BLOWING THE WHISTLE TIME’S UP FOR FINANCIAL SECRECY A Christian Aid report May 2010 d Blowing the whistle Front-cover photo: amateur footballers in an African tournament Christian Aid/Tom Pilston Blowing the whistle 1 CONTENTS Introduction 2 Open letter from Supporters Direct and The Football Supporters’ Federation 6 Financing the beautiful game 7 The Fit and Proper Person Test 10 Case histories 13 Who really owns our clubs? 16 Christian Aid Football Secrecy League 18 Financial secrecy and development 19 Tax dodging in the developing world 21 How tax-haven secrecy affects developing countries 22 Financial secrecy, South Africa and the World Cup 24 The Financial Secrecy World Cup 29 Recommendations 32 Appendices 35 Appendix A: Who really owns our clubs? 35 Appendix B: Details of ranking for Christian Aid Football Secrecy League 36 Appendix C: Who’s who in the Secrecy League 36 Endnotes to Appendix C 41 Endnotes 43 Acknowledgements 46 2 Blowing the whistle INTRODUCTION There seems little to link millions of patterns, save the lives of some 350,000 impassioned football fans in the United children under the age of five a year.2 Kingdom and Republic of Ireland with the To establish the scale of secrecy in football, poor and powerless in the developing world Christian Aid tried to find the true owners – on the face of it at least. of every club in the English, Welsh and But there is a connection – and it’s one that Scottish leagues, as well as the Irish League is growing ever stronger, disadvantaging in Northern Ireland and League of Ireland in football fans and further blighting the lives of the Republic of Ireland. those enduring extreme poverty. We discovered that a total of 14 English The difference between their lives is vast, Premier League members and a further five but football fans and those in need in in the Championship, together with one in poor countries are victims of the same League One and two in the Scottish League, phenomenon: the use of financial secrecy by are now based offshore. Until recently, that business entities in a way that minimises was also the case for one of the clubs in the their tax liabilities and accountability. League of Ireland. This secrecy – core to which is the The locations of ownership of a further anonymity offered by tax havens – has English Premier League club, a hidden the financial meltdown of a number Championship club and a League One club of football clubs from view until too late. were impossible to verify. Stakeholders, club supporters in particular, The research resulted in a new ranking: have been betrayed and the football the Christian Aid Football Secrecy League. authorities caught napping. Positions in the ranking reflect the extent In the developing world, the same web of of secrecy surrounding the controlling secrecy is used by unscrupulous companies ownership of each club, multiplied by a to dodge tax. There, its impact is deadly. measure to reflect the number of fans being denied information. Companies operating in the developing world that cook the books cost poor The clubs with the worst scores are therefore countries about US$160bn every year in those whose use of offshore secrecy unpaid taxes, Christian Aid has estimated.1 obscures both the clubs’ ultimate ownership and financial position. As a result the That sum, around one-and-a-half times the financial secrecy involved has the potential size of the international aid budget, could, to facilitate the greatest social harm in if used according to existing spending football. Introduction Blowing the whistle 3 The changes needed to tackle financial secrecy in football are the same that are needed to lift the secrecy that affects the developing world. To establish the secrecy component, we and the Republic of Ireland and people living used the ‘Opacity Score’ of the tax haven or in grinding poverty in poor countries. other jurisdiction to which we were able to The changes needed to tackle financial trace the ownership of each club. secrecy in football are the same that are These Opacity Scores are taken from the needed to lift the secrecy that affects Financial Secrecy Index that was drawn the developing world. Those who care up recently by campaign group the Tax about football, and those who care about Justice Network and Christian Aid, after eradicating poverty, should together demand analysing the secrecy each haven (or secrecy three major reforms. jurisdiction) offers, and the extent of their Tax dodging in poor countries could be reluctance to share information about those greatly reduced if companies trading using their services.3 internationally were required to declare As a measure of the size of clubs’ fan bases, the profits made and the tax paid in every we used the average home attendance. This country where they operate. That way, rough figure, although including visiting tax anomalies could be quickly spotted fans, provides the most consistent proxy for a and investigated (see ‘Tax dodging in the club’s supporter numbers – the stakeholders developing world’, page 21). who are routinely denied information about A similar rule, if applied to the owners of their club’s financial fortunes. football clubs and their companies, would Manchester United is used to winning most enable supporters and football’s ruling trophies that are available; it also heads this bodies alike to see where club owners’ new ranking. Although the identities of its assets and liabilities are held, and to know apparent owners are seemingly known – the the size of both. Glazer family from the US – full details of Armed with that information, fans would be their business empire remain a tax-haven far better placed to judge whether those with mystery. This makes the club, thanks to the the resources of the club at their disposal size of the gate at Old Trafford, the single amount to fit and proper owners (see ‘The Fit biggest contributor to football’s financial and Proper Person Test’, page 10). secrecy in the UK and Ireland (see the Christian Aid Football Secrecy League, Measures are also needed that would trigger page 18). far greater transparency in the business world. The ownership or control of each It isn’t just the curse of financial secrecy, company, corporation, trust, partnership, however, that links football fans in the UK 4 Blowing the whistle Introduction limited liability partnership, charity and Our research suggests that the Football other entity created under law should be a Association could make a much larger matter of public record. contribution in this area, however, by supporting our demands for greater financial Such information would help key transparency. stakeholders – whether football fans in the UK and the Republic of Ireland, or civil- The FA’s international relations programme society organisations in the developing world was set up in 2000 when England’s £11m – hold companies to account. People have a bid to host the 2006 World Cup ended in right to know who they are dealing with. failure. An extensive report from the Football Association following their post-mortem In addition, there should be automatic into what went wrong said that during the exchange of information between tax bidding, ‘English football... had adopted an jurisdictions. This would give revenue insular attitude.’ authorities in poor countries a better chance of discovering the true extent of the taxable It was seen by some members of UEFA profits a company is making, and of spotting (Union of European Football Associations) the transfer abroad of any monies corruptly and the organisation within whose gift acquired. the World Cup lies, FIFA (Fédération Internationale de Football Association), Such information exchanges could also help ‘as stand-offish and even arrogant’.5 the UK tax authorities recover some of the millions in tax that English league clubs Today England is again bidding to host a alone owe. World Cup, that of 2018. What better way for the FA to prove to UEFA and FIFA that it In recent years the Football Association has learnt the error of its ways than for it to (FA) in England has placed much emphasis take a stand against financial secrecy, not on its work in the developing world, as can just on behalf of football fans here, but of the be seen in the International relations section millions in developing countries living in on its website.4 appalling poverty? An international assistance and development A clear, public statement that financial programme is said to be active in all six transparency must be supported and that continents and it’s not just concerned with clubs should not utilise opaque structures, teaching football skills. Raising awareness of would be a first step. Making details of health and social issues in poorer countries is ownership a matter of public record as a also part of its mission. Blowing the whistle Introduction 5 prerequisite for membership of the leagues With the World Cup in mind, we also present the FA sanctions would be a further step in the host country South Africa as a case the right direction. history, looking at what financial secrecy means to the most powerful economy on the Campaign groups that champion football African continent. supporters such as the Football Supporters’ Federation and Supporters Direct, an In a recent theological study, The Gospel umbrella body set up by the UK government and the Rich, Christian Aid said paying tax to make football clubs and the game’s was part of showing love for one’s neighbour. governing bodies more democratic and The document argued that tax avoidance, accountable, would welcome such a move, just as much as the illegal evasion of as would Christian Aid.