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Old 9th September 2011, 20:31   #1
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Exclamation F1's run-in with Taxman for Indian F1 Grand Prix

The Indian GP could be under threat because of a dispute between the Formula 1 teams and the country's tax authorities.

Looks like potentially a show-stopper to the Indian Grand Prix, if the Tax authorities do not budge and think of this as an oppurtunity to reap benefits off this great event...... when they may just cheese F1 drivers and teams off!

I do hope, that like most issues, the big guns will agree on the way forward.

Source:
Whitmarsh confirms tax dispute could threaten Indian GP | Adam Cooper's F1 Blog
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Old 9th September 2011, 21:03   #2
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Default Re: F1's run-in with Taxman for Indian F1 Grand Prix

Very unfortunate but I wonder how come it has not come in any Indian newspaper as yet.
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Old 9th September 2011, 21:04   #3
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Default Re: F1's run-in with Taxman for Indian F1 Grand Prix

This is pretty old news IIRC.

The Indian F1 body is hoping for tax breaks that sports normally enjoy; but the Govt. is not relenting claiming F1 is a luxury sport.

(This goes back to a long time ago when Suresh Kalmadi made that request to the Sports Minitry I think; he claimed he got F1 to India)
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Old 9th September 2011, 21:19   #4
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Default Re: F1's run-in with Taxman for Indian F1 Grand Prix

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Originally Posted by libranof1987 View Post
This is pretty old news IIRC.

The Indian F1 body is hoping for tax breaks that sports normally enjoy; but the Govt. is not relenting claiming F1 is a luxury sport.

(This goes back to a long time ago when Suresh Kalmadi made that request to the Sports Minitry I think; he claimed he got F1 to India)
I think that tax break was more for what Jaypee would earn from hosting the Grand Prix. That I dont think should be given.

While here it seems to be that the govt is after the team's earnings and not of the circuit.

That actually depends on very complicated laws of taxation and is largely governed by international tax treaties for companies operating in multiple countries like the F1 teams.

Though I am not exactly sure of what the legality is involved here, but definitely the govt should not take any steps to jeopardise the GP which has a massive investment in it, and has a lot of people's fortunes tied up in it.

If nothing else, the legal tangles can be solved in proper time, but let the GP for this year go thorough.
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Old 9th September 2011, 21:25   #5
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Default Re: F1's run-in with Taxman for Indian F1 Grand Prix

From what I understood when I first head of this was - the Govt. provides some tax breaks to the event organizers (BCCI in case of cricket tournament) if the said tournament promotes sports and provides opportunities players to participate and excel.

The same was asked for F1; but the Govt. denied saying F1 is as such a luxury and commercial sport and hence not eligible for the tax break. The same was asked for IPL and denied.
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Old 9th September 2011, 21:45   #6
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Default Re: F1's run-in with Taxman for Indian F1 Grand Prix

Correct, but I think Jaypee have agreed to pay tax on whatever they earn from the GP weekend.

But from the above article it seems the issue is now more to do with the teams and drivers. All that depends on very complicated multi taxation rules and international tax treaties.
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Old 9th September 2011, 22:25   #7
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Default Re: F1's run-in with Taxman for Indian F1 Grand Prix

Wow...

So the F1 teams do not want to pay the tax!!!
What do they think Formula 1 is? Charity?

Any idea how much fuel they burn for one race (including practice, qualifying, actual race)? It will be interesting to compare it with India's daily or monthly consumption.
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Old 10th September 2011, 06:48   #8
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Default Re: F1's run-in with Taxman for Indian F1 Grand Prix

Mr. Anand

The F1 tteams most likely already pay their share of tax in which ever countries they are based out of.

The question is one of multi taxation due to operations in multiple countries.
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Old 10th September 2011, 09:29   #9
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Default Re: F1's run-in with Taxman for Indian F1 Grand Prix

I am not surprised by this news, the Govt taxes 30% of the prize money that is involved in Motor Sports events in India. No surprise, they wanted to tax the F1 teams and drivers.
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Old 10th September 2011, 09:38   #10
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Default Re: F1's run-in with Taxman for Indian F1 Grand Prix

I do not support tax breaks for any sporting event in our country. Everyone should pay taxes unless it is for a government recognized charity organization.
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Old 10th September 2011, 10:26   #11
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Default Re: F1's run-in with Taxman for Indian F1 Grand Prix

IIRC, when F1 was announced for India, the sports ministry had stated that F1 is not a sport as such and so no tax exemptions or breaks. I would agree that no exemption should be given, since its an expensive sport with even the tickets being expensive

But, I hope there are no implications on the coming F1 or future F1s.

