Cash Cow or Red Herring?

There has been a lot of chatter about the recent proposal to close the tax exemption for “entertainment/marketing” costs associated with sports/arts tickets purchased by profitable companies.

The truth is, it is not going to make any difference, either way, for anyone.  If the loop-hole closes, the Government won’t collect one dollar more, the Sens won’t sell one less ticket, and the companies won’t skip one opportunity to show off to their clients.

Here’s why.

The tax write-off is minuscule.  Companies are not motivated to buy these tickets to gain the tax write off, it’s merely a bonus.  As such, if the effort is good for business, they will continue to buy tickets, just like if it were not, they would not.  The tax write-off is NOT the deciding factor.

The government will not gain any more tax revenue because these companies will just spend this money on a different tax-exempt expense…and there a MANY to chose from.  If the government were closing all exemptions, then yes, it would provide an impact, but to close one, while leaving the other 99.9% active…it will make ZERO difference to the province.

This entire issue smacks of political posturing.  The government will take the path that earns them the best public opinion, knowing that, at the end of the day, it has neither cost nor gained anyone anything, but themselves.



2 Responses to “Cash Cow or Red Herring?”

  1. You contradict yourself. You write that the companies will continue to buy the tickets, but also write that the companies will spend their money on other things. While a large company could almost certainly afford to absorb the additional cost, the fact that the cost of doing business with the Senators will rise relative to the cost of doing business with any other company in the city will undoubtedly have a negative impact on ticket sales.

    The tax write-off is definitely not minuscule. 50% of a full season suite rental or club seats is a significant amount of money and to think that it would not have a significant effect on the decision to purchase would be foolish. Big and small businesses take advantage of this exception.

    What’s worse is that profits incurred through the sale of club seating and suite rentals are profits that the Ottawa Senators do not have to share with the rest of the league. It goes straight to their pocket.

    Now, the government estimates that changing the law would result in an additional $15-18 million in public revenues each year. When you consider that this amount is the aggregate of what the government would take from the Sens, Leafs, Jays, Raptors, Bulldogs, Marlies, Argonauts and Tiger Cats (I don’t know if Junior/amateur franchises would be affected), it’s a fairly insignificant amount that would be incurred by each team.

    • The purchaser would not receive a 50% rebate, merely a 50% reduction from the taxable portion of income (if any) not realized due to buying tickets.
      Also, the purchaser would, if motivated solely by the write-off, simply spend on another write off, thus allowing for no gain to the gov’t.
      This is why it is all just spin.

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