Sutcliffe: Sens should get used to new financial climate
The relationship between governments, taxpayers and sports teams is unusual and complex at the best of times. But when the economy is struggling and public finances are under pressure, the situation gets trickier.
The relationship between governments, taxpayers and sports teams is unusual and complex at the best of times. But when the economy is struggling and public finances are under pressure, the situation gets trickier.
Columnist Mark Sutcliffe
On the surface, a sports franchise is just like any other local company offering a product to the community. But because professional teams are tied to the identity of a city and evoke deep passion in thousands of people – meaning voters – they are often given special treatment by governments. And it’s tough to have a rational debate about whether that’s a fair practice.
The latest in a long line of examples was introduced when Ontario Finance Minister Dwight Duncan began speculating this week about ending the tax deduction for businesses buying tickets or suites at sporting events. Rather than focus on the direct impact that might have on the thousands of companies losing the deduction (who would therefore have to pay more taxes) the discussion immediately centred on what it would mean for the sports franchises that would be indirectly affected.
The sequence of events that followed Duncan’s announcement was predictable. The Ottawa Senators claimed any change to the deduction could kill their franchise, sports fans and columnists responded with the same level of reasoned analysis as if a referee had called a penalty on Ottawa late in the third period of a close game, and others wondered aloud why the government should be subsidizing high-falutin’ tycoons doing business in a luxury box at Scotiabank Place.
We’ve been here before. Once upon a time it was the discussion over whether the Senators should get a break on their municipal property taxes. Then it was the debate over whether a provincial amusement tax should be applied to their tickets. Every time, the same scenario: the team says its existence is threatened, the fans panic, and others argue we shouldn’t subsidize pro sports and its millionaire players.
When times are good, the balance of public opinion often tips in favour of granting special status to sports teams for all the economic development and other benefits they create in the community.
But there are limits to the community spirit of the average taxpayer. In 2000, the Liberal government introduced a subsidy for professional sports franchises struggling under the pressure of a weak Canadian dollar. It was against the better judgement of ministers like John Manley, but there was a sense that Canadians would not tolerate losing another NHL franchise. Yet the backlash from taxpayers was so fierce the government reversed course and scrapped the plan in a matter of days.
But the furor over the latest proposal is overblown. Eliminating the tax deduction for sports tickets is not as significant a change as some people are suggesting. For one thing, taxpayers are not subsidizing 50 per cent of the cost of a corporate ticket purchase, as some people seem to have inferred. A business that claims the deduction is simply not paying taxes on the cost of the ticket if it makes a profit. There’s a big difference. On a $100 ticket, this might amount to a tax benefit to the business of $7.75. That’s not worthy of a public outcry over subsidizing rich CEOs so they can watch wealthy hockey players.
However, the size of the figure also suggests that eliminating the tax deduction would not dramatically impact a company’s decision whether to buy tickets or not. It’s natural that the Senators are feeling the pressures of a tough economy and having to compete against larger markets and they don’t want any new disincentives to purchasing tickets, especially during their season-ticket renewal campaign.
But there are many more reasons beyond an 8-per-cent tax benefit that a business executive sees value in taking a client to a hockey game. The Senators are selling themselves short if they think that a lack of a tax deduction would be a deal-breaker for many companies.
Beyond that, there is the fundamental question of fairness to a business. This isn’t really about the Senators, but whether a hockey ticket is a legitimate business expense. If buying an ad in the program can be deducted as a marketing cost, then why not bringing clients to the game to build relationships one-on-one?
There doesn’t seem to be a compelling principle to eliminate the deduction, other than the fact that the province needs the cash. But it wouldn’t likely make a huge difference to many companies if they could no longer claim half the expense as they can now.
Either way, it’s clear that with player salaries and ticket costs rising as fast as provincial and federal deficits, there is a diminishing compassion for sports teams as struggling operations in need of government support. As the provincial Liberals are aware, when people are worried about their health care, they’re less concerned about whether business owners will buy hockey tickets.
Whether the tax deduction is scrapped or not, the Senators and other sports teams should get used to the new climate. In tough economic times, there isn’t widespread sympathy for billionaire owners and millionaire hockey players, making them convenient targets for cash-starved governments.
— Mark Sutcliffe, The Ottawa Citizen
It should be pointed out that a significant number of seats in those corporate boxes are occupied by the company’s employees and families. This is a nice perk on a lot of levels, and again, the loss of a slender tax benefit isn’t enough deterrent. The whole point of perks is to do things people really like, and we love hockey. If we have to take something away from everyone corporate and individuals, this is a pretty good place to start.
IF this goes through and the Sens end up leaving Canada… to gain 15M the Province says it will get… they will lose in excess of 30M in taxes paid by the Sens to the Province. It will have a big economic cost on the City in way of revenue, tourism & hospitality. It will affect the 67′s, new football and soccer teams, baseball team, NAC performances — and that’s just in Ottawa… it is widespread. How would the charities fair out as the Sens contribute large amounts of cash to charities…
Mr. Duncan said it would benefit the Toronto Maple Leafs.. as they could lower ticket prices so the ‘regular fan’ could attend. Is this guy for real? He actually thinks the new ownership of MLSE will lower ticket prices, to take in less revenue… And this guy is in control of the finances of Ontario? That explains a lot.
The NHL is quite unhappy with this potential move.. Steve Lloyd of the Team 1200 contacted the NHL to get their point of view regarding this tax exemption being scrapped… Lloyd also asked if that move was done would the NHL consider not allowing Ontario to use NHL games for the online betting (Pro-Line).. That takes in huge lottery money for the Province..
Bill Daly stated the NHL is unhappy with this move. And if it is done it is unnecessary and unfriendly.
Corporate sponsors and ticket holders bring in the most cash to the NHL… Upsetting them would not be a good move.
Pro sports bring a lot to the economy… yes this is a perk to the Corporations… but only one of many…
I like the Senators and all but I don’t see why they should get more of a tax break than working stiffs. Ultra-rich pigs at the trough wanting more meal. Blech.
Don’t want to see them move, of course, but give the working stiffs a break before you give one to these guys.
“they will lose in excess of 30M in taxes paid by the Sens to the Province.”
Prove it.
Open the team’s and city’s books and show me the intake of money, show me the T4s from the players and show me the Seantor’s accounting. Until you do, this is simply speculation.
Also remember that Ottawa was a thriving metropolis prior to 1992. We didn’t start existing then and we will exist if they leave. The money will be spent elsewhere. Don’t believe me? Ask Winnipeg, Quebec City or Atlanta…they are still spending money on other activities.
Duncan is a complete fool. The Ontario government has spending problem and instead of focusing on cutting spending, especially in areas like FIT, LHIN, etc or even cost of cancellation he is looking at the meals and entertainment deduction. I guess Duncan donuts has never worked in business to see that meals/entertainment are cost of doing business and companies currently can only claim 50% of the deduction for tax purposes. It should also be noted the bars/restaurant business would lose money big time if this deduction were to go through. So, what is duncan donut really trying to accomplish? It is apparently another game of smoke and mirror to detract from the Liberal failures to hint areas that would help the economy. It is not wonder why Ontario is in such a mess with dumb and dumber running the province!!