Canada’s Income Tax Act would permit a 50 percent deduction on luxury box tickets to last Sunday’s Grey Cup game, or on front row tickets to Taylor Swift’s upcoming Canadian tour, or even on a deep sea fishing adventure from Aiden’s Deep Sea Fishing Trips in PEI, so long as business is discussed with clients. But if you want to impress them at even the most modest of Canada’s roughly 2,400 golf courses, you’ll be on the hook for the full price.
Why? That’s the question Jeff Calderwood, the CEO of the National Golf Course Owners Association of Canada and co-chair of the National Allied Golf Association (NAGA) is putting to MPs Tuesday. He says the Harper government’s $1.9 billion surplus projected for 2015 is evidence that the government no longer needs to leave the golf industry outside of business entertainment tax breaks.
Calderwood says despite waning interest in the wake of the financial crisis, Canadian businesses spend nearly $300 million on schmoozing clients on golf courses every year, a figure he expects will double if golf outings qualify for tax deductions.
“It’s a matter of fairness. Golf is probably the ideal way to entertain a client. It has advantages over all other ways you could build that relationship. Yet, it’s the one that gets singled out in the Income Tax Act,” said Calderwood.
A round of golf was fully deductible until a 1971 tax reform exempted the game from a list of activities that today includes sporting events, theatre, concerts, cruises, night clubs, trips to social and sporting clubs and fashion shows, plus taxes and gratuities.
“I think it came down to the fact that the finance department official said ’If I can’t do this on the company tab, why on earth should you be able to.’ I think it was that straight forward. It was partly politics and of envy and partly to limit overall volume of expenditures,” said Geoffrey Hale, author of The Politics of Taxation in Canada and a professor at the University of Lethbridge.
He says the “why you if not me” approach from the golf industry is completely reasonable, but Calderwood’s lobbying efforts fail to account for how bureaucrats and tax scholars frame these issues.
“The appropriate tax policy answer is, unless there is a strong social policy case to be made for a particular measure, you should have fewer of these things [deductions] rather than more of them. That way one can have a more efficient tax system by reducing overall rates as opposed to having all of these targeted tax reductions,” said Hale.
NAGA is going on the offensive with big numbers to show the economic significance of the sport in Canada. They hope MPs will not only see the status quo as unfair, but also a roadblock holding back an important industry that needs a helping hand.
The advocacy group released a report in May saying the golf industry drove $19.7 billion in direct spending on everything from memberships and greens fees, to apparel, travel, and specialty TV channels.
“Golf isn’t just a great game. It’s a vital industry. So we are going to give them the economic impact numbers such as employment of 300,000 people, and 37 percent of those are college and university students. Half a billion in charitable fundraising is done on these golf courses. It’s the number one participation sport in Canada,” said Calderwood.
Brent Miller is the executive director of golf operations and member services for ClubLink, Canada’s largest owner and operator of golf clubs with 40 courses and over 15,000 members. He says the industry is still in the rough after companies reduced discretionary and entertainment spending in 2008.
“The golf industry, despite the fact that it has great support from a participation perspective, it’s been a good six or seven years that we have been in our own little golf recession due to the overbuild and supply of golf courses,” he said.
Miller and Calderwood say golf is no longer an aspirational pastime dominated by rich and powerful titans of industries wearing high socks and sipping snifters of port at old money country clubs.
NAGA says the national average for the cost of 18 holes is an easily affordable $42. Miller says the average at among ClubLink courses is between $85 and $90.
But the case for everyday Canadians taking to the links to improve their business prospects will be a tough sell in Ottawa according to Hale. While the Harper government has a track record of offering up boutique tax credits – like the Child Fitness Tax Credit for example – he says helping the business prospects of golfers isn’t politically viable.
“The Harper government has been very careful to target these things toward the broad middle class. I don’t think the optics of the one falls within their political marketing. From the standpoint of the Department of Finance, part of your job is to lean against this sort of thing, whether it’s coming from your political masters or from lobbying groups,” said Hale.
Still, Caldwell is optimistic that three years of research and lobbying will pay off by the time golfers are ready to tee off next spring.
“We’re definitely making great progress. We are meeting with individual members of parliament [Tuesday] and we’ve done so in the past to make sure they fully understand it. We have a high likelihood of having this fixed this spring,” he said.