64 replies to this topic

[Amphicar]

The government of Uttar Pradesh (the state in which the Buddh International Circuit is located) has obtained permission from the Indian Supreme Court to withdraw its 2011 decision to grant Entertainment Tax exemption to the Indian Grand Prix organisers, Jaypee Sports International.

 

The withdrawal of the exemption is expected to cost Jaypee Sports International about $5 million

 

http://timesofindia....ow/24502813.cms

 

The current year's race will presumably go ahead as planned but given the questions previously raised about the future of the Indian GP, this casts further doubt whether it will return to the calendar after next year's sabbatical.

[Buttoneer]

IIRC the only reason Jaypee could afford to do this was because they got the tax exemption. Between them, Bernie and the politicians appear to have squeezed this one dry.  No shortage of replacements waiting in the wings though.

[SpaMaster]

Always bound to happen. The previous government was Mayawati's. Now it is Akilesh Yadav's. It is very easy for the Supreme Court to give exemption when it involves public money. F1 can succeed in India without the F1 organizers getting too greedy about the public money. FOM and Jaypee both have to correct their misconceptions on how to do F1 business in India.

 

I must say I like this news.

[wj_gibson]

I always felt that the "sabbatical" for the Indian race was really just an excuse to let it quietly disappear. Quite what happens to the circuit site in that case, God only knows - a new industrial park?

 

There is some sort of academic paper to be written about the follies of government-funded F1 races in Asia over the last 10 years. Korea and India being the cases in point. I'm struggling to see the need for the Chinese race as well.

[garagetinkerer]

Hmm... i bet that was the reason why they made the circuit in UP... as they originally were planning to do a street circuit in New Delhi. I wonder if they could sod the track and still do a street circuit? Especially where they did the demo run in 2009. Almost 2000m of a straight and then there's a curving piece of road where you could do 250-300 (like Spa's 3rd sector )... it would be nice if they do that. However, opinions may vary on this one.

 

On the account of govt. overreach and mismanagement... i would not be surprised if they built the circuit to jack up the neighbouring property prices. I mean, people weren't buying stuff there, and recently though, there's been a jump in value by about 400% or more (if i remember correctly). Some of the politicians may have some property there, which is perhaps worth a damn sight more than before.

Edited by garagetinkerer, 22 October 2013 - 19:28.

[Radoye]

Having a noisy motor racing circuit usually lowers property prices, that's why all those folks around Europe who bought properties near existing circuits are now complaining about and demanding them to be shut down.

[loki]

Always bound to happen. The previous government was Mayawati's. Now it is Akilesh Yadav's. It is very easy for the Supreme Court to give exemption when it involves public money. F1 can succeed in India without the F1 organizers getting too greedy about the public money. FOM and Jaypee both have to correct their misconceptions on how to do F1 business in India.

 

I must say I like this news.

I'd say that the government of India has the misconception. They want to collect tax money from the teams based on income that India has no direct involvement in earning and don't realize that properly constructed tax advantages in the form of rebates, discounts and other means help grow that sort of economy.  One only has to look at how cities like Las Vegas and Orlando (and to a lesser extent Texas) use that same mechanism to generate revenue.  The events may be getting breaks but the money is made from revenue derived during the event in the form of sales tax, local economy, etc.  As an example the Sprint Cup date in Vegas generates about US$240 million in revenue throughout the area in the week leading up to the event.  This isn't an estimate, it's calculated from the receipts from the local economy.  Over the course of Cup events in Vegas the impact has been over US$2 billion.

[redreni]

IIRC the only reason Jaypee could afford to do this was because they got the tax exemption. Between them, Bernie and the politicians appear to have squeezed this one dry.  No shortage of replacements waiting in the wings though.

I don‘t even think affordibility is the issue. It wouldn‘t be a good idea for Bernie to allow the principle that governments can levy taxes on Grand Prix meetings and still expect to have a Grand Prix. Governments are supposed to pay the hosting fees for Grands Prix, not take a share of the gate money! That would be Bernie‘s way of looking at it, I expect.

