The two governments, the City of Montreal and Tourisme Montreal, have paid more than $170 million to host the Grand Prix du Canada since 2017, an event that results in losses for taxpayers.
• Also read: A polluting Grand Prix in a Montreal that calls itself green
• Also read: Prostitutes, the key to the sex industry
Tourisme Montréal and Grand Prix promoter Bell Canada recently released a study that estimated the economic benefit of the event at more than US$63 million and the resulting tax revenue for Quebec City and Ottawa at US$16 million will.
According to the study, 34% of the participants in the Grand Prix and related celebrations in downtown Montreal are from the metropolitan area. The others are mainly from the United States (20%), other provinces (20%), other countries (12%) and the rest of Quebec (7%).
Estimated tax revenue 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 by saying that the study conducted on the 2015 Grand Prix “underestimated” the economic impact of the event.
But even with tax revenues of $16 million, taxpayers lose. An analysis conducted by La Presse last year estimated the negative gap between government revenue and expenditure related to the Grand Prix at more than $20 million for the period 2015 through 2019 inclusive (more than $4 million per year ).
What is the net impact?
Economist Pierre Emmanuel Paradis, President of the company AppEco, regrets that the organizer of the Grand Prix and the sponsors praise the economic side effects of the event, without taking into account the public funds used for it.
“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.
With kind approval
Philipp Barla. Professor Laval University
Philippe Barla, economics professor at Laval University, agrees.
“Unfortunately, very few cost-benefit analyzes are carried out in Quebec, contrary to what we see in other countries, including the Scandinavian countries and the United States, where they are used much more frequently,” he specifies.
Conference Board of Canada chief economist Pedro Antunes believes it is legitimate to focus on the economic impact. However, it comes with a downside for accommodating visitors from the rest of Quebec.
“If Quebecers spend on this event in Montreal, will they spend less elsewhere? [dans la province] for other events?” he wonders.
- Listen to Richard Martineau’s interview with Anuradha Dugal, President of the Conseil des Montréalaises, on QUB radio:
The same in Europe
Colin Pratte, a researcher at the Institute for Socioeconomic Research and Information (IRIS), is not surprised that the Canadian Grand Prix costs more than it brings in for taxpayers.
It states 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 Grand Prix was negative, mainly due to the large amount of public funding allocated to them,” says Mr. Pratte.
He also wonders about the positive impact the Grand Prix would have on Montreal’s image in the world.
“Against the backdrop of the climate crisis, the Grands Prix lose their prestige and, on the contrary, can project a negative image of the host cities, he argues. How many tourists won’t visit the city because it’s hosting a Grand Prix they think is polluting? That’s impossible to quantify.
CANADIAN GRAND PRIX PUBLIC EXPENSES (2017-2022)
- New paddocks: $67 million
- “Hotel area”: 18 million dollars
- Funding post-pandemic: $5.5 million
- Circuit improvements: $8.7M
- Annual fees paid to F1 (2017, 2018, 2019 and 2022): $74M
- In total: $173 million
Public money for a company that is 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 also owns shares in digital radio network SiriusXM and Major League Baseball’s Atlanta Braves.
Low tax rate
John C Malone. American multi-billionaire
In late 2016, Liberty’s largest shareholder, John C. Malone, described Formula 1’s tax structure as “brilliant”.
Last year, Liberty recorded a tax expense of $45 million in its financial statements. Had it been paying the US federal tax rate of 21%, 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 filings show.
The recent decision by OECD countries to set a minimum tax rate of 15% could have a negative impact on Formula 1 revenues [alors] taxed at higher effective rates,” the company acknowledges.
For Colin Pratte, a researcher at IRIS, Liberty Media’s tax situation makes the decision to heavily subsidize the Montréal Grand Prix even more dangerous.
“We have to question the payment of public money in a company that multiplies tax systems in order 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.