17/07/17

Sports stars hit the headlines for their tax affairs

Lionel Messi, Cristiano Ronaldo, Jose Mourinho, Rangers football club. These are names you expect to hear at this time of the year in connection with the player transfer market, reports Irish Examiner.

You don’t expect to see them in the financial pages of the newspapers. Yet Mr Messi, Mr Mourinho and the others have been hitting the papers for their tax affairs.

Sports people by their very nature are competitive, so it should be no surprise they compete in the management of their own financial affairs.

There’s a long tradition of athletes and sporting clubs setting precedents on how tax should be collected. Even the 1966 World Cup England squad found themselves in front of the courts over the tax on the bonus they received for winning the competition.

Sporting careers are relatively short. Sportspeople worry about what’s going to happen when their bodies are no longer up to the demands. They try to use what career time they have to accumulate a nest egg, not always to the best effect.

Tennis icon Boris Becker was last month declared bankrupt after he lost a battle to refinance a property investment. Sportspeople have to prepare for what could be a long retirement. This perhaps places extra pressure to surrender as little tax as they can.

And for the more successful athletes, there are enormous amounts of money involved. Businesses want to be associated with their success — that is what puts an image of Mr Messi on the fuselage of a plane.

Not only is he superbly successful, he is also instantly recognisable.

Tax systems are quite efficient at taxing wages earned by the sweat of a brow whether over five sets or over 90 minutes. When earnings are tied to image rights or brands, it becomes more tortuous.

Earnings from image rights don’t have to accrue where the tennis player or soccer player is resident. It would appear from newspaper reports this has been a factor in the challenges to the tax affairs of Mr Mourinho and Mr Messi.

It is also entirely possible the degree of scrutiny by the revenue authority on the affairs of high-profile sportspeople is a direct result of the brand recognition which gives rise to much of their income in the first place.

Revenue authorities across the world want to be seen as effective enforcers. They need for the public to see from time to time that high-profile individuals from all walks of life are not immune from their attentions.

The same principle also applies to teams and clubs.

Last week the UK Supreme Court found that an earlier incarnation of Glasgow Rangers was using an offshore trust which offered loans to some of their squad members (rather than pay their wages straight) in a failed attempt to avoid tax.

It wasn’t just the UK which cried foul. Archrivals Celtic FC were quick to point out that if Rangers were paying less tax than it should, that gave them an unfair advantage in the Scottish League.

Failure to enforce the rules gives an unfair competitive advantage to the noncompliant over the fully compliant. The fact that so many of these high-profile cases have made their way to the courts might give sporting tax planners pause for thought.

That is undoubtedly the hope of the revenue authorities concerned.

 

Brian Keegan is director of public policy and tax at Chartered Accountants Ireland

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