The Business of HockeyDiscuss the financial and business aspects of the NHL. Franchise sales, valuations, TV contracts, ratings, expansion, relocation, the CBA and work stoppage discussion goes here.
No, they aren't. A few luxury boxes unsold at one of (if not the) highest price point in the league with a team that hasn't made the playoffs in 8 years. I doubt anybody in MLSE is fretting over it and I sincerely doubt they are really fretting over this proposal by McGuinity and co.
There is more than enough corporate support in the Greater Toronto Area for a second team, tax break or not, especially with the absence of an NFL team.
This should not effect Toronto teams in the slightest. The Leafs may not even need to reduce prices (and if they do, it will be on the high end tickets ranging from $250-800 and not the ones that the average fan can afford), the Senators on the other hand...
Really though, this tax break costs the government $15 million per year. We aren't going to get out of a $16 billion deficit by closing these holes. We are going to get out of it by slashing programs such as the $1.5 billion implementation of all-day kindergarten. Too bad McGuinity doesn't seem to grasp the full scope of the problem.
This is where politics enters into the mix. Politicians know that eliminating a corporate tax break will be looked on a 'fighting for the little guy' and thus dramatically increase their chances of being elected. Also, $15 million sounds like a lot of money per year to the ears, and it's rarely put into perspective with million vs. billions. Similar to US politicians fighting over 200 million in savings when the deficit is over a trillion.
It's an issue news media has abused when wanting to make something sound bigger than it is. The corporate bailouts and subsequent bonuses were one such case
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No, they aren't. A few luxury boxes unsold at one of (if not the) highest price point in the league with a team that hasn't made the playoffs in 8 years. I doubt anybody in MLSE is fretting over it and I sincerely doubt they are really fretting over this proposal by McGuinity and co.
Yes they are. The past few seasons, for the first time Ever the leafs have been unable to sell all of their luxury boxes.
This makes your earlier statement false. If there are already empty luxury boxes it shows that there are Not other companies that are willing to step up.
I have worked for both small and large companies that had corporate boxes or seats in Ottawa or Toronto. Those boxes and seats are no doubt used sometimes to treat existing or potential customers, but from what I have seen most of the time they were used as a perk for the company executives and management who were sports fans and that was fairly widely known in those companies. (At least one of them also had his annual membership at a private golf club paid.)
I currently know a local businessman who has a part-season pack of 2 tickets for Senators games. For a few of the games each year he treats one or another of his best customers, but most of the time he is there with a family member or friend. Yet he can legally claim his entire ticket package (plus all food and drinks at those games) as a business expense. He is quite honest about it and nobody can really blame him. And I highly doubt it if his best customers would leave him if he instead treated them to a fancy restaurant once a year.
I also once worked for a company that split a box with one other company and generally used it as a perk to all employees (use of the box rotated amongst various departments). The last time I went I took my brother and he doesn't even follow hockey. We spent the game talking about our kids, etc. So I can relate to the lack of noise at many Senator games in the expensive sections due to people not being there to really watch the game.
It's one thing to claim things like meals, including fancy ones, as part of doing business to woo customers, but I am against the claiming of corporate boxes costing over $100,000 a year and high-priced corporate seats. I don't doubt that the end of this tax break for tickets and luxury suites for sporting events would hurt the Senators; however claiming that it would drive the Senators out of business is quite an exaggeration, although an expected one. And if it isn't an exaggeration then the team doesn't belong here in the first place.
For every company that declines to purchase platinum seats or boxes, another will step up. Toronto's corporate community is large enough for its sports teams to avoid any kind of significant blow.
Even if (in your worst case scenario) MLSE can "say goodbye to upwards of $20 million," they'd still be making more than $80 million annually.
You don't get it. The "corporate" community is in it for the "corporate" tax credis. Don't kid yourself. How do you sell it to the Board of Directors to keep a box when it is now considered frivolous? It hurts the bottom line of the company. Shareholders won't go for it, etc...it is business.
No company will purchase those boxes if there is nothing in it for them. You don't understand business.
