French MPs last week backed a law exempting European football's governing body UEFA from paying tax in France on any profits it makes organising the Euro 2016 tournament here. Though many parliamentarians had misgivings, the measure had been promised by budget ministers under former president Nicolas Sarkozy, and President François Hollande's socialist administration argued it could not go renege on its word. Indeed, the current government has gone even further and widened the scope of the tax break to include any body running international sporting events in the country. In effect this is a blank cheque for major sports competitions staged in France at a time of fiscal belt-tightening for everyone else.
MPs debated the controversial Euro 2016 exemption measure on December 3rd after it was added to what was an otherwise routine bill making end-of-year adjustments to the 2014 finance law. During the debates the government then unexpectedly introduced the extra concession exonerating all “bodies charged with organising an international sporting competition in France” from paying any taxes or charges except VAT. Under this proposal no tax on profits, no social security contributions, no apprentice tax - a small levy on companies that goes to fund apprenticeships – will be paid by anyone organising European or world championships or the Olympic Games on French territory for events awarded to France before 2018. That amendment was duly passed.
In a joint statement after the vote, Patrick Kanner, minister for urban areas, youth and sport, and Thierry Braillard, junior minister for sport, said hosting such events offered France the chance to stimulate economic activity and create jobs. “In the context of very fierce competition between nations, France must ensure it has the best attributes for obtaining the organisation of these major events,” they said.
The issue of fiscal breaks for top sports events first came to light in November 2014, when the government's plan to exempt UEFA from tax over Euro 2016 was revealed by financial daily Les Échos. But in fact the story goes back to promises made in 2010, when Nicolas Sarkozy was president. According to information obtained by Mediapart, there were two separate ministerial letters addressed to UEFA as part of France's bid to host Euro 2016, one from Éric Woerth, budget minister under Sarkozy, and the other from his successor, François Baroin. They were cited by budget rapporteur Valérie Rabault, a former banker and now a socialist MP, on the National Assembly's finance commission in a report on November 26th, 2014. The first letter, dated February 2nd, 2010, and signed by Woerth, granted UEFA a “fiscal guarantee” as stipulated in the organisation's technical specifications, promising a zero tax bill if it chose France to host the tournament.
The previous government
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s curious promise
Rabault's report said Woerth had guaranteed that “UEFA will not be liable for taxes or levies in France on its turnover and/or on any form of revenues received or to be received by UEFA (...) from the fact of UEFA organising Euro 2016 and related operations in France”. But according to Mediapart's information, the minister also wrote that “current legislation allows the granting of these guarantees”, suggesting it was not necessary to obtain Parliament's approval for this commitment. This is highly debatable. UEFA may have wondered about this too, as it requested further confirmation, which was given in a letter dated April 11th, 2010, from Baroin, who had meanwhile replaced Woerth.
Jacques Lambert, the former head of the French Football Federation (FFF) who is now heading the French committee organising Euro 2016, himself believed that the tax commitment did not need further clarification. “The fiscal guarantee was clearly stated in the [contract's] technical specifications. We had two competitors, Turkey and Italy. I knew they were both going to give UEFA a guarantee and if we did not give the same [guarantee], we had no chance of winning,” he told sports newspaper L’Equipe in early November, adding that as far as the organisers were concerned the matter had been “settled” since 2010.
However, article 34 of the French Constitution gives Parliament alone the power to decide on tax matters. It would seem the current government only realised rather late in the day that Woerth's promise presented a problem, and that it could not avoid bringing the matter before Parliament. On November 12th budget minister Christian Eckert admitted as much before the finance commission. This would explain why such a potentially explosive subject was quietly slipped into the final adjustments to the 2014 finance law.
For the government it was a question of credibility: France had to keep its word or risk losing any hope of staging further international events. In the summary of reasons for introducing the law the government noted that “the French Football Federation's candidacy to host the tournament (...) required that the government make the commitment to the organising bodies to grant them special fiscal dispensations. This commitment took the form of a ministerial letter attached to the candidacy documents in 2010.”
When questioned in the National Assembly on November 25th about the reasons for the exemption Patrick Kanner replied: “In this period of prolonged crisis (...) why refuse ourselves something that can bring joy collectively and unite French people? In any case, France will keep its word for Euro 2016.” A ministry official told Mediapart that “if we had gone back on our word, there would have been no point in our country being a candidate for any major international event in the coming years”.
This was not the first time UEFA had demanded a tax break. It sought the same thing from Poland and Ukraine for Euro 2012, from Switzerland and Austria in 2008 and from Portugal in 2004. For France, however, it is a new development. The country hosted the 1998 FIFA football world cup without granting tax concessions. Though when France hosted the rugby world cup in 2007, partial exonerations of the entertainment tax were often granted, depending on the cities and towns which were hosting matches. This entertainment levy will in any case be abolished from 2015.
How much will its generosity over Euro 2016 cost France? In its summary of reasons for introducing the article the government says that it cannot put a figure on the cost of the measure. But in her report Rabault said that “the loss of potential fiscal receipts can be put at between 150 and 200 million euros”. Her report acknowledges that UEFA will pay towns and cities that host matches 20 million euros and the French football federation (FFF) is to receive the same amount. UEFA will also pay out 23 million euros to rent stadiums.
