HomeNewsHow Fan Loyalty Fails To Help Football’s Much-Needed Financial Reform

How Fan Loyalty Fails To Help Football’s Much-Needed Financial Reform

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Another month, another potential money scandal in the beautiful game. Unfortunately, and despite several weeks passing since tax officers raided two Premier League clubs, uncertainty remains as to who exactly is suspected of committing crimes, and what these misdemeanours are likely to entail.

What we do know is as follows: In late April 180 HM Revenue and Customs officers were deployed to search premises and seize possessions (including computers, mobile phones and business/financial records) of officials associated with sizeable English clubs (Newcastle and West Ham have featured most prominently in reports). Equivalent investigations also took place in France, most notably in Marseille.
The investigation relates to suspected tax fraud associated with several player transfers between these and potentially other clubs, amounting to a £5m loss in tax revenue. A host of other people not employed by the clubs have been implicated, ranging from agents associated with players and the clubs in question to members of organised crime gangs. Both clubs have declined to comment in any detail, although each have said they are assisting HMRC with its enquiries.

And yet, despite these reports, public outcry has been muted. Is this accepted as business as usual in the world of football?

Financial Foul-Play

Stories of financial mismanagement in football have become an all-too-common phenomenon. Even a brief reel of recent scandals is hard to compile, such is the volume of possible examples. Corruption in FIFA such as the recent admission of bribery charges by top official Richard Lai, seems one obvious place to start. Then there was last year’s ruling on Lionel Messi’s non-declared earnings and his use of tax havens. Not to mention Big Sam’s gaff over player ownership that cost him his job as England manager.

But perhaps a more relevant scandal presents itself in the case of Glasgow’s Rangers FC and its ultimate liquidation following financial troubles in the late 2000s. This case related in part to the use of employee benefit trusts to pay players and staff in loans between 2001 and 2010. HMRC says these loans disguised salary payments to staff and that it missed out on £46.2m in tax as a result.

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Dubbed the “big tax case”, the courts found in favour of HMRC, but BDO, the liquidator of the former Rangers FC deny that employee benefit trusts were used inappropriately and appeals continue today. Meanwhile, reports swirl that HMRC has been investigating major English clubs over the misuse of similar schemes.

Lack Of Meaningful Action

We can all foresee incentives to avoid paying tax – and in sport the need to gain competitive advantage is palpable. Equally, with so much money sloshing around the game, it makes sense that a great deal of effort goes into managing it appropriately. But what can tax authorities do to stop clubs from not paying their dues? After all, a lot of tax management is in a grey area.

There is a wealth of research into theories of effective regulation. These include the more heavy-handed threat of fines if taxes are dodged and getting companies to self-regulate, such as through codes of conduct, nudging techniques and also name and shame approaches such as publicly listing all companies that fail to pay the national minimum wage.

The recent operation involving British and French authorities would undoubtedly appear in the more heavy-handed bracket. Whether or not these and other investigations will lead to any prosecutions is another matter. More dubious still is the prospect that this case will be the last of its sort when it comes to financial irregularities in British football.

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But regulation can only do so much without concerted political will and the demand from society at large for action. The problem of football clubs not being upfront about their tax affairs is not specific to football. And there has been a distinct lack of sustained public outrage over the types of financial management and “creative accounting” that takes place among big companies. Often entirely legal, the OECD estimates that around US$240 billion is lost in tax revenue around the world as a result of tax avoidance techniques.

Tragically much of the ire towards financial foul play in society more generally – and most obviously the 2008 global financial crash – has failed to reassure us that meaningful action is likely to follow. There is a decided feeling that leading bankers, financial speculators and associated elites got away with the crisis, despite its huge impact on society.

spanish tax agencyIf apathy is present with respect to financial irregularities in general, this is compounded by the unique nature of football as an industry and the seeming inability of negative publicity to act as a handbrake on clubs’ moneymaking. Fans of Newcastle United, for example, already have a long rap-sheet of discontent towards owner Mike Ashley. He is the owner of Sports Direct, the firm which MPs compared to a “Victorian workhouse” last year. And the club is sponsored by payday loan company Wonga, which has suffered persistent criticism for exploitation of the needy. In addition, fans have also suffered relegation from the top flight of football twice under Ashley’s tenure, yet still turn out in their droves to support their team.

It seems, unlike other industries, sport relies on a customer base which is uniquely loyal to its provider. While admirable, this undoubtedly relieves some of the pressure on clubs and the football industry as a whole to properly eradicate financial malpractice.


Thomas Hastings
Dr. Thomas Hastings is a Lecturer in Organisational Behaviour and Human Resource Management at the University of Sheffield, based at the Work, Organisation and Employment Relations Research Centre (WOERRC) at Sheffield University Management School.

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