If you want $20 million+ per year of your tax dollars to support your hockey team, may I suggest moving to Glendale, Arizona?
I've been a lifelong small-C conservative, but the current setup makes me sympathize with the "Occupy" protestors. Why should working stiffs, who can barely make their mortgage payments, subsidize the rich in their "expense account lifestyle"?
You sound more like an NDP. Exactly like one, actually.
Working stiffs don't subsidize this. This is as valid an expense as advertising in newspapers, rinkn advertising, radio ads. These are all marketing expenses. In fact, businesses can only write off 50%. The others are fully expensed. If you invite a couple of clients who are on the bubble and after a night being wined and dined, entertained you close the deal, that is how business works. It worked for me and it is a way of doing business. So what happens with the restuarant write-off? Is that out the window too? You have no idea how many transactions occur this way.
This is way that business has created income and thus tax revenue for generations.
Corporate support is based on the write-off. Pure and simple. Corporations are in it to make money and save on taxes. If they don't save taxes, those boxes will all be empty. Every single one other than a billionaire nut who will spend 100k to watch hockey from a box with no tax credit...but rich people aren't stupid. MLSE can saygoodbye to upwards of 20 million. Easy.
Calm down. Nobody tries to just save on taxes per se. In many cases, losing a tax break is exactly equivalent to inflation. When that happens, corporations reevaluate whether they still want to incur that expense. Please stop with the apocalyptic stuff. (See below.)
Quote:
Originally Posted by kdb209
No, they don't get them for free. It's a tax deduction - they save an amount equal to their marginal corporate income tax rate.
In the US, businesses may deduct up to 50% of entertainment expenses. If their marginal tax rate is 50% (significantly higher than most businesses), then the net result is they save 25% on the effective cost of the tickets.
I can't talk to deduction limits and tax rates in Canada.
It's the same rule in Canada. According to the Canada Revenue Agency, luxury boxes count as entertainment expenses. As such, only 50% of the amount is deductible. Provinces have the right to use different rules but except for Alberta and Quebec (who administer corporate tax separately from the CRA), they usually don't. I checked for Ontario and they don't adjust federal taxable income for such entertainment expenses, i.e. end result = 50% deductible in Ontario too.
As for corporate tax rates, calculations are predictably complex but Ontario corporations face marginal rates from 16% (small businesses = 11% fed + 4.5% Ontario) to 31% (large listed companies = 19% fed + 12% Ontario).
Let's assume a luxury box in Ottawa costs $200k a year (I have no clue how much they actually cost). Because of the 50% rule, only $100k is deductible. This implies (using tax rates quoted above) tax savings between $16k and $31k, thus a net cost of $169k - $184k.
Posters who believe corporations only engage in such activities "because they can save taxes" should take a deep breath, read the paragraph again, and look at the big picture.
By the way, this is likely going to pass, and it's not a big deal. The federal government is not going to change its tax code just because Ontario does. There will be a small change on the "provincial tax" part of the T2 federal tax return (schedule 5/500). Back to the example above, Ontario-based corporations will lose the write off at the provincial level, i.e. they will lose a tax break between $4.5k and $12k on a $200k luxury box. Net cost goes from $169-$184 to $181k-$189k (remember they still get the federal write off). If you're still counting that's a 2.7%-7% increase in net cost. BIG DEAL.
Yes they are. The past few seasons, for the first time Ever the leafs have been unable to sell all of their luxury boxes.
This makes your earlier statement false. If there are already empty luxury boxes it shows that there are Not other companies that are willing to step up.
Fair enough. Let me rephrase my argument: There are more than enough corporations in Toronto willing to make an investment in corporate boxes, tax credit or not.
Quote:
Originally Posted by coladin
You don't get it. The "corporate" community is in it for the "corporate" tax credis. Don't kid yourself. How do you sell it to the Board of Directors to keep a box when it is now considered frivolous? It hurts the bottom line of the company. Shareholders won't go for it, etc...it is business.
No company will purchase those boxes if there is nothing in it for them. You don't understand business.
