rapidly into new markets with different tax regulations in each country can expose organisations to varying levels of financial risk, eat into margins and create long-term barriers to growth if not navigated with care.
The PGA European Tour has navigated many of these challenges. It operates in more than 30 countries, each with its own tax laws. Income sources, including broadcasting rights, sponsorship deals, ticket sales, merchandise and hospitality, are all taxed differently depending on the country of origin. Cross-border employment and the hiring of overseas contractors present further complexity. Withholding taxes on player winnings and appearance fees also fluctuate.
Sukh Dhillon joined the tour five and a half years ago as their first in-house tax specialist and has since been promoted to the newly created role of head of tax. His first act was to address challenges created by international expansion. He did this by optimising processes to quantify the risk and cost of doing business in new territories, which influenced decisions on whether to host tournaments in certain countries or not.
