Football for Sale—The Fraudulent Financials in Football
Sports from around the world have seen their fair share of financial scandals. Football is no exception and, has unfortunately seen itself associated with corruption multiple times, particularly with respect to the business aspect of it. With major financial frauds dating back to the 1940s with match fixings, the practice of committing the crime has continued to this day.
Keeping a Check on Overspending—FFP Regulations
Earlier this year, the world of football was left shocked following the news of Manchester City being handed a two-year ban from the Champions League for being in violation of Financial Fair Play (FFP) rules. FFP rules are a set of guidelines upheld by the Union of European Football Associations (UEFA) in order to discourage clubs from exploiting their financial superiority and gaining an unfair advantage. FFP rules state that what a club spends, must be balanced with what they earn. Its inherent design was to keep rich owners from spending their clubs into possible financial ruin, through overspending beyond their means on player wages and transfer fees. The other purpose of FFP was to prevent teams from doing what clubs like Paris Saint-Germain and Manchester City were accused of doing—buying trophies through lucrative sponsorships that increased a club’s revenue, thereby increasing the amount which the clubs are allowed to spend.
UEFA’s Club Financial Control Body (CFCB) found Manchester City guilty of deliberately inflating the financial value of a sponsorship deal–which would allow them to spend the extra money and thus, deceive UEFA. Leaked emails found that Manchester City owner, Sheikh Mansour injected €2.7bn into the club over the last 7 years through its various shareholders and over-valued certain sponsorship contracts. In addition to being banned from the UCL, the club was also fined 33 million dollars. French club Paris Saint-Germain was also accused of violating the FFP rules after UEFA opened an investigation regarding PSG’s 2017-18 finances—the season during which the club signed football stars, Neymar and Kylian Mbappe for world-record transfer fees. The investigation, however, was soon shut down after PSG filed an appeal claiming that UEFA took too long to review their own decision.
While the FFP attempts to regulate the financing of clubs, the incomes of players and the taxes they pay aren’t accounted for by any football association. Being amongst the highest-paid athletes in the world, incidents of tax evasion among high-profile footballers are a common occurrence. Her Majesty’s Revenue and Customs (HMRC), liable for tax collection within the United Kingdom, conducted an investigation into evasion by English football clubs, players, and agents. The attention on football came after the 2017 budget when all businesses were instructed to vary ‘image rights’ to employee payments. The financial motive for players to make their own Image Rights Company (IRC) is that it could save huge sums of money in tax. This led to clubs paying player’s IRC as a part of their wages guaranteeing a 19% corporation tax instead of 45% as an employee. Since 2017, the tax authorities have rightfully claimed back £330m in tax income from approximately 44 league clubs, 171 players, and 31 agents.
Football Stars—The Law Is Catching Up
Despite the taxation policies in the UK being relatively relaxed as compared to the 52% total effective tax in Spain for high profile footballers, the Mediterranean country has still managed to attract arguably the three brightest stars of world football–Cristiano Ronaldo, Lionel Messi, and Neymar. Over the past few years, the three footballers have had to make frequent visits to the Spanish courts regarding trials over tax evasion. In 2016, Lionel Messi and father-manager Jorge were convicted of defrauding the Spanish state of 4.1 million euros in unpaid taxes on the striker’s image rights, controlled by offshore companies. The pair were both given 21-month jail terms during the trial which later was changed to a fine by the Spanish courts, with the Barcelona star paying 252,000 euros. In addition to the suspended jail terms, the Argentinian international was fined about 2 million euros, with his father paying an additional 1.5 million euros.
In 2016, former Barcelona forward Neymar was found guilty of tax fraud by a Brazilian court and charged with a fine of 45.9 million euros due to the fact that he didn’t appropriately declare earnings from former club Santos and sportswear giant Nike. In a similar case, the Spanish Court found that there was enough evidence to go to trial over allegations tied to the Barcelona transfer. Both Neymar and Lionel Messi however, were spared prison due to Spain’s unwritten two-year sentence rule, which states that jail sentences of two years need not necessarily be served and can be replaced with a fine and probation.
Meanwhile, Portuguese star Cristiano Ronaldo, registered as a non-resident taxpayer under the Beckham Law, was accused of evading tax of €14.7m between 2011 and 2014. He also incorrectly described his image rights as capital gains to benefit from a lower tax rate. In his case, three of his tax fraud accusations had a penalty of 2 years each because of which the two-year prison sentence rule wouldn’t be applicable. Fortunately for him, the football star walked out of the court hearing by paying a hefty fine and escaping prison time.
In addition to players, popular managers such as Jose Mourinho have also been accused of concealing €3.3 million in earnings in offshore accounts. However, just like another celebrity, and with assistance from the Spanish Judiciary, he managed to escape custodial sentence by paying a hefty fine and accepting probation, considering it was his first offence.
The Infamous FIFA Scandals
Amongst all the financial scandals in the history of football, the title of the most infamous one would probably go to the 2015 FIFA corruption case. It single-handedly brought down heavyweights in the upper echelons of the organization—the former president of FIFA, Sepp Blatter, and former UEFA president, Michel Platini. In May 2015, a number of officials were arrested, with 18 of them indicted on charges of bribery, fraud, and money laundering. Additionally, they were convicted of using bribes in an attempt to influence clothing sponsorship contracts, the selection process for the 2010 FIFA World Cup host as well as the 2011 FIFA presidential election.
The bidding processes for the locations of the 2018 and 2022 World Cups were also investigated. Sepp Blatter, the long-term president, who was constantly accused of unethical financial dealings was charged with criminal mismanagement over a TV rights deal for the World Cup. He was also charged for a ‘disloyal payment’ to Michel Platini which occurred right before the FIFA Presidential election. Sepp, along with Michel Platini, who was suspended amidst the investigation at the time is currently facing a six-year ban from administering FIFA activities.
When not only the players but also the governing bodies practice such crimes, financial frauds like these would only make people question the integrity and credibility of the sport they love. While football has been on the wrong side of the news lately, more often than not, fans still religiously watch and support it in the comfort of their homes, or in the stands, vehemently chanting words of support for their home teams. If the sanctity of the game is to be preserved, organisations around the world must take drastic action to ensure personal greed does not overcome the underlying passion to be in service of the beautiful game.
Featured image credits: Philip Schmidli