Anyone know if the tax liability kicks in immediately, or if there is a delay? If it‘s immediate I bet Bernie not only expects the promoter to cover the entire tax bill with no help from FOM, but also removes India forthwith, and on principle, from all future leaked or official draft F1 calendars.

[garagetinkerer]

Having a noisy motor racing circuit usually lowers property prices, that's why all those folks around Europe who bought properties near existing circuits are now complaining about and demanding them to be shut down.

 

I know... but tell that to developers in India. They have jacked up prices since there's going to be an international airport there too Usually any facility or conveniences in India jacks up prices. Heck there's a neighbourhood in Delhi where apartments were about Rs 1 million-1.5 million, but now they have hit Rs 8 million - 15 million as there's a local train service and a flyway built. It is crazy... but what can one do.

[Kelateboy]

I seriously believe that this year will be the last Indian GP ever.

 

Too bad because IMO, the circuit is quite fantastic.

[Anja]

Good riddance, my least favorite circuit in current calendar. Yes, I even like Yeongam more.

[ensign14]

The government of Uttar Pradesh (the state in which the Buddh International Circuit is located) has obtained permission from the Indian Supreme Court to withdraw its 2011 decision to grant Entertainment Tax exemption to the Indian Grand Prix organisers, Jaypee Sports International.

 

So why should anyone ever do business with any government entity in India if they can just change their mind later and nick your money?

[Ross Stonefeld]

How long was the exemption supposed to last? If they're retroactively charging them that's one thing, but you can't expect laws/exemptions to never change.

[Amphicar]

So why should anyone ever do business with any government entity in India if they can just change their mind later and nick your money?

Government changes tax rules shock horror! Not exactly unknown in the UK methinks. Also in this case who was doing business with the UP government? Both the circuit and the race itself were/are private sector initiatives, with no central or state government involvement. Jaypee went into the venture without a guarantee of the tax waiver that they subsequently obtained. The Times of India piece suggests that Jaypee may have been economical with the truth in reporting the profits on the first race - if so, the government's decision to withdraw the tax waiver is perhaps more understandable.

 

I see that Monisha Kaltenborn shares my fear that the Indian Grand Prix is unlikely to return after next year's "sabbatical" - I think that would be a pity. I have no connections with India and have never even visited the country but it would be unfortunate if India were to be the only one of the emerging BRIC economies (Brazil, India, China, Russia) without a Championship F1 race.

[Ferrari_F1_fan_2001]

I always felt that the "sabbatical" for the Indian race was really just an excuse to let it quietly disappear. Quite what happens to the circuit site in that case, God only knows - a new industrial park?

 

There is some sort of academic paper to be written about the follies of government-funded F1 races in Asia over the last 10 years. Korea and India being the cases in point. I'm struggling to see the need for the Chinese race as well.

 

India has a lot of wealth; but it's not the type of 'deep pockets subsidiary' wealth (ala Abu Dhabi) to run the F1 track and make a loss year on year.

 

I suspect the track might turn into a playground for the playboys who want to track their fancy cars - in which case it could turn out to be quite profitable or it might become a fly over race for some Asia based racing series.

 

All is not lost; except in F1 circles.

[ensign14]

Government changes tax rules shock horror! Not exactly unknown in the UK methinks.

 

Not with retrospective effect, though, which is what the article suggests - that the 2011 decision will be rescinded, so it would never have been made.

[ReeVe]

Government changes tax rules shock horror! Not exactly unknown in the UK methinks. Also in this case who was doing business with the UP government? Both the circuit and the race itself were/are private sector initiatives, with no central or state government involvement. Jaypee went into the venture without a guarantee of the tax waiver that they subsequently obtained. The Times of India piece suggests that Jaypee may have been economical with the truth in reporting the profits on the first race - if so, the government's decision to withdraw the tax waiver is perhaps more understandable.