Quote:
Originally Posted by coladin
You sound more like an NDP. Exactly like one, actually.
Working stiffs don't subsidize this. This is as valid an expense as advertising in newspapers, rinkn advertising, radio ads. These are all marketing expenses. In fact, businesses can only write off 50%. The others are fully expensed. If you invite a couple of clients who are on the bubble and after a night being wined and dined, entertained you close the deal, that is how business works. It worked for me and it is a way of doing business. So what happens with the restuarant write-off? Is that out the window too? You have no idea how many transactions occur this way.
This is way that business has created income and thus tax revenue for generations.
Any business expense write off is a joke on the taxpayer pure and simple. Not one company should be able to write off any expense be it hockey seats, meals, gold memberships anything at all.
If a company or individual wants to spend money to get customers in this manner they simply need to set aside an amount for that purpose. The goal should be to try to keep overall taxes low for companies and individuals but close these bogus methods of dodging taxes. (And just because it has become accepted as the norm over the years does not make it any less bogus.)
I have worked for both small and large companies that had corporate boxes or seats in Ottawa or Toronto. Those boxes and seats are no doubt used sometimes to treat existing or potential customers, but from what I have seen most of the time they were used as a perk for the company executives and management who were sports fans and that was fairly widely known in those companies. (At least one of them also had his annual membership at a private golf club paid.)
I currently know a local businessman who has a part-season pack of 2 tickets for Senators games. For a few of the games each year he treats one or another of his best customers, but most of the time he is there with a family member or friend. Yet he can legally claim his entire ticket package (plus all food and drinks at those games) as a business expense. He is quite honest about it and nobody can really blame him. And I highly doubt it if his best customers would leave him if he instead treated them to a fancy restaurant once a year.
I also once worked for a company that split a box with one other company and generally used it as a perk to all employees (use of the box rotated amongst various departments). The last time I went I took my brother and he doesn't even follow hockey. We spent the game talking about our kids, etc. So I can relate to the lack of noise at many Senator games in the expensive sections due to people not being there to really watch the game.
It's one thing to claim things like meals, including fancy ones, as part of doing business to woo customers, but I am against the claiming of corporate boxes costing over $100,000 a year and high-priced corporate seats. I don't doubt that the end of this tax break for tickets and luxury suites for sporting events would hurt the Senators; however claiming that it would drive the Senators out of business is quite an exaggeration, although an expected one. And if it isn't an exaggeration then the team doesn't belong here in the first place.
No he couldn't. That would be tax fraud.
Quote:
¶ 19. For any outlay for entertainment to qualify as a deductible expense, a taxpayer must be prepared to demonstrate that the amount was incurred for the purpose of earning income (see the current version of IT-487, General Limitations on Deductions of Outlays or Expenses). Records should be maintained of the names and business addresses of the customers or other persons being entertained, together with the relevant places, dates, times and amounts supported by such vouchers as are reasonably obtainable. Expenses that are personal in nature (other than expenses incurred by the taxpayer while away from home in the course of carrying on business) are not deductible by virtue of paragraph 18(1)(h). Payments for the services of a security escort or tour guide for a business client are normally deductible (subject to the 50% limitation) provided the amounts were incurred for the purpose of earning income. However, payments to what are sometimes called "escort services" for illicit services of a personal nature are never considered to be deductible outlays.
Quote:
Allocating between business and nonbusiness. If you entertain business and nonbusiness individuals at the same event, you must divide your entertainment expenses between business and nonbusiness. You can deduct only the business part. If you cannot establish the part of the expense for each person participating, allocate the expense to each participant on a pro rata basis.
Not saying that it doesn't happen but expensing a ticket then using it for personal use is illegal.
You don't get it. The "corporate" community is in it for the "corporate" tax credis. Don't kid yourself. How do you sell it to the Board of Directors to keep a box when it is now considered frivolous? It hurts the bottom line of the company. Shareholders won't go for it, etc...it is business.
No company will purchase those boxes if there is nothing in it for them. You don't understand business.
