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Expert Group "Sustainable Financing of Sport”

Report from the 3 rd meeting (14 November 2012)

January 2013

Rep ort drafted by the Europ ean Commission

EU Work Plan

for Sport

2011-

2014


PARTICIPANTS:

XG FIN – Report 3 rd meeting

2

� Experts from the following Member States: AT, CY, DE, DK, FI, HU, IR, LU, MT, PL,

PT, RO, UK (chair)

� European Commission: DG EAC, DG COMP

� Other participants: Council Secretariat

� Observers: EOC EU Office, ENGSO, CEMR

1. INTRODUCTION

The chairman (UK) welcomed the members of the Expert Group "Sustainable

Financing of Sport" (XG FIN) and noted that the main aim of the 3 rd and last meeting

of the XG was to agree on the final text of the Group's deliverable.

The XG adopted the draft agenda without comments.

COM informed that the negotiations on the future EU Programme for Education,

Training, Youth and Sport ("Erasmus for All"), including the Sport Chapter, were

progressing. In its partial general approach of May 2012, the EU Council had

proposed some changes, one of which was to add volunteering in sport to the

objectives of the Sport Chapter. Meanwhile the European Parliament (EP) was

preparing its position and in the available draft documents this terminology was

confirmed. COM noted that one outstanding question regarding the Sport Chapter

was possible support for sport events; the EP was in favour, but the Council of

Ministers was against. Hence, the outcome of the negotiations for this particular

issue had still to be seen.

The representative from Ireland confirmed that the sustainable financing of sport

would be a main topic for the sport agenda under the Irish Presidency. The

Presidency programme foresaw a conference on that issue on 7 March 2013 as well

as a policy debate in the EU Council in May.

2. LATEST EU LEVEL DEVELOPMENTS WITH A POSSIBLE IMPACT ON THE FINANCING OF SPORT

The chairman (UK) welcomed the Commission representatives to report on specific

topics relating to the group’s work, namely EU developments in the fields of State

aid, Cohesion Policy (Structural Funds) and taxation (VAT). The chairman would

give an update on intellectual property rights (IPR) following discussions with DG

MARKT.

COM (DG COMP) noted that since the last meeting in May there had not been too

many developments in the field of State aid. State aid could take the form of state

assistance, using state resources, tax benefits or direct support. Sport fell under EU

rules, including State aid rules, if it involved an economic activity; which was the

case usually for professional sport. State assistance that fulfilled four cumulative

conditions laid down in Art. 107(1) TFEU (aid is granted by the State or through

State resources, leads to an economic advantage for certain undertakings, distorts or

threatens to distort competition, and affects trade between Member States) was

considered State aid. Selective aid from public resources to an economic activity was

likely to fulfil the requirements of that article and was, in principle, incompatible

with the internal market. However, for example aid for training of youngsters and


XG FIN – Report 3 rd meeting

3

amateurs was no State aid in the meaning of that article. As there was no single

European definition, COM looked at amateur sport on a case-by-case basis. If aid was

awarded to a professional club, separation of accounts would be required to

separate amateur activities from economic activities; and similarly, also amateur

clubs could have separate economic activities. Under certain conditions, derogations

from incompatibility could apply under Article 107(3)(c) – e.g. examining if there

was a market failure, a public interest, the necessity and proportionality of the aid.

COM would do a balancing exercise examining these elements against the negative

effect of the distortion. The positive effects from a European perspective, potentially

taking also Article 165 into account, could sometimes outweigh the negative effects

of the measure on competition.

Support for sport infrastructure was likely to constitute State aid, e.g. the

exploitation of a stadium (multifunctional or other) was, in principle, an economic

activity. However, if this infrastructure was open for the general public it could be

found compatible with the common market as it was demonstrated in the

Commission Decision of 13 October 2011 concerning the support of the sport sector

in Hungary through a tax benefit scheme (SA.31722). In this area in 2012 the

Commission launched in-depth investigation procedures in the cases concerning the

Nürburgring racetrack (SA.31550), the Uppsala arena in Sweden (SA.33618) and the

financing of a new multifunctional arena in Copenhagen (SA.33728).

Regarding aid to professional football and respective cases, DG COMP had not

received notifications; all cases were mainly based on complaints from citizens. In

October 2012 COM had sent a letter to all MS, which asked them to provide an

overview of public financing of professional football and reminded authorities to

notify measures that were likely to be State aid. This initiative was at this stage an

information gathering exercise, to get an overview of the situation in all MS. Besides,

the joint statement from Vice-President Almunia and UEFA President Platini was

mentioned which was issued in March 2012 on the interaction between the

application to professional football of Financial Fair Play (FFP) rules by UEFA and

the control of State aid in professional football by the COM. COM considered that if

FFP rules worked, fewer State aid cases would be expected.

In the discussion, concern was raised with regard to financial solidarity mechanisms

within sport involving both professional and amateur sport within the club. COM

noted that the link between both sides should be transparent; a separate account

should exist for the amateur part of the club to ensure that public money did not

flow through the amateur club to support professional activities.

