Sportsmen and Tax Avoidance

Last week, Brighton Footballer and generic looking Southern Man, Glenn Murray, was arrested under suspicion of £1.1 million in tax fraud. For a man who is a very mediocre Premier League striker, the first question that must be asked is how does Glenn Murray have that amount of unpaid tax at his level? But more importantly I have to ask is how or why he is allegedly committing the crime? In recent years there have been countless cases of sportsmen avoiding or evading tax. Both of the best football players in the world, Messi and Ronaldo, have cases of tax fraud put against them. In fact, Messi should arguably be in jail over his tax avoidance. In Formula One, one of my all time heroes, Lewis Hamilton, was exposed in the paradise papers to have created an effective fake company based in the Isle of Man, so that he can use a private jet and run it tax free, something which seems if anything a bit too much effort to dodge tax on one item. Luka Modric, Javier Mascherano, Boris Becker and Wayne Rooney are just the tip in the iceberg of sportsmen and sportswomen who have at least been alleged to have dodged tax.

Of course, there are many other examples of the rich and famous that commonly dodges tax and cost millions and collectively to the nations coffers, but this blogs focus, sports people, exposes the clear issues with tax avoidance and evasion within how the other half live and how some even are not aware of the fact they are avoiding tax.

lewis-hamilton-challenger

Hamilton with his infamous jet

To start with the case in point of Lewis Hamilton, and his bizarre tax arrangements, there is a clear difference between what he has done – tax evasion, to tax avoidance. What Hamilton has done is technically legal, although still deeply immoral, and that lays the problem. The Isle of Man, and its business tax haven rules, is a part of the British state. Like Isle of Man, the rest of the Channel Islands also run as tax havens. Back when David Cameron was preaching his “all in it together” stance over austerity, one of the first things he should have done is close the UK territory tax havens and got the extra tax into the economy. Hamilton is simply just an example of those who have taken advantage of even the UK’s lax blind spots with tax law. This of course is not just the fault of the Cameron government or the May government; this is the fault of successive governments since the end of the Second World War.

Unfortunately what the Hamilton case shows is that many who have the money will exploit the tax laws if there are tax laws open to evade legally. Of course, dealing with the other issue sport stars like Hamilton pose to the taxman, the issue of living in non-UK tax havens like Switzerland and Monaco for example, is something which can only be solved with international cooperation, which is something far more difficult, and of course, Brexit will make it even harder to deal with this issue, but that is an argument for another day.

Although I love Formula One and indeed Football, I can still agree with the vast majority of people who see sport stars in this level as grossly overpaid; it makes it even more baffling that there is the need to avoid tax. Of course, this is not saying all sportsman are fraudsters, looking at the examples of Ayrton Senna, Juan Mata, Didier Drogba, and David Beckham, there is clear that some sports not only give back to communities, but completely understand the situations they have been in or are currently in is obscene, while others are quite honest that they don’t even deal with their own finances, which leads to the biggest problem which sport has exposed in the world tax system relating to the 1%, ignorance of the crime.

In his trail, Javier Mascherano fully admitted that he has never dealt with his own taxes at any point of his career, and that he left everything with his lawyers and accountants, and at the end of the trial paid everything he owed in unpaid tax to the Spanish authorities. Similarly, Boris Becker quickly paid up his own tax bill of over €3 million when it went to trail and realised he had committed his own undoing. What these two examples show is that many people don’t even know they are breaking tax rules, but due to the best accountants being instructed by firms to shave as much off a tax bill as possible as a general rule, have ended up getting in trouble anyway. To be fair to the sports people in this regard, Becker and Mascherano both pay tax in numerous countries, and for those who can’t be bothered to do their own taxes for numerous different locations, it makes sense to have accountants to settle it for them.

Mascherano

How can this issue be overcome? In terms of football there is a clear solution. As reported by The Sun (of all places), Premier League clubs have an agreement with the taxman to allow players salaries to be paid into private ‘image right’ companies, rather than directly as wages, which as of October 2016 was allowing a fifth of the total players in the league to pay no tax, costing the taxman £80 million a year. This is very similar to the tax arrangement Mascherano had in place. In addition, tax arrangements are commonly created between players, clubs and agents during transfer deals. In these cases, governments should legislate for football clubs to release the tax bills of its player’s wages to customs, and to ban these sweetheart deals, and make it imperative that the club, as an employer, pays its players wages transparently and as most employers do, deduct the tax for their employees in order to stop this sort of tax evasion. This would also cut out accountants sorting out illegal tax arrangements if football clubs were forced to deduct income tax themselves like most organisations. Although this is just once industry example, making all payments and company pay which should be eligible to tax immediately tax deductible would begin to repair the damage. After all, If there was a guarantee that 45% (or hopefully 50%) of Alexis Sanchez’s wage went straight back in to the country coffers there would be few complaints from me in regards his high pay.

Just think, if one average Premier League striker has robbed the NHS he was probably born into of £1.1 million, how much could closing the right tax loopholes claim back into the hands of the masses of the world. Of course, the amount of corruption in sport team ownership is a complete other level on shady legal dealings, and the fact there is such a massive issue with sport stars alone shows how flawed world tax systems have with making sure the rich and famous pay their fair share.

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