FIFA Corruption Threatens Tax Privileges as Switzerland Examines Payments
Soccer’s governing body is in danger of losing its tax benefits in Switzerland because of accusations that officials bought and sold votes, a blow that would cut into FIFA’s $1.3 billion in annual revenue.
The organization is a tax-privileged association in Switzerland, a designation shared by yodeling and folk dance clubs. FIFA may lose that status after accusations of bribery and vote buying.
The country spent the past two years trying to end its image as a haven for tax dodgers. Now Swiss lawmakers have passed a motion, written by an ex-employee of FIFA’s former marketing partner, demanding that FIFA change its operations and reform by the end of this year or face new legislation on its tax breaks.
“They’re a big company in the international entertainment business,” said Roland Rino Buechel, the member of Parliament for the Swiss People’s Party who wrote the proposal. “The legal status they have is a very advantageous one. It’s like a sixth- division football club, or a fisherman’s association: they have the same law and this gives them many advantages. It shouldn’t be like this anymore.”
The motion, which is the first step to revise a law, was accepted by the government in March and kick-started a review by officials. The sports ministry will publish a report by the end of this year and make recommendations.
FIFA moved to Zurich in 1932. Its president, Sepp Blatter, 75, was backed last week for a fourth term by 92 percent of FIFA delegates in a vote overshadowed by the suspension of his opponent for alleged bribery.
“FIFA’s reputation is now at an all-time low and obviously the election with just one candidate was something of a farce,” U.K. Prime Minister David Cameron told lawmakers on June 8, according to the Associated Press. “They have got to prove that they are actually capable of doing the job.”
The vote for Blatter came after accusations of improper requests by FIFA officials in the run-up to the selection of the hosts for the 2018 and 2022 World Cups. The scandal forced Blatter to propose measures to improve the Zurich-based group’s governance structures.
“FIFA is a gang of hoodlums, it’s an embarrassing organization,” said Hans-Peter Margulies, a retired lawyer from Zurich, while shopping on Bahnhofstrasse, the city’s ritziest shopping street. “It’s not compulsory for FIFA to leave Switzerland, but it should be treated like any other commercial organization and not like an exception.”
Sponsors, including Adidas AG (ADS) and Visa Inc., are getting anxious. Coca-Cola Co. (KO) last week called the bribery allegations “distressing and bad” for soccer and the World Cup, which brings in $4 billion for FIFA.
The displeasure increased in the past six months as 10 members of FIFA’s 24-member executive committee were suspended or accused of improper behavior. Qatar, the surprise choice to host the 2022 World Cup, has denied suggestions that it bribed delegates ahead of the vote.
Mohamed Bin Hammam, the Qatari head of Asia’s governing body, withdrew his candidacy for FIFA’s presidency on May 29, a day before being suspended with FIFA Vice President Jack Warner amid accusations the duo conspired to buy votes.
FIFA makes money by selling marketing and television rights for the World Cup. Two years ago, annual sales at soccer’s ruling body surpassed $1 billion for the first time in its then 106-year history.
Buechel, who worked with marketing partner ISL for a year before its bankruptcy, wants sponsors and the 208 member-nations to pressure FIFA management to change its governance before Swiss officials have to act. Any new legislation also could affect Swiss-based organizations including the International Olympic Committee and UEFA, Europe’s soccer body. Switzerland’s location at the heart of Europe and low taxes makes it attractive to such agencies.
“Let’s give them a chance, and if we’re not satisfied by the end of the year, we will change the laws,” Buechel said in a telephone interview from Oberriet, Switzerland.
Zurich’s government also is reviewing FIFA’s status after three Zurich Social Democrats questioned last month whether FIFA is “abusing association law” and should pay taxes like commercial organizations, the leader of the initiative, Peter Schulthess, said in a telephone interview.
FIFA said in a June 7 e-mailed statement that it is adhering to Swiss taxation rules for associations, which grants tax reductions, and added that it isn’t exempt from taxes on income and capital. FIFA said it spent $1.3 billion on the World Cup in South Africa and spent $794 million on development between 2007 and 2010.
Blatter said at a June 1 press conference in Zurich that FIFA will become more transparent. He asked former U.S. Secretary of State Henry Kissinger, 88, who helped reform the IOC after a bribery scandal, to sit on an advisory panel to help with corporate governance and ethics. Opera singer Placido Domingo, 70, had been invited to join as well, Blatter said in an interview with CNN.
“We are going to create more transparency,” Blatter said. “We are ready to move forward.”
Still, FIFA is fighting the publication of court documents linked to the corruption case against ISL, according to the prosecutor’s office of the Swiss canton of Zug. The documents, which journalists asked to be released last year, name two people within FIFA who received bribes and described the role of FIFA executives who tolerated the payoffs, newspaper Handelszeitung reported on May 31, without saying where it obtained the information. FIFA declined to comment on the case.
“For years Switzerland felt privileged for being domicile to global organizations such as IOC and FIFA, but in times of increasing transparency and accountability the opaque and scandal-ridden FIFA highlights the downside of the country’s neutrality and secretiveness,” said Bernhard Bauhofer, founder of Sparring Partners GmbH, which advises financial companies on managing their reputations.
The criticism stretches to Zurich’s shops and bars, where people discuss whether the organization should find a new host.
“FIFA is an institution to manage this sport, and they should remember that,” said Montse Cortes, 37, as she watched Barcelona’s victory over Manchester United in last month’s Champions League final. “It has more power and money than a lot of countries on this world: this is sad.”
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