Asked about the purpose of the letter to MS, COM informed that the aim was to

provide guidance and to remind them of the applicable rules. Unlike other sectors,

there were no guidelines in place for sport; these could only be expected when the

number of cases increased. It was premature to confirm whether or not guidelines

would be established. If that happened, there would be public consultations with all

stakeholders. On the question why the focus had been on football only, COM said that

it was looking at potential disciplines where distortion was most likely to happen –

football was the biggest market in terms of sponsorship and transfers.

Regarding economic and non-economic activities, COM explained that in any area


XG FIN – Report 3 rd meeting

4

the distinction would remain difficult in the absence of the relevant jurisprudence.

However, some activities were clearly non-economic, such as youth training or

activities of an amateur club, but the more there was commercial exploitation of

certain activities (e.g. professional club players employed fulltime), the more there

was a chance to go towards “economic activities” and subsequently State aid.

Furthermore, COM stressed that the analysis should be made on a case-by-case

basis. For instance, support to sport facilities or swimming pools could potentially be

compatible with State aid rules if they were of local nature (e.g. in the “Dorsten” case

there was considered to be no cross-border dimension, because the facility was

more than 50 km from the border). Potentially there could be complaints from

private competitors when a public authority supported a club, and COM would have

to look into this.

COM (DG EAC) presented the state of play regarding the EU's future Cohesion

policy 2014-2020: The inclusion of sport in the Lisbon Treaty provided a basis to

better promote the interests of sport at EU level, including a more systematic

mobilisation of other EU programmes and funds for sport and a more systematic use

of EU funds for projects and actions in support of sustainable sport structures. The

2007 White Paper on Sport, in its societal chapter, identified the importance of

specific EU programmes and funds to support actions in the field of sport. The 2011

Communication on sport noted that the Structural Funds can support investments in

line with priorities set in the Operational Programmes in order to exploit the value

of sport as a tool for local and regional development, urban regeneration, rural

development, employability, job creation and labour market integration.

Accordingly, the Commission committed “to fully exploit the possibility of the ERDF

to support sport infrastructure and sustainable activities in sport and outdoors as a

tool for regional and rural development, and of the ESF to strengthen the skills and

employability of workers in the sport sector”. Sport projects as such were not

eligible for funding under the Structural Funds for the period 2007-2013 (i.e. there is

no specific reference to sport). However, sport-related activities could be funded if

they contribute to regional/local/urban/rural development or employment.

Investments in health tourism, sport tourism or leisure and sport infrastructure

have been financed from the European Regional Development Fund (ERDF). Under

the European Social Fund (ESF), sport projects that make a positive contribution to

regional employment or constitute an investment in human resources can be

financed. While no complete overview or figures were available regarding the

contribution of the Structural Funds to sport, many best practice projects were

identified which had been financed from the Structural Funds (e.g. ERDF/INTERREG,

ESF, EAFRD). Besides, the brochure on Funding for Sports in the EU was mentioned,

which had been prepared by the EOC EU Office.

Regarding the programming for 2014-2020, COM informed that within the COM's

proposal of the Common Provisions Regulation (CPR) 11 thematic objectives

(exhaustive list) were identified, whereas the fund-specific regulations listed

investment priorities (exhaustive list). Besides, the Common Strategic Framework

(CSF) translated the thematic objectives into key actions (indicative list). COM

presented the main areas (thematic objectives/key actions) where sport-related

projects could in principle contribute to the scope of the relevant Fund; these were

mainly linked to promoting employment and social inclusion. COM noted that

recently it had started submitting Commission Position Papers to Member States.


XG FIN – Report 3 rd meeting

5

This would be the basis for the informal phase of the negotiation process. Following

that informal period and after adoption of the Regulations package (as well as

possibly the CSF) by the EP/Council foreseen for the first quarter 2013, the COM

would prepare a Negotiating Mandate (based on the Position Papers) which would

then be the basis for the formal procedure to discuss with the Member States the

Partnership Contracts and the Operational Programmes (to be adopted by COM by

end 2013).

In the discussion, concerns were raised that the situation could be worse than before

for sport, because tourism had been removed from the Regulations; in the current

period many sport projects were financed linked to tourism. Recently the EP had

asked for adding sport to Articles 3 and 5 of the ERDF Regulation. However, in the

end the final decision would be taken in the Member States as the Partnership

Contracts and Operative Programmes were drafted at national/regional level.

As an additional argument for ensuring an adequate place for sport in the new

Cohesion Package, COM highlighted the importance of sport’s contribution to the

economy. It was important to acknowledge that, when the economy was suffering,

sport was a very resilient sector, generating growth and jobs. According to the

results of a recent EU study, the share of sport in the EU economy, expressed in

Gross Value Added (GVA), was 1.76%, while the share of sport in employment

amounted to 2.12% (comparable to agriculture, forestry and fishing combined).