To be clear. Being able to write off these boxes does not make them free. The company still pays for them.
What is does is reduce the companies income for tax purposes. The money saved is equal to basically (cost of entertainment)*(company effective tax rate).
Not saying that it doesn't happen but expensing a ticket then using it for personal use is illegal.
Sorry, you're absolutely right about the legality (thanks for digging up the relevant evidence).
However, it is widely done, which is part of the reason why I hope the Ontario government goes through with their plan so that taxpayers like myself no longer have to partially pay for it.
No, I get that.... but you wouldn't expect spending on marketing to be tax deductible, would you?
Have nothing against companies having an entertainment budget for employee appreciation and to try to attract clients, but don't like the idea of it being a tax deductible expenditure. That, to me, makes absolutely no sense.
Marketing expenses not tax deductible? Why not? Why is advertising your product and acquiring new business a less valid expense than buying equipment or paying workers?
Quote:
Originally Posted by Beerfish
Any business expense write off is a joke on the taxpayer pure and simple. Not one company should be able to write off any expense be it hockey seats, meals, gold memberships anything at all.
If a company or individual wants to spend money to get customers in this manner they simply need to set aside an amount for that purpose. The goal should be to try to keep overall taxes low for companies and individuals but close these bogus methods of dodging taxes. (And just because it has become accepted as the norm over the years does not make it any less bogus.)
Can you guys clarify your position that business expenses should not be tax deductions? Businesses should be taxed on gross revenue only? What about businesses whose spending (business expenses!) is more than their revenue? Under your plan they would be taxed even after losing money!?
By the way, this is likely going to pass, and it's not a big deal. The federal government is not going to change its tax code just because Ontario does. There will be a small change on the "provincial tax" part of the T2 federal tax return (schedule 5/500). Back to the example above, Ontario-based corporations will lose the write off at the provincial level, i.e. they will lose a tax break between $4.5k and $12k on a $200k luxury box. Net cost goes from $169-$184 to $181k-$189k (remember they still get the federal write off). If you're still counting that's a 2.7%-7% increase in net cost. BIG DEAL.
Thanks for this explanation quantifying the actual implication to businesses. Of course the Senators would be against such a much, but I don't buy it when the Senators president says:
Quote:
“We have a sizable portion of our operation that’s run based on corporate support for suites and for tickets,” he said. “So if we had a 10-per-cent to 20-per-cent loss of that business, we would be out of business.”
In the first case, would they really lose 10-20% of their business? And if so, would they they really go out of business? I am highly sceptical about both.
Calm down. Nobody tries to just save on taxes per se. In many cases, losing a tax break is exactly equivalent to inflation. When that happens, corporations reevaluate whether they still want to incur that expense. Please stop with the apocalyptic stuff. (See below.)
It's the same rule in Canada. According to the Canada Revenue Agency, luxury boxes count as entertainment expenses. As such, only 50% of the amount is deductible. Provinces have the right to use different rules but except for Alberta and Quebec (who administer corporate tax separately from the CRA), they usually don't. I checked for Ontario and they don't adjust federal taxable income for such entertainment expenses, i.e. end result = 50% deductible in Ontario too.
As for corporate tax rates, calculations are predictably complex but Ontario corporations face marginal rates from 16% (small businesses = 11% fed + 4.5% Ontario) to 31% (large listed companies = 19% fed + 12% Ontario).
Let's assume a luxury box in Ottawa costs $200k a year (I have no clue how much they actually cost). Because of the 50% rule, only $100k is deductible. This implies (using tax rates quoted above) tax savings between $16k and $31k, thus a net cost of $169k - $184k.
Posters who believe corporations only engage in such activities "because they can save taxes" should take a deep breath, read the paragraph again, and look at the big picture.
By the way, this is likely going to pass, and it's not a big deal. The federal government is not going to change its tax code just because Ontario does. There will be a small change on the "provincial tax" part of the T2 federal tax return (schedule 5/500). Back to the example above, Ontario-based corporations will lose the write off at the provincial level, i.e. they will lose a tax break between $4.5k and $12k on a $200k luxury box. Net cost goes from $169-$184 to $181k-$189k (remember they still get the federal write off). If you're still counting that's a 2.7%-7% increase in net cost. BIG DEAL.