Cross-party opposition to the tax exemption
These figures did not placate the many MPs who opposed the measure. Several amendments were filed to annul the fiscal exoneration, signed by parliamentarians of a variety of persuasions – Greens, communists, members of the centrist UDI and even dissident socialist MP Pascal Cherki, plus Jean-Luc Laurent,who heads the left-Gaullist MRC founded by Jean-Pierre Chévènement. Laurent rallied opposition from a dozen or so socialists, including Michèle Delaunay, who was minister for the elderly until last April. These amendments were debated but not adopted. However, their backers showed their anger during the debates.
“This is a matter of principle. At a time when we are asking citizens to make efforts to improve public accounts, it is incongruous to bring in this kind of exoneration,” Laurent told Mediapart. EELV deputy Éric Alauzet said the exoneration contradicted other French commitments. “How can we say that the war on tax evasion is a priority and at the same time try and attract sporting organisations that behave like companies seeking to avoid taxes at any price?” he said.
Alauzet said France has stripped itself of all credibility in its criticisms of Luxembourg's fiscal deals with multinationals. UEFA, like the multinationals that champion aggressive fiscal optimisation, hardly pays any tax in the country where it is registered, Switzerland, where it is considered as a non-profit organisation. UEFA’s Swiss taxes were the equivalent of 400,000 euros on millions of euros in profit in 2013, he said.
There was in fact very little chance these amendments in the National Assembly aimed at blocking the tax exemption would be passed, as on November 25th the socialist group in Parliament had agreed to reject them. Two socialist MPs, Karine Berger and Yann Galut, had then decided to adopt a new approach. “We're going to put the question of tax equality to our colleagues,” Berger told Mediapart at the time. “Why should only sport benefit from fiscal exemptions?” With a touch of irony, they suggested granting comparable tax advantages to the Eurovision Song Contest, the Cannes Film Festival, the FIAC international modern art fair, Le Bourget Air Show and a number of other similar events.
Their amendments were finally withdrawn, but their approach may yet bear fruit. The Constitutional Council is routinely asked to approve all France's finance laws and is very demanding over questions of equal tax treatment. It might not be happy about this favouritism reserved for sports events alone.
Sporting federations jump on tax break bandwagon
An amendment that would have limited the tax exoneration measure to just the Euro 2016 tournament was tabled by budget rapporteur Rabault via the influential finance commission. It recognised that France could hardly renege on its promise to UEFA but left to future finance laws the question of whether to repeat the exoneration for other sporting events. In other words, there would be no signing of a blank cheque. But this amendment was also rejected.
The government, meanwhile, had decided to go further and settle the issue by also exempting future major international sporting events organised in France. Next year the country will host the world rowing championships at Lake Aiguebelette in the French Alps and will also stage the knockout phases of the EuroBasket 2015 basketball tournament. For 2017, it has bid to host the men's world handball championship, lost out to South Africa for the world canoeing championship and is co-hosting the world ice hockey championship with Germany. It will be hosting golf's Ryder Cup in 2018 and is competing with South Korea for the FIFA women's football world cup in 2019.
Another opportunity arises with Paris's candidacy for the summer Olympics in 2024 - President Hollande said in a television interview on November 6th that he backed this bid. And last week Hollande called for support for tax breaks for all major international sporting events. “The government must be present (...) on the fiscal front to allow big tournaments to be organised here, in our country, and not only for football,” he said during a visit to national sports institute INSEP. “We need to have great events to convince young people to take up the discipline.”
Sources at the sports ministry insisted in the run-up to the parliamentary vote last week that the government’s position on the legislation “remained the same” despite the MPs' amendments. “It's about ending favourable treatment for just a few major sports, which are also the wealthiest,” said one source. “It also ensures fairness towards all sports. And it is about transparency, where we announce publicly what we are doing rather than allow the budget minister to decide on a case-by-case basis.”
This approach buoyed the hopes of representatives of various French sports, who, one by one, had discovered for the first time in early November that the Euro 2016 tournament had been granted a tax exemption, and were worried that MPs would sink their chances of getting the same deal. Bernard Lapasset, president of the French Committee for International Sport (CFSI), in charge of the possible bid for the 2024 Olympics, had attacked what he called the “negative signal” that the MPs opposed to tax exemption were sending to the Olympic world. Meanwhile a senior figure in the French handball federation told Mediapart of his “hope” that his sport's world cup in 2017 would benefit from the same tax exoneration and of his “deep disquiet” ahead of the National Assembly vote. The same message came from the governing bodies for golf, basketball and athletics.
In addition, on December 3rd the heads of the governing bodies for football, athletics, basketball, handball, hockey, badminton and wrestling addressed a letter to MPs, a copy of which (see above) has been seen by Mediapart. In it they talk about future international competitions in their disciplines and raise the alarm over the fact that “the awarding of these events comes up against ever tougher competition, in a context where the terms, particularly fiscal, that are offered by other countries form a central part of the dossier bids”.
In the end the government and MPs listened to these fears. But budget minister Eckert also sought to calm the mood of opponents by promising that the across-the-board tax exemption for sports events should be limited in time, and apply only to competitions awarded to France before 2018. After some nervous moments on the government benches the proposal was finally adopted, and France has now become a tax haven for big sporting events. This will include the 2014 Olympic Games if Paris's bid is accepted by the International Olympic Committee, who will make their decision in 2017.
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- The French version of this article can be found here.
English version by Sue Landau
Editing by Michael Streeter