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.
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Tourisme Montréal and Grand Prix promoter Bell Canada recently released a study estimating the economic benefits of the event at over $ 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 holidays held in downtown Montreal are 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 has doubled from 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 with the fact that the study conducted on the 2015 Grand Prix “underestimated” the economic impact of the event.
However, even with tax revenues of $ 16 million, taxpayers are losing ground. An analysis conducted by La Presse last year estimated the negative gap between government revenue and expenditure related to the Grand Prix at over $ 20 million for the period 2015 to 2019 inclusive (more than $ 4 million annually) .
What is the net impact?
Economist Pierre Emmanuel Paradis, president of the AppEco company, regrets that the promoter of the Grand Prix and the sponsors praise the economic impact of the event without taking into account the public funds injected.
“What’s important to look at, and what this type of study doesn’t give us, is the net impact on the economy,” says Mr. Paradis.
Filippo Barla. Laval University Professor
Philippe Barla, professor of economics at Laval University, agrees.
“Unfortunately, in Quebec, very few cost-benefit analyzes are carried out, unlike what we see in other countries, including the Scandinavian countries and the United States, where they are used much more,” he explains.
The Conference Board’s Canadian chief economist, Pedro Antunes, believes it was legitimate to focus on economic impact. However, it comes at a disadvantage for including visitors from the rest of Quebec.
“If Quebecs spend in Montreal on this event, will they spend less elsewhere? [dans la province] for other events? ” she wonders.
- Listen to Richard Martineau’s interview with Anuradha Dugal, president of the Conseil des Montréalaises, on QUB radio:
Same thing in Europe
The fact that the Canadian Grand Prix costs more than it brings taxpayers comes as no surprise to Colin Pratte, a researcher at the Institute for Socioeconomic Research and Information (IRIS).
He says that in 2020 Danish university researchers published a comprehensive study of Formula 1 races held in Europe from 1991 to 2017.
“Their data led them to conclude that the impact of the Grands Prix was negative, mainly due to the large amount of public funds allocated to them,” says Pratte.
He also questions the positive impact that the Grand Prix would have on Montreal’s image in the world.
“In a context of climate crisis, the Grand Prix are losing prestige and can, on the contrary, project a negative image of the host cities, he says. How many tourists will not visit the city because it hosts a Grand Prix that they consider polluting? This is impossible to quantify.
PUBLIC EXPENDITURE FOR THE GRAND PRIX OF CANADA (2017-2022)
- New paddocks: $ 67 million
- “Hospitality area”: $ 18 million
- Post-Pandemic Promotion: $ 5.5 million
- Circuit improvements: $ 8.7 million
- Annual fees paid to F1 (2017, 2018, 2019 and 2022): $ 74 million
- Total: 173 million dollars
Public funds to a very active company in tax havens
The millions of dollars that governments spend each year to ensure Montreal’s presence on the F1 calendar ends up in the coffers of an American company that has branches 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 of the SiriusXM digital radio network and the Atlanta Braves of Major League Baseball.
Low tax rate
John C. Malone. American multi-billionaire
In late 2016, Liberty’s largest shareholder, John C. Malone, called Formula 1’s tax structure “brilliant”.
Last year, Liberty posted a $ 45 million tax expense in its balance sheet. If it had had to pay the 21% US federal tax rate, the company would have had to pay $ 166 million instead. The discrepancy is due to tax credits and other reasons, Liberty’s most recent annual financial records show.
The recent decision by OECD countries to set a minimum rate of 15% could have the effect of “negatively impacting Formula 1, as its income 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 heavily subsidize the Grand Prix de Montréal even more dangerous.
“We need to question the payment of public funds in a company that multiplies tax regimes to pay as little tax as possible,” he said.
- From 2015 to 2031, taxpayers will have paid more than $ 300 million in F1 rights for the Canadian Grand Prix.