Wetts1012;310375 wroteNo, its a tax. Markup is an option. Witholding is not.
A winning player has little/no chance of getting it back.
Investors should understand going in that your insta-up for 30% roi hit.
OP post questions what is a fair markup for a BAP. My contention is that the 30% withholding tax is an imbedded markup for most US tournament BAPs.
For purposes of recovering the 30% withholding tax that is charged to Canadian tournament players in the US, a player must be able to demonstrate they have incurred losses for other tournaments during the year. These losses typically take the form of other tournament buyins.
When a player cashes in a US tournament during the year, the buyin costs for other US based tournaments can be applied to effectively recover a portion of the withholding tax applied to the tournament cash.
As a simple example, if a player offers a $1,000 BAP at 1.2 on a US based tournament, they will effectively receive $1,200 (if they sell 100%). On the basis they have cashed in other US tournaments during the year, although it cost them $1,000 to enter the tournament, their actual out of pocket cost is $700 ($1,000 - $300) as 30% of the buy-in can be recovered by applying this buyin cost against the profits earned on other tournaments throughout the year. So effectively, the BAP markup is much higher as the player's cost is only $700 but they are receiving $1,200 in return.
As a result, to be fair to supporters of US based BAPs, the ability to deduct the cost of the buyin to recover 30% of the initial buyin should be factored into the pricing of the BAP. If a player already has a US cash during the year, the supporter of the BAP should not be charged the 30% that player can recover in withholding from the amount of the buyin. If a player wants to use a markup of 1.2 on a $1,000 to effectively earn $200 to cover their variance, the BAP should therefore be applied at a rate of 0.9 ($1,200 - $300) versus the 1.2 to account for the recovery of the withholding tax.
Thoughts?