Nadal claims he loses money when he plays at Queen's every summer
British tennis officials are holding "high-level discussions" with the government in a bid to gain a tax exemption for foreign players.
Rafael Nadal will not play at the Aegon Championship at Queen's in 2012 because of the earnings he will lose to tax.
The ATP World Tour Finals could also leave London when its contract ends in 2013 unless UK tax laws are altered.
"We're taking this very seriously," said Lawn Tennis Association (LTA) chief executive Roger Draper.
"One of our priorities is to retain this event and tackle the player-tax issue," added Draper, who expects to find out if tennis has earned an exemption when the government reveals the Budget in March.
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The most senior people in government are taking this seriously because they can see the economic impact - there is sympathy there, we're hopeful
Roger Draper
LTA chief executive
UK tax rules state that in addition to tax paid on prize money and appearance fees, visiting athletes have to hand over a percentage of their global endorsement income, with the amount proportional to the time they spend in the UK.
It means Nadal, who normally spends four weeks in London over the grass-court season in the summer and then returns to the capital for almost two weeks in November for the Tour Finals, hands over some of his earnings from sponsors such as Nike and Babolat to HM Revenue and Customs.
The Spaniard claims he actually loses money from his week at Queen's.
"We're busy having high-level discussions with the chancellor, prime minister and treasury minister at the moment," Draper revealed.
"The government has got a lot of issues on its plate but we had the prime minister at the National Tennis Centre for three hours the other week and I've had a letter from the chancellor this week explaining the things he is going to do.
Analysis
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Tennis has been concerned about this for several years and officials have been lobbying the government quietly behind the scenes
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"So the most senior people in government are taking this seriously because they can see the economic impact. They've made a commitment to us that they're going to look into this. There is sympathy there, we're hopeful."
London's 17,500-capacity O2 Arena was awarded the season-ending World Tour Finals - previously staged in Shanghai - on a four-year deal from 2009.
"We haven't had formal talks with the ATP [about extending the contract] as yet," stated Draper. "But our intention is to sit down during the course of 2012 to have those discussions.
"Clearly the player-tax issue has got in the way of some of those discussions - what we want to do when we sit down with the ATP is have that issue out of the way.
"We've got lots of things in our favour but we're not standing still because there are a lot of countries in the world that are beginning to get their act together - like Brazil, China, India and so on - and are making statements in terms of major events."
Other individual sports such as golf and athletics are also affected, with sprinter Usain Bolt thought to have pulled out of last summer's London Grand Prix at Crystal Palace for tax reasons, but the 2012 London Olympics has been granted an exemption.
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