All franchises of the Pakistan Super League (PSL) incurred big losses ranging from PKR 200 million to 700 million (USD 1.4 million to USD 5 million approximately) each in the first two seasons while the teams have sought a financial restructuring and tax exemptions from the government of Pakistan.
According to a report published in ESPNcricinfo, a letter was sent by the Pakistan Cricket Board (PCB) to Punjab Finance Minister Makhdum Hashim Jawan Bakht which includes consolidated financial details of the five franchises from the 2016 and 2017 seasons.
During the last two seasons, the franchises have raised concerns over the amount of tax they have had to pay on top of their franchise fees and other operational expenses, all contributing to the losses they are incurring. According to the letter, Lahore Qalandars – the least successful franchise on the field, having finished last each season – have incurred the largest losses: PKR 312,744,021 in 2016 and PKR 420,914,836 in 2017.
Quetta Gladiators, the lowest-priced franchise when the league was launched, have incurred the smallest losses: PKR 46,530,560 in the opening season and PKR 63,518,476 in 2017. Quetta are among the more successful franchises, having finished runners-up twice in three seasons.
On the other hand, Karachi Kings, the most expensive franchise when the league was launched, incurred losses of PRK 117,028,811 in 2016 and PKR 60,846,776 in 2017. Islamabad United, the current champions, twice winners and the league’s most successful franchise, lost PKR 184,148,300 and PKR 241,981,640 in 2016 and 2017 respectively. The 2017 champions Peshawar Zalmi made a loss of PKR 237,233,858 in the opening season but reduced that ten-fold to PKR 20,152,767 in their winning season.
The first owners of the Multan franchise, who pulled out after one season, cited the dollar fluctuation as one of the main reasons for their leaving. The Multan Sultans are believed to have made a loss of approximately PKR 400 million in the one season they played in 2018.
The figures may seem eye-opening but the fact that the league is mostly played in the UAE, where logistics and operational costs are much higher and sponsorship cannot be leveraged as it might have had it been played in Pakistan, are a big factor.
One of the main concerns of the franchises is that the franchise fee they pay to the PCB every year is in US dollars – the value of the Pakistani rupee against the dollar has plummeted, however, over the last six months.
The other big concern is the taxes paid on the franchise fee. According to the figures in the letter, franchise fees made up anywhere from 30% to 91% of a franchise’s total costs in 2016 and 2017.
“The PCB is currently invoicing franchises by adding up Sales Tax [16%] amount which is recovered by PCB from the franchises…,” explains the letter, sent in early December by the PCB’s chief operating officer Subhan Ahmed.
“In addition to the above, the federal government’s withholding tax currently chargeable at 10% of the franchise fee is also levied by the PCB and deposited with the Federal Board of Revenue. The amount of franchisee fee plus taxes adds to the financial hardships of the franchisee who in addition to these, also incur costs of players’ match fees, logistics etc in the UAE and Pakistan. Thus it adds to their financial burden since they are incurring heavy losses.
“PSL is still in its nascent years and unless measures/steps are taken to protect the brand there is a risk that the franchisees will start pulling out of the PSL. We have already have one such instance when Multan Sultans team’s contract had to be terminated on account of failure to meet their financial obligations.”
Once the league moves back to Pakistan properly, the franchises will be able to make profits and it will also generate “higher economic activity in the country”, according to the board. Until then, the board has asked the Punjab government to provide tax relief to the franchises, sponsors and rights holders for a period of five years.