Sport subsidies in Hungary

Topics: Risk, Subsidy, American football Pages: 28 (10259 words) Published: November 28, 2013
Introduction
Sports play an important role in the lives of every single country around the world. This is true in Hungary as well. But there is a huge difference between the sport life of Hungary and the sport life of the western countries, both in their efficiency and their structure. In western countries sport organizations have transformed into businesses in the capitalism, which means they all have their own revenues, costs, profits and their own markets. As a result the state does not have to play a role in the lives of these sport organizations. In contrast to this in Hungary the sport organizations were under the control of the state in the communism so they didn’t have their own revenues, costs, profits or markets. Sports were held a national concern and sports politics focused on the social benefits so the state financed the whole sport life of Hungary. After the political and economic change in 1990 the sport organizations were forced to adapt to the new conditions. Capitalism set foot in Hungary and as a result, change began toward the business model in sports.1 But the problem was that they had no revenues or markets so they could hardly survive. As a result the state has subsidized the sport organizations ever since then because sports are a national concern and they could not let all the sport organizations go bankrupt. But the problem with these state subsidies was that they slowed down the transformation of sport organizations into businesses because sport organizations could continue to rely on the money of the state without having to worry about finding different ways to make their own revenues. The current government introduced a new state subsidy program for the sports and I am going to analyze the effects this huge state subsidy could have on sport organizations, with special attention to football organizations. My main question is whether this state subsidy could help the transformation of sport organizations into businesses or only slow down the process like the rest of the state subsidy programs did so far. I am going to answer this question by analyzing the effects this state subsidy could have on the different markets of football organizations in theory. After that I am going to analyze the development plans of two different football organizations and I am going to do a risk analysis, which will include defining and assessing the risks, which could stand in the way of the success of the development plans. I am going to do this by analyzing the probability of each risk happening and the extent to which each risk could endanger the fulfillment of the project. Finally I am going to finish my paper with the conclusion on whether this state subsidy could help the transformation of football organizations into businesses or not in real life, so whether it is going to be a blessing or a curse. 1. The summary of the state subsidy program

1.1. The corporate income tax incentive
This new state subsidy program is really unique because the state does not give directly money to the sport organizations but instead offers a corporate income tax incentive to those companies, which subsidize sport organizations. The business entities subject to corporate income tax can account the subsidy as an expense, hence reducing the tax base and additionally the total amount of subsidy may be deducted from the payable corporate income tax calculated upon the basis of the reduced tax base. This in practice results in a realized gain on the supporter’s side, as the tax saving nominally exceeds the amount of the actual subsidy2. As much as it may seem like a sponsorship, it is not since the concept of subsidy shall in each case mean a contribution made without any consideration, therefore in order to benefit from the tax incentive, it is expressly prohibited to stipulate any kind of consideration, even that of promotional nature (e.g. advertisement, free tickets, advertisement) within the subsidy agreement.3 It is also not a...
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