Cheers,
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Old 10th September 2011, 13:49   #12
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Default Re: F1's run-in with Taxman for Indian F1 Grand Prix

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Originally Posted by Ardy View Post

But, I hope there are no implications on the coming F1 or future F1s.

Cheers,
That's exactly what the concern is here... There is no doubt that F1 this year, and hopefully in the coming years is going to help the local region and many businesses develop to a certain extent, in addition to raising the country's profile on the world stage.

India should be making sure these world events are as inviting to the participants as possible and held without any troubles. All of this helps to reflect on a country's ability to deal with the modern development.

I am not against taxing for F1 or any other single event. But the government needs to be a bit more clever and think about the benefits from such a event as a whole. Whilst making exceptions on certain rules and policies, e.g. tax rate, they can perhaps ask F1 teams to engage in a small event that would help the country (such as AIDS / other disease awareness). This is just an example. These trade-offs will suit both the teams and government. But for this, the government needs to overlook the bureaucracy of individual departments and act as a whole.

A 'sport' such as F1 attracts viewers from a larger spectrum of society - ultra rich people (who treat this an indulgence), down to the common school kid (who dreams of F1 cars); and this fact can be used by the government in plenty of ways.

They have done it in the past and I think should do it in the future.

IBN-LIVE reports:
Quote:
India exempted the cricket World Cup from income tax earlier in the year, however.
The government also granted tax exemption on income to residents and non-residents alike gained from international sporting events in India in 2006, when the country hosted the IIC Champions Trophy cricket tournament.
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Old 14th September 2011, 07:17   #13
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Default Re: F1's run-in with Taxman for Indian F1 Grand Prix

Yet another roadblock for F1 in India. This time customs is playing the spoilsport by inposing customs duties.

Source: Customs row threatens Indian Grand Prix - The Times of India

Cheers,
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Old 14th September 2011, 08:25   #14
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Default Re: F1's run-in with Taxman for Indian F1 Grand Prix

The whole issue is because the government has classified F1 as entertainment and not a sport. Hence the custom duty. The government insists that F1 is not a sport, yet it recognizes the FMSCI as a national sports federation.

The duty amount is a estimation. It says, F1 equipment has never been valued (I am not sure of that).

According to the article "JPSI might have to pay customs duty on the cargo that lands in India. With no known estimates of the F1 paddock, JPSI could be coughing up Rs 600 crore or more to allow the cargo to land in India for the race. After a deduction of 2%, the remaining amount will be returned to JPSI. " which would mean the company will actually be paying about 12 crores. Add 1% interest charge (assuming the company takes a loan on the amount for a month). The total cost might come to 15Cr.


I am not sure why the government doesn't see the bigger picture. My guess is they would have collected more through tax because of the event than through duty. Yes, the tickets are expensive but the government gets a cut of it as taxes also on accommodation, food and on money spent on anything by anyone who has come for the event. Also, the jobs created (temp and permanent) due to the event. The incremental income if the event is a success and the race returns in the years to come.
Look at the promotional value. They get to promote brand Indian on an International stage with at least 300 million international viewers for 3 days. The cost the government would have to spend to do that by itself. The buzz. I can go on.
As usual the government is being short sighted.

Last edited by AdityaLN : 14th September 2011 at 08:26.
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Old 14th September 2011, 10:49   #15
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Default Re: F1's run-in with Taxman for Indian F1 Grand Prix

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Originally Posted by AdityaLN View Post

According to the article "JPSI might have to pay customs duty on the cargo that lands in India. With no known estimates of the F1 paddock, JPSI could be coughing up Rs 600 crore or more to allow the cargo to land in India for the race. After a deduction of 2%, the remaining amount will be returned to JPSI. " which would mean the company will actually be paying about 12 crores. Add 1% interest charge (assuming the company takes a loan on the amount for a month). The total cost might come to 15Cr.
To this you also need to add Rs.10Cr that JPSI has to pay errrr "Contribute"
to National Sports Development Federation for their F1 Franchisee Contract duration.

Even though I don't have any issues on the contribution part, but that's extra 25Crore that gets added to an event cost. And obviously its the normal viewing public that is going to pay for it.

P.S: I heard that the parking for 3 days is Rs.600 per car and no you can't pay day wise. Its Rs.600 whether you go once or thrice.

Cheers
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