 

I see that Monisha Kaltenborn shares my fear that the Indian Grand Prix is unlikely to return after next year's "sabbatical" - I think that would be a pity. I have no connections with India and have never even visited the country but it would be unfortunate if India were to be the only one of the emerging BRIC economies (Brazil, India, China, Russia) without a Championship F1 race.

 

I don't know how the legal and tax systems in India work, but the article suggests the promoters were paying money into no lien account (in simple terms while the money was still the promoters' they couldn't lien it ie use it as guarantee/security/collateral for loans etc), which makes no sense to me if they were exempt from taxes.

 

But still, are they only seeking taxes from the promoter or are we back to 2011 when they said they wanted to collect taxes from FOM and the teams for the sale of the tv rights?

[Amphicar]

I don't know how the legal and tax systems in India work, but the article suggests the promoters were paying money into no lien account (in simple terms while the money was still the promoters' they couldn't lien it ie use it as guarantee/security/collateral for loans etc), which makes no sense to me if they were exempt from taxes.

 

But still, are they only seeking taxes from the promoter or are we back to 2011 when they said they wanted to collect taxes from FOM and the teams for the sale of the tv rights?

I'm no expert in Indian tax law but I read the situation as being that the (previous) UP government's decision to grant Jaypee exemption from Entertainment Tax was subject to a legal challenge to the Supreme Court. Consequently,  the Supreme Court did not allow a complete waiver but required Jaypee to pay the tax into an escrow account - possibly pending the completion of further legal proceedings. The current UP government has now sought (and obtained) confirmation from the Supreme Court that it is able to withdraw the previous government's decision to grant a tax waiver. If the Supreme Court had not ordered that the tax be paid into an escrow account I would not imagine the UP government could claim it retrospectively - but the money is sitting in an account so potentially available. The fact that the court has also queried the honesty of Jaypee's accounts suggests that there will be further litigation on this matter. 

 

As they used to say in Private Eye, this one will run and run.

 

I think this state level tax issue relates to the organiser's profits and is distinct from the national government's desire to levy taxes on FOM, the teams and the drivers. You begin to see why Bernie prefers to cut deals with authoritarian regimes - none of this democracy and rule of law stuff to get in the way!

Edited by Amphicar, 23 October 2013 - 12:25.

[SpaMaster]

I'd say that the government of India has the misconception. They want to collect tax money from the teams based on income that India has no direct involvement in earning and don't realize that properly constructed tax advantages in the form of rebates, discounts and other means help grow that sort of economy.  One only has to look at how cities like Las Vegas and Orlando (and to a lesser extent Texas) use that same mechanism to generate revenue.  The events may be getting breaks but the money is made from revenue derived during the event in the form of sales tax, local economy, etc.  As an example the Sprint Cup date in Vegas generates about US$240 million in revenue throughout the area in the week leading up to the event.  This isn't an estimate, it's calculated from the receipts from the local economy.  Over the course of Cup events in Vegas the impact has been over US$2 billion.

The recent 'state' government tax exemption is a different issue.. The issue you are raising has been discussed many times in the past.

 

Coming to today's statements by Monisha Kaltenborn, she is exactly right. F1 has failed to market itself well in India. F1 wants easy money and is not interested in long term sustainable business model and sport vision. I am from India and know the dynamics of the country very well. F1 has great market potential India, but they can't expect any favours from the government. It has to be pure merit-based attempt to capture market. India or its people don't care one bit if F1 leaves. F1 is the one that stands to gain if it comes to India. Theoretically it is a great situation for F1, but an unusual one for the F1 management and ironically the best viable route to do F1 business. Sure the Indian system is not the greatest, but this episode says a lot about how spoiled the F1 management is.

[jjcale]

Not with retrospective effect, though, which is what the article suggests - that the 2011 decision will be rescinded, so it would never have been made.

 

Retrospective would be if they wanted to claim back taxes... rescinded implies that, but most people usually interpret a "rescission" in a sensible way .. and there are rules that ensure for that.

 

...as I am sure you know

 

 

Anyway .. good job to whoever took this decision

Edited by jjcale, 23 October 2013 - 18:34.

