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Grand Prix of Canada | A “hard to explain” gap

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Alan Binder
Alan Binder
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Economists doubt that tax revenues will reach $ 16 million

Vincent Brosso BeaulieuVincent Brosso Beaulieu

The latest economic impact study produced by the Canadian Grand Prix of Formula 1 and its partners shows that the tax revenue it generates doubles from $ 8.1 million to $ 16 million annually. This large increase raises doubts among the four economists consulted Journalism.

The tax revenue generated by the Grand Prix has grown twice as fast as the economic fallout, which is unusual in this type of study.

Economists do not understand how tax revenue was able to increase twice as fast (from 8.1 million in 2015 to 16 million in 2019, i.e. + 98%) than the economic impact of the event (from 42.2 million in 2015 to 63.2 million in 2019, i.e. + 49%). Usually, if the tax burden remains the same, then tax revenue varies at the same rate as the economic fallout for the same event, they say. This is a fundamental principle in this type of study.

In Quebec, only one festival has published its data on economic benefits and tax returns for more than a year: the Montreal International Jazz Festival (FIJM), in 2016 and 2017. In the same proportion, at 24%.

“If the economic impact increases, the tax revenues will follow the same ratio,” says Pedro Antunes, chief economist at the Conference Board in Canada. If we used the same assumptions and the same model, I cannot imagine how such a contradiction could exist. We are talking about the Canadian dollar for two years and the tax burden remained more or less the same in Quebec between 2015 and 2019. ”

“If it’s the same event and the same types of spending, it’s not normal,” says economist Pierre Emmanuel Paradis, president of AppEco that specializes specifically in economic impact studies.

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“If there was no change in the tax burden, there wouldn’t be as big a difference.” “Something is not clear here,” says Jonathan Goyette, professor of economics at Sherbrooke University. “It’s a bit strange,” says Philip Parla, professor of economics at Laval University. Rather, it is difficult to interpret. ”Mr. Jowett and Mr. Parla provided their comments on the preliminary version of the Methodology Handbook for Economic Impact Studies from the Ministry of Tourism of Quebec, which they thank them for in the final version of the guide published in 2016.

In the case of the Grand Prix, the tax revenue includes consumption taxes and taxes on employee wages. This is how the Quebec Ministry of Tourism asks all festivals and events to calculate their economic results and tax revenue with the same criteria and the same formula (we only calculate the expenditures of visitors over 40 km in length who mainly come from this event), according to its methodological guide.


The atmosphere on Crescent Street during the 2019 Grand Prix

These two tax burdens (consumption taxes and payroll tax) remained more or less the same in Quebec between 2015 and 2019. It is for this reason in particular, that liberal Representative Carlos Letau “does not believe” in such an increase in tax revenue in Quebec. the year. “I don’t see how [les recettes fiscales] It can grow much faster economic benefits. “If the tax burden remains the same, then there is no logic,” says Mr Leitão, who was formerly chief economist at Laurentian Bank before entering politics.

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Study not yet public

Before drawing final conclusions, the four economists consulted Journalism (Pedro Antunes, Philip Parla, Jonathan Goyette and Pierre Emmanuel Paradis) unanimously agreed on the fact that it should be made public, including its methodology.

The 2019 study has not been made public by the three partners who funded it, Tourisme Montréal, Société du parc Jean-Drapeau (SPJD) and Octane Race Group, local promoter of the Grand Prix.

During a press conference about the Grand Prix two weeks ago, Tourisme Montréal revealed the two main conclusions of the 2019 study: 63.2 million in economic benefits and 16 million in tax benefits.

Quebec’s Economy Minister, Pierre Fitzgibbon, cited the Quebec government tax revenue to justify the payment of the Formula One racing rights.

The joint study on the economic impact of the 2019 Grand Prix is ​​being conducted by analysts and economists to determine the financial implications of the event’s occurrence. Since it has not been posted with our partners yet, we will not provide any further comments for the time being. “The Canadian Grand Prix is ​​the country’s largest sporting event and contributes to making Montreal a world-class tourism destination.” Octane Racing group didn’t remember Journalism.

Were there visitors who did not attend the race?

For his part, SPDJ explains the difference between the 2015 and 2019 numbers in three ways. He consulted economists Journalism He argues that the first two causes, inflation and the exchange rate, are variables already taken into account in the growing economic impact.

There is still a third factor invoked by SPJD: “The expenditures of the visitors (who explicitly came to the event in Montreal) were concentrated in downtown Montreal.”

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SPJD notes that “the same methodology was used to estimate the economic impact of the event between 2015 and 2019.”

One thing changed in 2019, however, and that the study counted the number of visitors to downtown Montreal as well as visitors to the race site in El Notre Dame. This was not the case in 2015, when all the interviewed visitors were in إle Notre Dame, where the Gilles Villeneuve circuit is located.

Were there any visitors in the city center who did not attend the race but said they mainly came to Montreal to participate in the celebrations around the Grand Prix? The Montreal Tourism Department and SPJD did not answer this specific question. SPDJ said the study methodology will be explained “in detail” when the study is revealed at a later time.

The government of Quebec’s Minister of Tourism, Caroline Brooks, indicated by e-mail that “the methodology [de l’étude de 2019 du Grand Prix] Complies with the methodological guide [du ministère du Tourisme du Québec] To conduct studies to measure the economic impact of festivals and major events.

The Ministry’s methodological guide requires the presence of a “representative sample of the selected persons on the site of the event.”

Jonathan Goyette, a professor of economics at the University of Sherbrooke, thinks, in and of itself, it’s not a bad thing to take that extra step of visitors to the city center for the Grand Prix. But according to Mr. Joyette, it is “imperative” that the study separate the implications from visitors who attended the Grand Prix and its aftermath from downtown visitors who would not have attended (if that were the case). Otherwise, he said, “it becomes confusing to compare the results.”

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