The Hindu Business Line : Be a sport, don't tax

THE SUGGESTION FROM the income-tax department that the tax-exempt status to the Board of Control for Cricket in India be withdrawn is interesting. BCCI's tax status has been somewhat clouded ever since the Government withdrew two years ago the general exemption given to associations promoting sport. Evidently, the Government did not want these bodies to enjoy such a status as a matter of course but would rather they approached it specifically on the grounds that their activity constituted a `charitable purpose' deserving of exemption. This brought the apex body for cricket in India under greater scrutiny by taxmen. But whatever the merits of BCCI's arguments, the controversies it has been embroiled in over the award of telecast rights for cricket matches in India and the allegations of lack of a genuine representative character to its internal functioning have only served to damage its case on this question.

But any perception of mismanagement of cricket affairs in the country should not cloud one's judgement on the larger question of whether sport bodies, as a rule, and cricket, in particular, deserve tax exemption on their surpluses. There is little doubt that cricket owes its healthy financial status not to any governmental largesse but to the huge fees the television channels are willing to pay for the right to telecast matches. This, in turn, is linked to the almost universal appeal of the game and the people's willingness to not just pay a fee for watching matches beamed live by these channels but also, indirectly, in the form of higher prices for the merchandise advertised during the telecast. In effect, then, Indians collectively (anyway such an overwhelming majority as to render the rest of little consequence) pool their resources and spend on creating an infrastructure that makes possible continued enjoyment of the sport. An element of `mutuality' (the tax principle that one cannot earn incomes out of one's own self) has been created in the arrangement as to rule out any notion of `surplus' that is liable to taxation.

But legalities apart, the question to be asked is, does the country need to spend at all on cricket and, if so, what is the institutional mechanism for deploying resources into the sport. Nations, including those with a poorer record of social development than India, do spend on sport, and as a game with the largest fan following it can be nobody's case that New Delhi not do so on cricket. In the event, it is far better that the mechanism of BCCI is used for this purpose rather than the state impounding revenues through taxation and then funding cricket via the exchequer. Of course, if there is any extravagance on the part of those responsible for its administration — and let it be said the BCCI has not exactly distinguished itself on this score — that is a corporate governance issue which requires different corrective measures. In any case, taxation while doing nothing to curb such profligacy can only reduce the pool of surplus available for development of the sport.

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