Caught the Cup but Dropped the Tax
Written by Arghya // April 11, 2011 // Law & The Judiciary // 10 Comments
This is a guest post by Rohan Bagai. Rohan is a graduate from New York University, and is currently a corporate lawyer working with one of the leading law firms in India.
As the dust settles on India’s euphoric victory in the world cup and things get back to normal, what seems to have gone unobserved in this cricketing labyrinth is the Indian government’s largesse to bestow a charity worth Rs. 45 crores approx. (presumably highly undervalued) in the form of income tax breaks to the money spinner global cricket regulator, the International Cricket Council (ICC). Evidently, in the year 2005, the Cabinet had approved the proposal to amend the income tax laws to provide an exemption to the income of persons/entities arising from an international sporting event conducted in India. Accordingly, section 10 (39) of the Income Tax Act, 1961 was inserted in the year 2006 to empower the Government to grant such tax waivers to the global sporting bodies in the event they organize play offs in India (provided more than two countries participate and the same is notified by the Government).
Purportedly, the recent Cabinet decision to confer income tax exemption to the subsidiaries of ICC for their income arising in India from the Cricket World Cup, 2011, seems dubious and arm twisted. The said proposal apparently made its way through the Cabinet deliberation, despite ruckus from within and a suspected perceptible bias and ‘conflict of interest’ tainting the Cabinet decision.
Even if we choose to close our eyes to the colossal loss to the exchequer or give the benefit of doubt to the ICC chief cum Union Cabinet Minister (who reportedly was a silent spectator in the Cabinet deliberation), the grant of such form of tax subsidy at the cost of siphoning tax payers’ money to a cash-rich cricket governing body (non-charitable, mind you) that has milked the tournament from broadcasters, spectators and sponsors, appears to be skewed. Rather such an exemption should be sanctioned to promote and endorse games/competitions in India for sports that lack financial merit. While cricket is already a rage, nothing short of a religion in India, it hardly needs any fiscal benefits.
For this, all credit goes to the money minting, Board for Cricket Control in India (BCCI), which is unparalleled in its riches. Besides, a similar immunity from income tax was provided to the ICC for the Champions Trophy in the year 2006. Although the Federation of International Hockey (FIH), the organizers of the hockey world cup in New Delhi last year, reaped exemptions on luxury tax (for hotel accommodations for the players and delegates) and entertainment tax (to lower the costs on tickets at the stadiums in order to promote the games), nevertheless, no question of income tax waiver ever arose then. That said, with least offered by the ICC to the Indian tax payers at the world cup (in terms of cuts on ticket prices for matches or any fringe benefits), ICC makes an appalling case for entitlement of any such tax exemptions from the Indian Government. Therefore, shouldn’t the Government re-consider such discharges under the law that present occasions for political patronage and instead dole out the same funds to publicize, encourage and manage monetarily stifled sports like hockey, athletics etc.?
Cricket is not just a game anymore. With the game being the product, players the assets, spectators and TV viewers the market, and revenues pouring in from the in-stadium advertising, player endorsements, tickets and broadcasting rights, it’s a business and that too a gigantic one. When players pay taxes on their match fee and endorsements, and the broadcasters and media firms follow suit, there seems little wisdom in letting ICC (a profit-making entity) scot-free.
10 Comments on "Caught the Cup but Dropped the Tax"
Rohan, as disappointing as this decision may be to some, it is hardly unique in the world of sport. All sporting mega events that take place, say, once in every four years, demand tax concessions as a part of the winning bid package. The FIFA World Cup was largely tax exempt in South Africa in 2010; Brazil will be in 2014. The London Olympics in 2012 has been exempted from paying both income and corporation tax. The ICC didn’t pay taxes in the West Indies in 2007 either. I’m sure this is true for other events as well.
Basically, no country will ever win a bid to host any mega event if it doesn’t offer the the tax concession. The rationale of the bidding countries is that the spillover economic benefits from hosting a big event far outweigh the loss to the fiscus. I think this argument is slightly bogus (see http://www.criticaltwenties.in/economicsocialpolicy/feel-it-is-it-here) but it’s a fact of life. If we want to see mega events in our own backyard, we pay for them.
Funnily enough, India’s economic clout is so great in cricket (also, the BCCI is such a huge bully) that it alone might just be able to coerce the ICC into hosting a World Cup in the subcontinent without the tax break condition. But this is a pretty exceptional example.
Absolutely agree with the above reply to your article. And just to add to that Bangladesh and Sri Lanka also gave the said exemptions and it’s general practice in high revenue generating events, not only current but future revenues in form of tourism, marketing of the game etc..
Anisha and Prateek: I appreciate your critique and concur with your point of view that it is customary for mega sporting events around the world to get tax waivers from hosting nations. Further, I do not dispute the rationale of the economic benefits (from hosting the event) far outweighing the loss to the exchequer (as rightly pointed out Anisha in her article). However, my piece merely attempts to draw attention to: one, the hypocrisy of the government in not sanctioning the same tax concessions to other sports that lack financial merit, for instance, the hockey world cup (even though they meet the pre-conditions under law); and, second, the questionable manner of approving such an immunity by the Cabinet (with the ICC chief in attendance at the deliberations). Rather, why shouldn’t India (the Union minister, in particular) make use of its (his) herculean position in the cricketing world to grab benefits for its tax payer while not letting ICC off the hook
Actually, I suggested the opposite: that it is often hard to make the case that the long-term benefits from hosting a big event outweigh the loss to the exchequer
I suppose the problem is the very close nexus between politicians in the BCCI/ICC and those running the government. It’s all ‘bhai bhai’ between them, so it’s unlikely to one entity taking on the other.
Well written article and an equally adequate response.
Anisha: Oh. I see. Anyway, thanks for your comments!
Shohit: Thanks a ton!
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