A taxing problem

If you're waiting for the World Cup or the Champions Trophy to come to India, don't hold your breath. And don't blame the ICC or the Board of Control for Cricket in India (BCCI) for it. Blame the Indian government and its policy of slapping 33 per cent income tax on these events.

Board president Jagmohan Dalmiya has managed to convince the ICC that the World Cup, now allotted by rotation, should come to the subcontinent on the third turn instead of the fifth, on the strength of four nations - India, Pakistan, Sri Lanka and Bangladesh - hosting it jointly, but that will matter little considering the tax burden that will apply, especially considering that other countries are more than eager to grant 100 per cent exemption.

The previous two World Cups held in South Africa and England were fully tax-exempt while PILCOM, the joint management committee of the Indian, Pakistani and Sri Lankan cricket boards, is still locked in a dispute with the Indian income tax authorities, who have made a tax claim to the tune of Rs 100 crore.

"It is a hopeless situation," Dalmiya told Wisden Asia Cricket. "We are fighting a bizarrely short-sighted attitude. What can the Income Tax Department hope to gain by denying the country the opportunity to host the World Cup? If there are no tournaments, they will get no taxes anyway, but the country will stand to lose substantial side revenue. Ultimately, the game and the fans are the losers.

"We have the instance of the English government going out of its way to waive all taxes so that the ICC headquarters can stay in London. They have even gone to the extent of offering to move the England Cricket Board office out of Lord's to provide more space to the ICC. And here we are, where the passion for the game is so incredible, doing everything to prevent prestigious tournaments from being hosted."

India were due to host the last edition of the Champions Trophy, and at one point the BCCI was even prepared to go ahead with the tournament in the hope of later being able to persuade the Income Tax Department to grant a waiver. But it ultimately decided to withdraw the claim, paving the way for Sri Lanka to play host. "The income tax authorities claim that since these tournaments are hugely profitable, the ICC should not shy away from paying tax," says Dalmiya. "But why should the ICC be ready to pay when all other countries are willing to waive tax?"

The dispute between the tax authorities and PILCOM has dragged on for eight years. While the BCCI has been exempt from paying tax all these years, the tax department ruled that the income that had accrued to PILCOM, which they considered an Association of Persons, and not a management committee as it had been constituted, was taxable.

"Even for matches held in Pakistan and Sri Lanka, the tax authorities took a view that the rights for the entire tournament belonged to PILCOM and therefore should be taxed irrespective of the location," says Kishore Rungta, the then treasurer of the BCCI. Not only that, they also taxed the BCCI on revenues earned by PILCOM, which they held was an agent of the board.

When it comes to the staging of other major events, like the Asian Games or the Afro-Asian Games, the question of taxation does not even arise. These events simply do not generate enough money, and require government subsidies to meet the huge infrastructure costs involved in running them.

Apparently the government doesn't quite see it that way and in fact the law has now been amended to remove the tax-waiver to the BCCI for even bilateral series. Under the new rule, the BCCI will have to pay sales tax for the sale of television rights and service tax for hosting matches. "Cricket is not seeking any subsidy," says Rungta. "Sports promotion is one of the activities of the government but at least we are not a burden on the exchequer. What we are saying is, whatever money cricket is earning, let it stay in cricket itself."