Canadian Grand Prix, an event that loses taxpayers

The two governments, the City of Montreal and Tourisme Montreal, have paid more than $170 million since 2017 for the Grand Prix du Canada, an event that loses taxpayers.

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Tourisme Montréal and Grand Prix promoter, Bell Canada, recently announced a study estimating the event’s economic benefits at more than $63 million and the resulting tax revenue for Quebec City and Ottawa at $16 million.

According to the study, 34% of participants in the Grand Prix and related celebrations held in downtown Montreal come from the metropolitan area. The others come mainly from the United States (20%), other provinces (20%), other countries (12%) and the rest of Quebec (7%).

Estimated tax revenue doubled compared to 2015, when it was estimated at $8.1 million. Joined yesterday by NewspaperAnd economist Jean-Marc Bergevin, author of the recently unveiled study, explained this important leap by the fact that the 2015 Grand Prix study “underestimated” the economic impact of the event.

However, even with tax revenue of $16 million, taxpayers are losing out. An analysis by La Presse last year estimated the negative gap between government revenue and GP-related expenditures at more than $20 million for the 2015-2019 period inclusive (more than $4 million annually).

What is the net effect?

Economist Pierre-Emmanuel Paradis, President of AppEco, regrets that the Grand Prix promoter and sponsors are praising the event’s economic results without taking into account the public money that has been poured into it.

“What is important to look at, and what this kind of study does not give us, is the net effect on the economy,” says Mr. Paradis.

Philip Barla.  Professor Laval University

photo courtesy

Philip Barla. Professor Laval University

Philip Parla, professor of economics at Laval University, agrees.

“Unfortunately, in Quebec, there are very few cost-benefit analyzes being done, as opposed to what we see in other countries, including Scandinavia and the United States, where they are being used more,” he explains.

The Conference Board of Canada’s chief economist, Pedro Antunes, believes it is legitimate to focus on economic impact. However, it does bring the downside to including visitors from the rest of Quebec.

“If Quebecers were spending in Montreal for this event, would they spend less elsewhere? [dans la province] for other events? “Wonders.

  • Listen to Richard Martineau’s interview with Anuradha Dougal, President of the Montreal Council, on QUB Radio:

The same in Europe

The fact that the Canadian Grand Prix costs more than it brings taxpayers does not surprise Colin Pratt, a researcher at the Institute for Social, Economic and Information Research (IRIS).

It says that in 2020, Danish university researchers published a comprehensive study of the Formula 1 races held in Europe from 1991 to 2017.

“Their data led them to conclude that the impact of the Grand Prix was negative, mainly due to the large amount of public money allocated to them,” says Mr Pratt.

He also questions the positive impact of the Grand Prix on Montreal’s image in the world.

“In the context of the climate crisis, the Grand Prix loses its prestige and can on the contrary project a negative image of the host cities, he argues. How many tourists would not visit the city because it holds a grand prix that they consider polluted? This is impossible to determine.

Overhead on the Canadian Grand Prix (2017-2022)

  • New pastures: 67 million dollars
  • Hospitality area: $18 million
  • Post-pandemic promotion: $5.5 million
  • Circuit improvements: $8.7 million
  • Class 1 annual fee paid (2017, 2018, 2019 and 2022): $74 million
  • sum: 173 million dollars

Public funds for a very active company in tax havens

The millions of dollars that governments spend every year to ensure Montreal is on the Formula 1 calendar ends up in the coffers of a US company that has subsidiaries in tax havens in the Cayman Islands and Jersey.

Since 2017, Formula 1 has been owned by Liberty Media, which is also a contributor to SiriusXM digital radio network and Major League Baseball’s Atlanta Braves.

low tax rate

John C Malone.  American billionaire

Photo: Agence France-Presse

John C Malone. American billionaire

At the end of 2016, Liberty’s largest shareholder, John C. Malone, described Formula 1’s tax structure as “fantastic”.

Last year, Liberty recorded tax expenses of $45 million in its financial statements. If it had to pay the US federal tax rate of 21%, the company would have to pay $166 million instead. The discrepancy is attributed to tax credits and other reasons, according to Liberty’s most recent annual financial filing.

The recent decision by OECD countries to set a minimum tax rate of 15% could have a “negative impact” on Formula 1, because its income would be [alors] taxed at higher effective rates,” the company acknowledges.

For Colin Pratt, a researcher at IRIS, Liberty Media’s tax situation makes the decision to provide major financial support for the Montreal Grand Prix all the more risky.

“We should be skeptical about paying public money in a company that multiplies tax schemes to pay as little tax as possible,” he said.

  • From 2015 to 2031, taxpayers will have paid more than $300 million in F1 rights to the Canadian Grand Prix.

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