It just doesn't add up
Putting a GAA inter-county manager's payment through the books would see a manager losing close to half of the 'under-the-table' cash he is accustomed to getting, a case study reveals.
The involvement of the taxman is one of the major reasons why 'option three' on director general Paraic Duffy's discussion paper on 'Payments to managers' looks doomed to failure.
If, theoretically, a manager is running an inter-county team for €45,000 per annum, on top of a regular €65,000 salary in another job, he could expect to lose over €21,000 if his managerial income was regularised by the GAA.
If a county board wanted to ensure that a manager still took home €45,000 after tax, they would have to provide him with a gross figure of close to €90,000, which is way beyond most counties, with most already struggling with the costs of inter-county team preparations.
It begs the question as to why a manager or a county board would want to agree to payments in accordance with one of the options provided by Duffy last month, when it would cost them so much.
Many of the managers who are used to 'under-the-table' payments for their services could deem regularised payments to be not worth their while under the weight of such an additional taxation bill.
For the purposes of our case study, the county board supplies the manager with a phone, but the manager looks after all his own travel arrangements.
The assumption is that he travels 16,000km in the line of duty with his county, which, at current GAA mileage rates, can be charged at 50 cent per kilometre. The difference using civil service mileage rates is minimal.
According to professional services company PricewaterhouseCoopers, who compiled the figures, half of that travel figure, 8,000km, and 75pc of the phone bill would not be liable for tax.
As an earner currently in receipt of €45,000 cash from the board for his services, the individual in question pays tax only on his regular salary. The 'effective' rate of tax on a €65,000 salary is 35pc, which sees deductions, when PAYE, PRSI and USC are calculated, of €22,666.54 to leave a net income of €42,333.46.
With the €45,000 cash he receives from the board, his total income amounts to €87,666.64. But put that €45,000 through the books, and the picture is completely different.
The total taxable income, after the non-taxable elements of phone usage and travel are deducted, is €106,600 and every cent of the additional €45,000 earned for the management services will be charged at the marginal rate of tax of 52pc.
With a far greater proportion of the combined income liable to the 7pc universal social charge, the difference is very significant with an effective tax rate of 42pc applying.
The total deductions between the management and the other salary rises to €44,458, an increase of €21,673 in deductions with the manager taking home just over €62,000. It's a difference of over €25,000 in take home pay.
It is accepted that some equipment costs the manager may accrue could also be written off against tax, but these would be minimal as most teams usually enjoy a full support structure from the county board for its administration.
An alternative way of meeting tax obligations would be to put payments through a management services company, of which the manager himself could be a director.
In the near certain event of the GAA not going down the road of payments to managers next week, however, the tax implications won't be relevant.
But it does underline why so many managers and benefactors would be keen to keep payments off the books.
The prospects of any county supporting 'option three' in the GAA's 'payments to managers' document, which recommends paying or increasing the expenses of managers, is diminishing all the time.
Limerick, Cork and Waterford have already this week decided to support 'option two', which calls for stricter policing of the hidden payments, with the establishment of a regulation and audit committee and a full-time compliance officer.
Clare, Tipperary, Meath and Donegal are other counties who have already made the decision to oppose regularising payments, while Kerry's clubs have effectively decided that they, too, will not be supporting payment. Their board is to make a submission next week.
All the Ulster counties will be opposing payments, while Wexford, Galway, Longford and Westmeath all have meetings scheduled for next week to discuss the issue.
At this stage, it will be a surprise if any counties go against the trend of supporting 'option two', though there is a suggestion that Westmeath may call for improved expenses for managers.