Tax Fraud Scandals in Soccer

The recent tax fraud scandals in soccer: Why are most of them in Spain, and lately have a link to Real Madrid?

The term tax fraud is starting to become common in the world of football. More and more footballers are being targeted by government authorities and accused of unpaid taxes and tax evasion. Big names from all over the world have appeared recently from the likes of Messi and Cristiano Ronaldo, Neymar, Xabi Alonso, Angel Di Maria, Ricardo Carvalho, and even Jose Mourinho. Looking closely at the list of the latest soccer icons involved, one cannot ignore the fact that they all appear to share some similarities: most of them are active or were active in Spain, or are members or were members of Real Madrid.

The problem in Spain

The first big cases regarding tax fraud in the football world happened in Spain. Neymar and his father were recently facing a two-year prison sentence and a possible $10.6 million fine on corruption charges related to irregularities during the Brazilian footballers transfer from the Brazilian team, Santos to Barcelona in 2013. In the end, the case was resolved after Barcelona paid a fine of 5.8 million Euros, after acknowledging that they made “an error in the fiscal planning of the player’s transfer”.

Messi was another player who was also targeted by the Spanish government. The Argentinian star and his father were accused of tax fraud and were sentenced to 21 years in prison. Once again the Spanish Government agreed on a deal with the footballer, and he is set to pay a fine of 255 thousand Euros before closing the case.

The latest target to be prosecuted by the Spanish Government has been Cristiano Ronaldo, one of the richest athletes in the world.  Click here to read our article on the top ten richest soccer players.  The Portuguese star is accused of underreporting certain earnings and failing to declare others. The Spanish Government would be asking for more than 14 million Euros of unpaid taxes and the footballer could be facing jail time. The Spanish Government has stated that they could reach a deal, and Ronaldo, would also pay a fine to avoid jail time.   However, the Portuguese star has stated that he would not be willing to plead guilty, and has instead been looking to put pressure on Spanish officials by threatening to leave the country over the allegations. This could not only set off a chain reaction and a message to other footballers to avoid Spain as a country of residence which would affect La liga, but also it would be a rough economical blow to the Spanish first division football by losing one of its two main stars to another competing European league.

Recent reports in the press also stated that other players have been targeted by the Spanish government including Xabi Alonso, Radamel Falcao, Samuel Eto’o,  Angel Di Maria, Fabio Coentrao, and manager Jose Mourinho as well, most of them linked at one point to Real Madrid.

Although there have been cases of tax fraud in other countries by footballers, such as in the English Premier League, they have not been as big as the ones being prosecuted in Spain, and certainly not as frequent. The similarity of how these cases are being handled as well as the fact that many of the footballers accused  have also lived in other countries and played for several clubs in Europe without any problems, also leaves us to question, if perhaps something is “off” in Spain.

“So why are Spanish prosecutors going after all these big-name soccer personalities, all of them hailing from other countries? It all goes back to David Beckham, who joined Real Madrid in 2003 from Manchester United. He became one of the first foreigners to take advantage of what became known as the “Beckham Law,” a Spanish tax law passed in 2005 that allowed foreigners to sign up for a 24 percent tax ceiling over their first six years of contract employment in the country. The foreigners who signed up for this program could also avoid paying taxes on income earned from outside of Spain (like…say… worldwide image rights) under certain conditions.” mentioned Matt Bonesteel on a recent article written by him published in the Washington Post, where he also explains, that in 2010, this law was changed, so that from then on, anyone with an income of more than 600, 000 Euros a year would not be eligible, allowing the Spanish Government to take a closer look at the operations of high earning foreigners with activities in the country during the recent years.

So, Is there a link to Spain in the recent tax frauds? Yes, there is. After some changes to recent tax laws in the country, the Government is apparently initiating a well orchestrated prosecution against wealthy residents, namely those popular enough to make an example of, or in this case footballers. This would fit well into the many recent statements made by the footballers defenders like Milestone International Tax Consultants, behind Cristiano Ronaldo and Jose Mourinho, going on to say: “This is a witch hunt against the wealthy, which is not limited to footballers. This is jealously riding roughshod over the rule of law.”

So, why are most of them linked to Real Madrid recently?

It seems the Spanish government has decided to target Real Madrid in the last couple of months. After going after Barcelona players like Neymar, Lionel Messi, Javier Mascherano and Alexis Sanchez, they seemingly have switched sides and decided to go for the rival club. Now to many fans this might seem to have a football rival background but that is not the case (Let’s not forget some Atletico players have been involved as well in the tax scandals), the answer is much simpler and has to do with which club might have had more money that it “incorrectly declared”, namely through something complex like image rights. And what other club that earns more in the world through player image rights than Real Madrid?

Angel Di Maria, Mesut Ozil, Xabi Alonso, and Fabio Coentrao, all linked to Real Madrid have been accused of tax fraud before the Cristiano Ronaldo case. All of them for evading taxes during their stay in Madrid, and all of them facing similar charges regarding hiding income through offshore companies. A large part of that income due to image and sponsorship rights. The latest to be targeted is Manchester United and former Real Madrid coach, José Mourinho, who like Ronaldo is accused of hiding income through off- shore companies, and also interestingly shares the same agent and management company as Ronaldo, Gestifute, owned by soccer agent Jorge Mendes. And what is Gestifute specialty? Gestifute is a Portuguese sports management company that handles high amounts of income from some of the top footballers contracts and image rights. Their clients? Ronaldo, Di María, Pepe, Nani, Quaresma, Rafael Marquez, James Rodriguez, and Radamel Falcao. All top footballers that also have large income from image marketing and sponsorships.

So it would seem the Spanish know too well, exactly, who to target.

So whats next?

It’ll be interesting to see how the Ronaldo case develops. Like we mentioned before, Ronaldo is threatening to leave the country and Real Madrid, leaving La liga without one of its main attractions, which also could make other footballers slowly start to think twice before accepting to play in Spain, in order to avoid possible tax problems. This would have severe economical consequences for the nicknamed “league of the stars”. Will La Liga and teams like Real Madrid and Barcelona accept this?

It is rumored that Ronaldo would be looking to ask Real Madrid to pay his fine in order to stay, but if this happens it will also create another problem for Spanish clubs. It could very well start a bad tendency of future footballers with tax problems threatening to leave unless their teams accept to pay their fines.

When in comes right down to it, the recent scandals are not between players and the Spanish Government. They hide a much bigger money dispute between Spanish Clubs and the Spanish Government. We’ll just have to wait and see how the two  sort this out. Meanwhile, expect more soccer players to be accused and pay the price.

What are your thoughts on this?  What will happen La Liga is the world greatest football players say no to the league?  We welcome your comments

Be the first to comment

Leave a Reply

Your email address will not be published.