07 Aug 2017
Lionel Messi is unquestionably one of the greatest footballers in the history of the sport. This is in part down to his reputation for fair play, rare in Spain’s La Liga, where strikers commonly dive in order to win points. Unfortunately it seems Messi has played less than fair with his taxes.
The charges against Messi related to deals to sell his name and image in marketing strategies for the products of an array of companies, including Procter & Gamble, Adidas and Pepsi-Cola. Prosecutors accused the footballer and his father, Jorge, who manages his affairs, of setting up a chain of sham companies based in Switzerland, Uruguay and Belize to escape tax payments on part of the income from these marketing deals, denying the public purse €4.16 million.
Messi and his father were sentenced to 21 months in prison, although both have had their sentences suspended. They were also ordered to repay large sums: €2 million and €1.5 million respectively.
In court both men pleaded ignorance, insisting that an adviser told them their schemes were legal. Messi went further, saying that he knew he lacked the ability to comprehend the relevant documents and signed them solely on the basis of the advice he was given.
Such a defence would be bound to fall on deaf ears in jurisdictions such as the United States, where, as Robert Wood put it in a recent Forbes article: “According to the IRS (Internal Revenue Service), willfulness is a voluntary, intentional violation of a known legal duty. It is shown by your knowledge of reporting requirements and your conscious choice not to comply. Even wilful blindness, a conscious effort to avoid learning about reporting requirements, is enough.”
Spanish prosecutors essentially agreed. “There is no deliberate ignorance here, it’s fraud and that’s all there is to it, because he didn’t want to pay his taxes,” said Mario Maza, the lawyer representing state tax officials. “It’s like a crime boss. At the very top is the bigwig who doesn’t want to know about the details.”
The details, set out in a recent report by Global Witness, are certainly complex. The key to the Messis’ tax evasion was the use of jurisdictions with weak or manipulable transparency rules—the UK, Switzerland, Uruguay and Belize—for funnelling the money. The Messis’ beneficial ownership of the Swiss company Lazario GmbH and the British firm Sidefloor Ltd was hidden by the use of nominee directors. On top of this the companies had, as shareholders, companies in other jurisdictions where it is possible to completely obscure ownership information. The beneficial ownership of the UK business Sports Enterprises was kept secret because it was 50% owned by a Uruguayan country. Under Uruguayan law, no information about the owners or directors of businesses registered there has to be made public. Even more than that: companies themselves do not have to keep information about who they are owned by.
There are well rehearsed arguments for and against corporate transparency, but this Messi affair highlights, in a media friendly way, the ways in which wealthy individuals exploit opacity to avoid paying their fair share of tax. There has never been a shortage of evidence to this effect, but footballers are already widely criticised for their hefty pay packets. By leveraging the football connection, tax justice campaigners will be able to get their message to an audience they might otherwise struggle to reach. In addition, for Spanish tax authorities, there is an element of high-profile example-making to this case—a technique used to great effect in jurisdictions such as the Philippines which struggle with cultures of tax avoidance and evasion.
Tom Wheeldon is a freelance journalist and political commentator at Radio France Internationale.
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