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Is the Spanish justice system punitive regarding footballers' tax abuses?

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Toni Prat analyzs footballers' tax abuses

In Spain, tax fraud is becoming commonplace to explain the disputes caused by football players against the Spanish tax authorities. From Cristiano Ronaldo to Sergio Ramos, Xabi Alonso and Lionel Messi, there is a lot of business. But are they treated impartially?

Around the world, Sergio Ramos inspires the most talented defenders. Winner of two European championships, a World Cup and four Champions League titles with Real Madrid, three of them as captain, the stopper is becoming an example for future generations to follow in order to fill his trophy cabinet. But the colossus is currently struggling with the Spanish administrative justice system.

The press, a means of pressure from administrative authorities

According to the newspaper El Mundo, last week the Spanish national team selection record holder paid a fine of €1 million to the tax authorities for irregularities related to his image rights between 2012 and 2014, not to mention appealing against this fine. In this case, Ramos would have transferred income to his company Sermos 32 SL to reduce its taxation. A classic of its kind in Spain, where politicians or top sportsmen like footballers are regularly targeted by the media. At the beginning of October, Xabi Alonso, a former Real Madrid midfielder, was the subject of a €2 million tax fraud conviction between 2010 and 2012. To this end, the public prosecutor is claiming four million euros in damages without taking interest into account, added to a five-year prison sentence. But is that reasonable?

Toni Prat, a specialist in Spanish tax law at Andersen Tax & Legal, explains this type of procedure: "The fact that their cases appear in the press obscures the popularity of the targeted players and forces them to pay the fine. It is very normal to have this type of trial made public, because it allows for a form of equality with the population. It is a constructive procedure to ensure the equality of all before the law."

In other words, footballers accused of tax fraud become financial regulators for the Spanish administration and not criminals who must necessarily be placed in prison. A lawyer in employment law, Rémi Ruiz pushes for compensation from the State: "It seems more logical to me to attack the wallet of a wealthy footballer than to place him in a prison environment. What would be the interest of prison for footballers? They are socially integrated, they are not physically dangerous to society... It seems disproportionate to me."

Messi and the example of the stay of execution

However, another logic emerges in the minds of citizens with a two-tier justice system. If judges show clemency to footballers through the payment of a fine, can this decision create a sense of injustice across society? The problem is growing. In 2017, the Spanish courts ordered Lionel Messi to pay a fine of €2.1 million for tax fraud on his image rights between 2007 and 2009. The fivefold Golden Ball winner, which had reduced his revenues thanks to front companies based in Uruguay, Belize, the United Kingdom and Switzerland, was also sentenced to 21 months in prison. His father, Jorge Horacio, was also sentenced to 15 months' imprisonment as an accomplice in the case.

"For people who do not have a criminal record on a tax level, sentences of less than two years and one day are significant for a stay of execution," clarifies Toni Prat.” If the player in question had not wished to pay the fine, the sentence would probably have increased on a criminal scale, and the player would probably have had to go to jail."

So are football players too protected? It’s possible. "The French are amazed by the possibility of a sentencing arrangement with the Spanish courts, something not very common in France," said Mr. Ruiz. In this case, should the Spanish State not ask that the player be subject to a very heavy financial penalty in order to make this a deterrent? I do not think it is normal for agreements to be systematically reached. To take Cristiano Ronaldo's example, the player openly declared himself innocent until the end to finally settle... This is perplexing."

The current Juventus Turin striker was indicted in July 2017 for tax evasion, accused of deliberately concealing a total of €43 million from the Iberian tax authorities between 2011 and 2014, and €28.4 million in subsequent years via companies in the Virgin Islands and Ireland. In total, this represents a shortfall of €14.7 million for the Spanish State. Claiming his innocence, the Portuguese man nevertheless undertook to pay a fine of 18.8 million in early January 2019 to put an end to the dispute...

Reforming company law or going through the sportsman, you must choose

In fact, the list is still long when it comes to listing the football stars caught in the eye of the tax cyclone: Neymar, Marcelo, Mourinho, Di María, Falcao... In other words, most of the personalities targeted are former (or current) employees of FC Barcelona and Real Madrid, the two giant clubs in Spain. "There is a big problem of exemplarity among top athletes, and this is all the truer in Spain," explains Mr. Ruiz. “In France, more than 80 billion euros of tax evasion are recorded each year. If everyone does this, the system collapses. For football fans who follow this sport every weekend, won't this phenomenon end up disgusting them from this environment? This reminds me of the problem the Tour de France has with doping: audiences are not as good as they were in the early 2000s. In football, the image is being seriously damaged by these tax evasion cases, and it is only increasing."

To avoid this situation, which could jeopardize fans' passion for football, three main solutions have emerged. The first would be to reform company law in broad terms in order to prevent investments from Spain to foreign countries. A rather utopian theory in practice, but one that is worth considering. The second solution would specifically target a branch of company law to ensure the criminal protection of players: the right to an image.

"It is a confusing regime, already rewritten several times but too imprecisely," says Prat. What is needed in this case is a special regulation for football players to allow them to tax what they earn in a very short period. This would be easily achievable and adaptable on their side. For the administration, this would allow a meridian clarification of the fulfilment of laws."

Finally, the last possible sanction remains that of the field, namely "to build an ethical charter for the footballer in order to clarify his tax commitments, under penalty of being sanctioned with several or more matches suspened," concludes Mr Ruiz. “It would not be inconceivable that the player's club would be sanctioned since it is partly responsible for its employee. For the footballer, this could take a form like political ineligibility." Prevent footballers from practicing their passion for their tax gaps? That's a lot for FIFA to talk about.

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