I am glad that you read up on the laws, but I am a VP of a Corporation and let me tell you that you are completely naive about how corporations work. They are not getting the box without the tax deduction. Sorry. I won't. Well, I have two tickets I might. My colleagues won't. I already spoke to two box owners and they won't keep the boxes. They make zero financial sense. You dismiss a 15-30K tax write off like chump change, not to these people it ain't.
Any business expense write off is a joke on the taxpayer pure and simple. Not one company should be able to write off any expense be it hockey seats, meals, gold memberships anything at all.
If a company or individual wants to spend money to get customers in this manner they simply need to set aside an amount for that purpose. The goal should be to try to keep overall taxes low for companies and individuals but close these bogus methods of dodging taxes. (And just because it has become accepted as the norm over the years does not make it any less bogus.)
Wages are a write off too, how is compensating your employees with prepaid goods/services any different? At the end of the day these companies are still trying to make money, it's not like they exist solely to give perks to their employees. They do that to retain their professionals and remain competitive. It's simply a cost of doing business.
You sound more like an NDP. Exactly like one, actually.
Totally wrong. I joined the Reform Party when it expanded into Ontario in the early 1990's. For our American friends... the closest analogue is their Tea Party. I oppose these tax subsidies for sports for the same philolosophical reasons the Goldwater Institute opposes them in Glendale.
Quote:
Originally Posted by coladin
Working stiffs don't subsidize this. This is as valid an expense as advertising in newspapers, rinkn advertising, radio ads. These are all marketing expenses.
There is a major difference between getting the message out to buyers, versus bribing buyers with the average taxpayer's dollars.
Quote:
Originally Posted by coladin
If you invite a couple of clients who are on the bubble and after a night being wined and dined, entertained you close the deal, that is how business works. It worked for me and it is a way of doing business. So what happens with the restuarant write-off? Is that out the window too?
Yes. And if a guy spends money wining+dining his date, hoping to get laid that night, should he be able to write that off on his taxes?
There is a major difference between getting the message out to buyers, versus bribing buyers with the average taxpayer's dollars.
Please explain what is the difference? Taking clients to hockey games isn't illegal is it? And how it is taxpayer's dollars being spent? Wouldn't using other advertising "rob" the taxpayer even more because those expenses are fully deductible?
Quote:
Originally Posted by knorthern knight
Yes. And if a guy spends money wining+dining his date, hoping to get laid that night, should he be able to write that off on his taxes?
I am glad that you read up on the laws, but I am a VP of a Corporation and let me tell you that you are completely naive about how corporations work. They are not getting the box without the tax deduction. Sorry. I won't. Well, I have two tickets I might. My colleagues won't. I already spoke to two box owners and they won't keep the boxes. They make zero financial sense. You dismiss a 15-30K tax write off like chump change, not to these people it ain't.
lol. are you really the VP of a Corporation (with a capital C??) or do you play one on the Internets?
I'm not dismissing anything. The federal tax deduction isn't going away. what's going away is about a third of the current tax break, i.e. the Ontario corporate tax deduction. the Ontario tax rate is lower than the federal rate. The total price is 3-7% higher without the write off per my previous post. Were my numbers off?
Maybe the Sens and Leafs were planning to increase box prices by 5% next year. If they did, corporations would feel a ~10% hike because they also lose the Ontario deduction. So maybe the Sens and Leafs will have to forego the increase in asking price. Let me ask you again: is this the end of the world?
If companies' reasons for renting the box are non-financial to begin with (your claim), why would they change their decision because of a marginal increase in the cost of doing so?
lol. are you really the VP of a Corporation (with a capital C??) or do you play one on the Internets?
