F1 in deficit for 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, a loss-making event for taxpayers.

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

According to the study, 34% of Grand Prix participants and related parties 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 The newspapereconomist Jean-Marc Bergevin, author of the recently presented study, explained this significant leap by the fact that the study conducted on the 2015 Grand Prix “underestimated” the economic impact of the event.

However, even with $ 16 million in tax revenue, taxpayers are losing out. An analysis by La Presse last year estimated the negative gap between government revenue and spending related to the Grand Prix at more than $ 20 million for the period from 2015 to 2019 included (more than $ 4 million annual).

What is the net impact?

Economist Pierre Emmanuel Paradis, president of AppEco, regrets that the promoter of the Grand Prix and the sponsors praise the economic repercussions of the event without taking into account the public funds that are injected into it.

“What’s important to look at, and what this kind of study doesn’t bring us, is the net impact on the economy,” says Mr. Paradise.


Felip Barla.  Laval University Professor

Image courtesy

Felip Barla. Laval University Professor

Philippe Barla, a professor of economics at the University of Laval, agrees.

“Unfortunately, in Quebec, there are very few cost-benefit analyzes that are done, unlike what we see in other countries, including the Scandinavian countries and the United States, where they are used much more,” he says.

The chief economist of the Conference Board of Canada, Pedro Antunes, believes it was legitimate to focus on the economic impact. However, it does bring inconvenience to the inclusion of visitors from the rest of Quebec.

“If Quebecers spend in Montreal for this event, will they spend less elsewhere? [dans la province] for other events? he asks himself.

The same in Europe

The fact that the Canadian Grand Prix costs more than it contributes to taxpayers is not surprising to Colin Pratte, a researcher at the Institute for Socio-Economic Research and Information (IRIS).

He 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 funds allocated to them,” says Mr. Pratte.

He also wonders about the positive impact that the Grand Prix would have on the image of Montreal in the world.

“In a context of climate crisis, the Grand Prix lose its prestige and may, on the contrary, project a negative image of the host cities,” he argues. How many tourists will not visit the city because there is a Grand Prix that they consider polluting? This is impossible to quantify. »

PUBLIC EXPENSES OF THE CANADIAN GRAND PRIZE (2017-2022)

  • New paddocks: $ 67 million
  • “Hospitality area”: $ 18 million
  • Post-pandemic promotion: $ 5.5 million
  • Circuit improvements: $ 8.7 million
  • Annual fees paid in F1 (2017, 2018, 2019 and 2022): $ 74 million
  • Total: $ 173 million

Public funds to a company very active in tax havens

The millions of dollars that governments spend each year to ensure Montreal’s presence on the F1 calendar end up in the coffers of an American company that has subsidiaries in the tax havens of the Cayman Islands and Jersey.

Since 2017, Formula 1 has been owned by Liberty Media, which is also a shareholder in the SiriusXM digital radio network and the Atlanta Braves of Major League Baseball.

Low tax rate


John C. Malone.  American billionaire

Photo: AFP

John C. Malone. American billionaire

In late 2016, Liberty’s largest shareholder, John C. Malone, described the Formula 1 tax structure as “brilliant.”

Last year, Liberty recorded a $ 45 million tax expense on its financial statements. Had he had to pay the US federal tax rate of 21%, the company would have had to pay $ 166 million. The discrepancy is due to tax credits and other reasons, according to Liberty’s most recent annual financial statements.

The recent decision by OECD countries to set a minimum tax rate of 15% could have the effect of “adversely affecting Formula 1, as their revenues would be [alors] taxed at higher effective rates, “the company acknowledges.

For Colin Pratte, an IRIS researcher, Liberty Media’s fiscal situation makes the decision to subsidize the Montreal Grand Prix even more dangerous.

“We have to question the payment of public funds in a company that multiplies the tax regimes to pay the minimum possible tax,” he said.

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

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