[redreni]

it would be unfortunate if India were to be the only one of the emerging BRIC economies (Brazil, India, China, Russia) without a Championship F1 race.

No it wouldn‘t.

[loki]

The recent 'state' government tax exemption is a different issue.. The issue you are raising has been discussed many times in the past.

 

 

Understood regarding the team tax issue but the example of tax waivers for events is exactly what I'm talking about using Las Vegas and Orlando as examples.  The government incentivises event promoters with tax breaks and makes up the revenue in an increased tax base from hotel room retail, sales tax, etc.

 

It's not FOM or the FIAs responibility to promote the race. That falls on the promoter.  Much like with a music concert the race is sold to a promoter that stages the event and pays a sanction fee.  For example if there were a Rolling Stones concert that wasn't well publicized it isn't the fault of the band but the promoter.  It's the same here. It's Jaypee that is responsible for promoting the race.  In the US FOM doesn't promote the race, CotA does.  I'd say if anything this shows that the Indian market may not be ready for F1 races in country right now given the high sanctioning fee.

[Lee Nicolle]

If Bernie dropped his fees back to realistic levels the promoters may be able to run the event. That is all promoters. Many taxpayers world wide are sick of subsidising F1. Yes it brings in money and tourists, and maybe even showcases your city. But when they all lose millions the benefits are tangible. Taxpayers suffer higher taxes, as well as disruption to their lifes. Though at least India has got a decent pernemant circuit from it. Here in Oz we have lost a couple!!

[Gilles4Ever]

FOX SPORTS News @FOXSportsNews

BREAKING: The Supreme Court in India to hear petition seeking cancellation of this weekend's Indian Grand Prix over alleged unpaid taxe

[Module]

Understood regarding the team tax issue but the example of tax waivers for events is exactly what I'm talking about using Las Vegas and Orlando as examples.  The government incentivises event promoters with tax breaks and makes up the revenue in an increased tax base from hotel room retail, sales tax, etc.

 

Are you seriously comparing Las Vegas where the richest people in the world come and spend their money and a new track in India? Las Vegas has a huge infrastructure built only to suck all money out of tourists. Does the event even generate income to cover infrastructure and security, police and such expences? Why not compare India with Monaco or Dubai, why have incometaxes?

[Antonov]

would be quite the sensation if it were to be cancelled

[EthanM]

Are you seriously comparing Las Vegas where the richest people in the world come and spend their money and a new track in India? Las Vegas has a huge infrastructure built only to suck all money out of tourists. Does the event even generate income to cover infrastructure and security, police and such expences? Why not compare India with Monaco or Dubai, why have incometaxes?

 

Austin uses the same model and it's hardly the epicenter of the world's rich and famous

[SophieB]

 

FOX SPORTS News @FOXSportsNews

BREAKING: The Supreme Court in India to hear petition seeking cancellation of this weekend's Indian Grand Prix over alleged unpaid taxe

 

 

BBC covering same story - Indian Grand Prix: Court hears bid to cancel Sunday's race

 

The petition was filed on the grounds that the organisers have allegedly not paid taxes for a previous event.

"We will hear the petition tomorrow," said Chief Justice P. Sathasivam.

A spokesman for the circuit's owner, Jaypee Sports International Limited, said: "Whatever the court says, we are ready to follow."

 

 

I also tweaked the thread title to cover this sensationalistic twist.

[Gilles4Ever]

At least it's not Buxton's words

 

Will Buxton @willbuxton

Just spoke to @vickychandhok. In his words “no chance at all” that the race will be cancelled.

[Bloggsworth]

Given that any of the modern sports, as they are presented, could be described as entertainment as they would not exist without the generosity of television rights (particularly Indian Premier league cricket), all major sport in India could be at risk as the next step is to tax foreign participants as "Entertainers" rather than sports-persons.

[Longtimefan]

Can't believe I'm actually saying this about F1 but I am..

 

I would be quite happy if it was cancelled to be honest, the last few races (even the ones on classic tracks) have been quite boring indeed and I'd rather stay in bed sunday morning than lose sleep to another dull race.  ...race?  hmm I mean procession.