I'm not dismissing anything. The federal tax deduction isn't going away. what's going away is about a third of the current tax break, i.e. the Ontario corporate tax deduction. the Ontario tax rate is lower than the federal rate. The total price is 3-7% higher without the write off per my previous post. Were my numbers off?
Maybe the Sens and Leafs were planning to increase box prices by 5% next year. If they did, corporations would feel a ~10% hike because they also lose the Ontario deduction. So maybe the Sens and Leafs will have to forego the increase in asking price. Let me ask you again: is this the end of the world?
If companies' reasons for renting the box are non-financial to begin with (your claim), why would they change their decision because of a marginal increase in the cost of doing so?
What do you mean "non-financial"? The boxes are all completely financial. Itis all about the write off. Why would anyone get a box to watch a game if you don't benefit from the expense?
I am a VP of a Corporation. I know, i shouldn't be socializing with the likes of high school guys, but I love my hockey team and as a business owner who has seasons and utlilize these tickets for my business, I can see a lot of people getting out of the hockey expense without the tax write off. As I said earleir, I spoke to a few box owners who already stated that either they won't or the BOD won't allow it. They are not increasing prices on boxes when they can hardly find people to take them as it is.
Totally wrong. I joined the Reform Party when it expanded into Ontario in the early 1990's. For our American friends... the closest analogue is their Tea Party. I oppose these tax subsidies for sports for the same philolosophical reasons the Goldwater Institute opposes them in Glendale.
There is a major difference between getting the message out to buyers, versus bribing buyers with the average taxpayer's dollars.
Yes. And if a guy spends money wining+dining his date, hoping to get laid that night, should he be able to write that off on his taxes?
I am a conservative as well and recognize that there are many factors that stimulate small business, large business and the tax base. There are many investments that government create to stimulate the economy. That is part of the conservative mantra. Reform was a bunch of extremists cooks who had tunnel vision when it comes to any spending matters, so I guess in a sense your statement does fall into your ideology.
It is not bribing. Pfft...for real? Well, maybe to angels and naive people out there, it may come off that way. Business has been carried out this way for centuries, I can see why you may have a problem with this. If I have to explain this to you, you might as well move to Cuba or China. Capitalism baby.
Your last comment reeks of immaturity. Terrible analogy.
Please explain what is the difference? Taking clients to hockey games isn't illegal is it?
It borders on a "kickback", which is highly illegal.
If a salesman slips a buyer a couple of hundred dollars under the table, to convince the buyer to buy whatever, it'a a kickback. Then the buyer uses the $200 to buy a ticket to the game.
But if the salesman takes the buyer directly to the game, it's legal?
Six of one, half a dozen of the other. It waddles like a duck, quacks like a duck, flies like a duck, as far as I'm concerned it is a duck.
Quote:
Originally Posted by EvilPirateZamboni
And how it is taxpayer's dollars being spent?
The tax write-off, which corporations are whining about losing.
Quote:
Originally Posted by EvilPirateZamboni
Wouldn't using other advertising "rob" the taxpayer even more because those expenses are fully deductible?
You're conflating "advertising" with "entertainment". They are 2 totally different concepts. If you can't make that distinction, there's no point in us arguing.
It borders on a "kickback", which is highly illegal.
Paying kickbacks is highly illegal? In some situations sure, but don't make generalizations. (Hint: The businesses in question aren't declaring deductions for what are "highly illegal" transactions) If you had said of questionable business purpose I would agree.
Quote:
Originally Posted by knorthern knight
The tax write-off, which corporations are whining about losing.
That doesn't explain how a business deducting a business expense is somehow taking money from taxpayers. (Hint: the businesses in question, they are taxpayers)
You also seem to have conveniently snipped off part of the question:
Wouldn't using other advertising "rob" the taxpayer even more because those expenses are fully deductible?
Quote:
Originally Posted by knorthern knight
You're conflating "advertising" with "entertainment". They are 2 totally different concepts. If you can't make that distinction, there's no point in us arguing.
I don't think they are totally different concepts, and I asked you to explain the difference. If you can't explain the difference, then we aren't actually arguing, it's just you making statements you can't support.
