Commentary
By Austin Thompson

Many Canadians are fans of FIFA World Cup soccer. But Vancouver and Toronto’s decision to host 13 men’s World Cup matches, at considerable taxpayer expense, has not been popular. In a recent poll, roughly 70 per cent of Metro Vancouver and Greater Toronto Area residents said they believe government spending to support hosting the World Cup is “not worth it” (with the remainder responding it was “worth it” or “not sure”). That skepticism is justified.

Canadian taxpayers are on the hook for $1.1 billion in FIFA-related spending, including $473 million from Ottawa and $593 million from provincial and municipal governments. That means each FIFA game hosted in Canada benefits from roughly $82 million in taxpayer subsidies—and these amounts may grow if there are cost overruns.

Taxpayer subsidies for professional sports are always hard to justify, but especially so in light of Canada’s fiscal challenges. Federal and provincial debt has nearly doubled since the 2007/08 fiscal year, after adjusting for inflation, and this year the average Canadian family faces the unsavoury prospect of paying 43.5 per cent of their income in taxes.

This is the first problem with the World Cup subsidies: governments are making a discretionary spending commitment at a time when government finances and household budgets are already stretched.

So why did politicians sign off on such a large and optional subsidy for FIFA? The standard defense is that World Cup spending is not really a subsidy at all, but a prudent public “investment.” That claim deserves scrutiny.

World Cup boosters point to visitor spending, tourism promotion, civic pride and global exposure to justify the expense. Some of these benefits are real. Vancouver and Toronto will attract visitors, some businesses will see higher sales, and many Canadians will enjoy watching the tournament.

But the relevant question is not whether the tournament will generate economic activity. It will. The question is whether that activity warrants more than $1 billion in government subsidies.

A robust economic literature on sports mega-events, including the World Cup, finds that the benefits of hosting such events are often overstated, the costs are frequently underestimated, and the promised economic windfalls rarely materialize.

The basic problem is straightforward. Spending on World Cup-related activities doesn’t exist in a vacuum. Some international travellers will come to Canada specifically for the games, but their travel may displace some ordinary tourists and business travellers who would have visited anyway. Local residents may spend more on FIFA tickets or concessions at the stadium, but household budgets are limited, meaning that extra spending on the tournament often comes at the expense of spending on restaurants, entertainment and other local businesses. And some people will simply avoid areas hosting FIFA events because of crowds, congestion and elevated prices.

This is why we should treat with caution any eye-catching estimates of GDP, jobs or visitor spending associated with the games. The federal government, for example, repeats the claim that the World Cup will add $2 billion to Canada’s economy. But that figure comes from a FIFA-commissioned Deloitte economic-impact assessment, not an independent analysis focused on returns for taxpayers. More importantly, this type of assessment counts spending related to the event, but does not properly account for the fact that much of this spending typically reduces spending elsewhere in the economy. Presenting these gross spending numbers as the “benefit” of hosting is misleading, to say the least.

A related problem shows up on the cost side. If governments want to defend World Cup spending as an “investment,” they should be clear about what taxpayers actually pay. Instead, some governments have presented the cost in a way that makes the subsidy look smaller than it is.

For example, the City of Toronto’s budget documents present a “net cost” of $0 for the World Cup, even though City Hall is slated to spend $380 million. That’s because Toronto counts its government dollars from municipal reserve funds, hotel taxes and contributions from higher levels of government as revenue to offset FIFA expenses. But this is still taxpayer money. If government had not spent these funds on FIFA, they would be available to fund tax cuts or finance more pressing priorities.

Likewise, the British Columbia government’s presentation of FIFA-related costs is opaque. For example, in tallying the anticipated expenses and revenues associated with hosting the World Cup, the government counts $250 million to $260 million from a temporary hotel-tax increase in Vancouver as revenue to offset the cost of hosting the games. But that tax runs for seven years, including years before and after the tournament. It’s outrageous to treat a seven-year tax increase on Vancouver hotels as a revenue stream that should be attributed to, and netted against, the subsidies dedicated to hosting a handful of World Cup matches.

Those who benefit most from FIFA should pay the cost of hosting the games.

Austin Thompson is a Senior Policy Analyst at the Fraser Institute.