 

I think cancelling the race would hand both titles to RBR?   That would be rather apt tbh..  an empty and shallow end to both titles.

 

I won't hold my breath though, I really don't think theres any chance of a cancellation

[Gilles4Ever]

Indian GP organisers expect event to go ahead unaffected

Vicky Chandhok, head of the Indian motorsport federation, said such cases were not unusual.

"You do find the odd persons going out to try to stop sporting events - be it cricket or whatever," Chandhok told AUTOSPORT.

"It has happened before and it is nothing new to this country.

 

 

"The event will go through as scheduled. They will let the litigation be heard as normal court but you cannot hold an event to ransom. That is not my worry at all."

 

[rmpugh]

How about we negotiate with the Indian Government? The GP can go ahead, but they cancel Vettel's Visa and he is deported, then all F1 fans in the world donate a quid to them?

[nosecone]

How about we negotiate with the Indian Government? The GP can go ahead, but they cancel Vettel's Visa and he is deported, then all F1 fans in the world donate a quid to them?

not all.

 

only fanboys who don't give a **** about sportsmanship. If Vettel isn't allowed to race then we all know that this race is a joke and the second best team (team+driver=team) will win...

 

i know it was a joke, but ... well

[Doughnut King]

Wouldn't that be the lamest way to finally win the championships: sitting in the paddock at a cancelled race.

[ReeVe]

 That would be rather apt tbh..  an empty and shallow end to both titles.

 

 

I am not quite sure why it would be apt? Do we live in parallel universe where actually being better than their opposition makes them worthy of "punishment"? Or do they deserve "shallow and empty" titles because they managed to out-devellop their oposition in the last 2 months?

[rmpugh]

not all.

 

only fanboys who don't give a **** about sportsmanship. If Vettel isn't allowed to race then we all know that this race is a joke and the second best team (team+driver=team) will win...

 

i know it was a joke, but ... well

 

Au contraire, only hardcore Vettel fanboys would prefer Vettel winning the championship by sitting on his arse outside of the car to him having to work just a tiny bit more for it.

[nosecone]

Au contraire, only hardcore Vettel fanboys would prefer Vettel winning the championship by sitting on his arse outside of the car to him having to work just a tiny bit more for it.

well ... you got me completely wrong.

 

What i tried to say is that if the GP takes place all drivers should be allowed to drive... no more no less.

 

I want the GP to take place and i even more wish that the WDC isn't wrapped up after this race... althoug it's almost inevitable...

Edited by nosecone, 24 October 2013 - 12:42.

[ForeverF1]

If the race does not start, then surely, no points would be awarded and the circus will move on to Abu Dhabi.

[HoldenRT]

It's a worrying trend that these new circuits are being built.. and then ditched a few years later.  It's like the circus comes to town.. uses up it's welcome and then it's abandoned.  Turkey is a great circuit for example.  The money being spent on these new circuits, only to be ditched a few years later is a big concern.  And I'm not talking about any one country, but all of them.

[ReeVe]

If the race does not start, then surely, no points would be awarded and the circus will move on to Abu Dhabi.

 yes, but since Vettel has a 90 point lead if they go to Abu Dhabi he will go there as 2013 WDC since there will only be 75 points available from the final 3 races. Same will apply to Red Bull (129 points available from the final 3 races, Red Bull has a 148 point lead in the WCC)

Edited by ReeVe, 24 October 2013 - 12:51.

[HuddersfieldTerrier1986]

If the race does not start, then surely, no points would be awarded and the circus will move on to Abu Dhabi.

 

Correct, it'll be like it never existed. No points could be awarded unless at least 2 laps were completed.

[rmpugh]

If the race does not start, then surely, no points would be awarded and the circus will move on to Abu Dhabi.

 

ATM Vettel is 90 ahead with 100 remaining. If the race is cancelled he will be 90 ahead with 75 remaining.

[ForeverF1]

Good point.