Sport represented a labour-intensive growth industry which meant that growth in

the sport sector was likely to lead to additional employment. The sport sector

thereby contributed to fulfilling the Europe 2020 goals. Country-specific results in

this study should help further defend the role of sport as an important driver for

innovation, growth and jobs.

COM (DG EAC) presented recent developments regarding the VAT system, in

particular referring to the Communication on the future of VAT "Towards a simpler,

more robust and efficient VAT system tailored to the single market" which had been

published in December 2011. The topic was high on the European agenda as VAT

constituted a major part of the revenue of national budgets. COM noted that the

Council had called for the removal of unjustified tax burdens.

Regarding the rate structure as proposed in the Communication, the application of

the standard rate should remain the basic principle and the use of reduced rates was

an option for the Member States. In October 2012 the COM launched a consultation

on the review of existing legislation on VAT reduced rates, which would run until 4

January 2013. The review should then lead to a new proposal in the field of VAT by

the end of 2013 (as included in the COM Work Programme). It was noted that sport

was not directly concerned; the paper singled out sectors but attention was drawn to

the fact that the general direction was that reduced rates should not be the means to

reach social and other political objectives.

COM mentioned a draft study (not yet published) on VAT in the public sector and

exemptions in the public interest, which had been carried out by Copenhagen

Economics. It highlighted that in many cases differential VAT treatment existed

between public activities and private activities.


XG FIN – Report 3 rd meeting

6

In the discussion, experts expressed concern both about maintaining reduced rates

and exemptions in the field of sport. COM noted that more information on planned

initiatives ahead could possibly be made available at the conference in Dublin in

March organised by the Irish Presidency. The chairman stressed the importance for

stakeholders and Member States to reply to consultations relating to VAT.

The chairman (UK) updated the XG on the European framework for online

gambling by referring to the COM's Communication adopted on 23 October 2012,

which sets out an action plan seeking to enhance clarity throughout the EU for the

benefit of national authorities, operators, consumers and related industries such as

payment service or media service providers. Five action areas had been prioritised

to address the challenges faced at EU and national level: compliance of national

regulatory frameworks with EU law; enhancing administrative cooperation and

efficient enforcement; protecting consumers and citizens, minors and vulnerable

groups; preventing fraud and money laundering; and safeguarding the integrity of

sports and preventing match-fixing. COM had found that it was not appropriate at

this stage to propose sector-specific legislation, but that there were unanimous calls

for policy action at EU level. In the document, COM confirmed that Member States

were free to set the objectives of their policy on games of chance and to define

protective and regulatory frameworks. Following the Communication, the COM

would speed up on-going infringement proceedings, clarify their procedures,

facilitate cooperation and enhance exchanges of information. While a key aspect of

the Communication was to consider sustainable financing of sports integrity

measures, the chairman noted that more concrete steps towards a more balanced

relationship between sports events organisers and the betting industry (i.e. a sports

organisers' right) were not included in the document.

3. DELIVERABLE OF THE XG FIN: STRENGTHENING FINANCIAL SOLIDARITY MECHANISMS

WITHIN SPORT

The chairman (UK) presented the draft final document representing the Group's

deliverable, i.e. "Recommendations to strengthen solidarity mechanisms within

sport". The final format of the document including a set of recommendations and

best practice examples was displayed on screen for possible comments. The XG had

no objections to the format. The chairman introduced the main changes in the

background paper, in particular the elements relating to the function of the group as

well as to State aid and EU funding programmes.

The recommendations were presented including the results from the online survey,

which had been sent out in October. Regarding the four main recommendations

there was general support and the XG agreed on the final wording. Subsequently

there was an in-depth discussion on the proposed list of detailed recommendations.

Regarding best practice examples, the chairman reminded that it would be good to

have a more comprehensive set of examples. One option would be to send out a link

to a dedicated website to national sport federations allowing them to fill in any

examples they might have. These could then be taken forward and a collection of

‘case studies’ could possibly be produced ahead of the conference organised by the

Irish Presidency.

In the discussion the question arose whether the number of recommendations was

not too high. The chairman replied that for this reason four main recommendations,


XG FIN – Report 3 rd meeting

7

which the XG believed to be the most important at EU level, had been singled out and

highlighted at the beginning of the document.

The chairman noted that he would revise the document according to the comments

received and circulate it for a final check to the XG with a short deadline given that

the final text of the deliverable had to be submitted to the Council WPS by the end of

the year. Furthermore, the chairman informed that the deliverable would be handed

over to the Irish Presidency with a view to its conference on this issue on 7 March,

followed by a discussion at the Sport Directors' meeting the day after. It could also

form the basis for the policy discussion in May in the Council. The chairman

reminded the XG to provide further best practice examples until mid-February to

contribute to the preparation of the Irish Presidency conference.

4. A.O.B.

The chairman concluded the last meeting of the XG FIN in the framework of the EU

Work Plan for Sport for 2011-2014 and thanked the members for their active

participation and the Commission for its support.

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