[redreni]

At least it's not Buxton's words
 
Will Buxton @willbuxton

Just spoke to @vickychandhok. In his words “no chance at all” that the race will be cancelled.

Whilst I am realistic enough to agree with Chandhok, in my opinion, if there are unpaid taxes, the Indian authorities have a duty to demand that the outstanding amount is paid by close of business tomorrow and, if it is not, to prevent the remainder of this year‘s event from being staged. This is not like the dispute over import duty being demanded of the teams, which was a load of bureacratic nonsense given that every country in the world will waive import duty on equipment which is only being brought in for a single event and then being "exported" again within days. The promoters ought to pay tax. The event is poorly attended and it‘s hard to argue that it creates a tourism boon that would justify a tax waiver, and in any event it is entirely a matter for the Indian authorities to decide, at their absolute discretion, whether or not to grant waivers. The promoter can‘t simply refuse to pay his taxes and then say "well the taxes ought to have been waived". They weren‘t waived and, rather than pay them, the promoter took the regional tax authority to court and lost, and having lost, still doesn‘t appear to be paying up.

And from the tax authority‘s point of view, the threat of cancellation of Sunday‘s race is their best and possibly only hope of recovering the unpaid taxes. F1 isn‘t coming back to India and, once this weekend‘s event is over, the promoter can just declare itself insolvent and disappear.

[Gilles4Ever]

Whilst I am realistic enough to agree with Chandhok, in my opinion, if there are unpaid taxes, the Indian authorities have a duty to demand that the outstanding amount is paid by close of business tomorrow and, if it is not, to prevent the remainder of this year‘s event from being staged. This is not like the dispute over import duty being demanded of the teams, which was a load of bureacratic nonsense given that every country in the world will waive import duty on equipment which is only being brought in for a single event and then being "exported" again within days. The promoters ought to pay tax. The event is poorly attended and it‘s hard to argue that it creates a tourism boon that would justify a tax waiver, and in any event it is entirely a matter for the Indian authorities to decide, at their absolute discretion, whether or not to grant waivers. The promoter can‘t simply refuse to pay his taxes and then say "well the taxes ought to have been waived". They weren‘t waived and, rather than pay them, the promoter took the regional tax authority to court and lost, and having lost, still doesn‘t appear to be paying up.

And from the tax authority‘s point of view, the threat of cancellation of Sunday‘s race is their best and possibly only hope of recovering the unpaid taxes. F1 isn‘t coming back to India and, once this weekend‘s event is over, the promoter can just declare itself insolvent and disappear.

From the article linked to earlier.

The Indian Supreme Court will hear the case on Friday. It is connected to a 2011 ruling the grand prix should be classified as entertainment rather than sport, and should therefore be denied tax exemptions.

 

It's not that they haven't paid the taxes, it's about wether or not they have to pay taxes. The same guy brought the same case in 2011.

 

It seems the organiser's problems all relate to the goalposts having moved in the years since they started the whole project.

[ReeVe]

The same guy brought the same case in 2011.

 

do we know what's this guy's issue with the race? I mean i assume the tax thing is  means to an end not his real objection,a quick google search only delivered some actor with the same name

[Gilles4Ever]

do we know what's this guy's issue with the race? I mean i assume the tax thing is  means to an end not his real objection,a quick google search only delivered some actor with the same name

Probably publicity/international platform

 

David Cushnan @DavidCushnan

Store this one up for the 'use of major sports events as a tool for international promotion' textbook: tinyurl.com/q8q29r2 #F1 #India

[redreni]

From the article linked to earlier.

It's not that they haven't paid the taxes, it's about wether or not they have to pay taxes. The same guy brought the same case in 2011.
 
It seems the organiser's problems all relate to the goalposts having moved in the years since they started the whole project.

Yeah and, correct me if I‘m wrong, the guy who brought this same case in 2011 won, which to a non tax lawyer such as myself, would appear to indicate that the entertainment taxes should have been paid before now?

[fabr68]

Publicity stunt?

TV ratings must be at an all time low

I dont think anyone will notice if there is no race this weekend.