What exactly is the finance scandal surrounding Mourinho and C Ronaldo?

By Tony Attwood

The English papers (other than the Sunday Times) are making little of the financial scandal that erupted across Europe yesterday – perhaps because they were not part of the group that put the research together, perhaps because in their superior manner they think their readers won’t be able to follow the details.

So in the interest of clarity here’s one way in which the tax scams that increasing numbers of football people seem to enjoy.

Imagine for a moment I am a very successful writer, earning lots of money from the books I write.  (Preposterous of course, but just set reality aside for a moment).

I sell the rights to all the income from my future books to a company based in Panama, or the British Virgin Islands or some such place.  Since the ownership and workings of such companies are always kept secret no one knows that by a strange coincidence I also have a deal with that company which says that once fees have been paid to the local people who by law have to be on the board, the rest of the money is mine.

So money pours into that account and no tax is paid.

I then decide to take a holiday in the Virgin Islands (for example) and one day saunter into the bank which holds the account for the company I’ve set up, and ask them to pay me $Lots in cash.  There’s no problem since the currency of the territory is US dollars and the money is mine.  I now have lots of cash, and so toddle over to a local estate agent and get him to buy me a big house using my cash.  Now I have a house paid for with earnings which have had no tax paid on them.

So it goes on, and on and on.  Quite often the big earners don’t do any of these actions themselves but allow their agents to handle all the details.  They just end up with properties, business and loads of dollars, all without paying tax. In the example above I could also set up arrangements so that all my bills are paid for by a business linked to a business linked to my Virgin Islands account.  Still without paying tax.

Why do the British allow it?  Well, if you look at the Panama Papers it is probably because a lot of the families of politicians utilise it.  But that perhaps is another story which also might be why the papers in Britain don’t really cover the issue much.   (Or perhaps they think we are just not interested in the notion that Mourinho has been very active indeed in avoiding the sort of taxation that the people who support his teams pay as a matter of course).

But fortunately we can read the European papers, and Le Temps in Switzerland has given us what the British media refuse to offer.

Back in May Spanish media reported that Mourinho was fined nearly £800,000 over alleged irregularities in his tax returns with payments being made of  around £1.6 million, including the fine and unpaid tax.   Of course with an income of £13m a year he could afford it and it was interesting to note that he did not appeal the fine in a case that centred on that old favourite tax dodge, image right earnings from brands like Adidas, Jaguar and American Express during his time at Real Madrid.  (Image rights like royalties can accrue in multiple countries and so can be subject to a tax scam).

But let us be clear in saying there is no suggestion in the reports he deliberately committed any wrongdoing.

In October 2015 he was accused of avoiding paying £24,000 stamp duty on a home he bought in Setubal, Portugal in 2008.  It is suggested (and of course I don’t have the resources to validate such a claim, I can only put together the bits and pieces from various newspapers that are willing to follow the story) that he had paid £1.1 million for the property.   But in a separate court case centring on corruption in Portugal it emerged he paid around £350,000 more, saving himself £24,000 in stamp duty.

Meanwhile it is said that Christiano Ronaldo concealed more than 160 million Swiss francs (around £150m) of earnings by putting in place an opaque system of monetary movements set up by (it is alleged) Jorge Mendes to hide CR7’s  income from sponsorship. 

It is also said that José Mourinho has been using the same system which operates via the Mirabaud Bank in Geneva, where Cristiano Ronaldo hid 74.7 million euros (£70m).  As a result of the financial movements a tax rate of around 4% has been paid.

The source of the money in the Ronaldo case is sponsorship income. Each Nike football shoe stamped “CR7” earns him 13 euros.  Not bad if you can get it.

Other Ronaldo sponsors are equally generous. For 6 hours 45 minutes of filming a commercial for Toyota in 2013, Ronaldo received $1.9 million. An advertisement in China for a Honda brought him in 2 million euros for what Le Temps a little sarcastically called “six hours of “work”.”

And then there is a screen of companies registered in the secretive British Virgin Islands combined with the Spanish “Lex Beckham”, law that ensures tax advantages for certain foreigners by not taxing the marketing receipts gathered abroad – including of course “image rights.”  Hence a tax rate of 4%.  

But that notorious Lex Beckham ended on 1 January 2015 and so it is said that Ronaldo liquidated the British Virgin Islands account (which had a throughput of 75m euros over the previous five years) and resold the rights to the images of the player for the next five years to a close friend of Jorge Mendes – Peter Lim, thus keeping the low tax rate going.

So for €74.7 million, Peter Lim bought the image rights of Cristiano until 2020, via two companies in… guess where…  the British Virgin Islands. The money went into Ronaldo’s account at the Mirabaud Bank in Geneva.  As a result of that Ronaldo got five years of future income and paid €2.7 million tax instead of €33.6 million which would have been paid if the income had been paid between 2015 and 2020.  

Of course as we’ve reported from time to time other players who have played in Spain have been held accountable to the courts for similar creative ways of not paying tax including Samuel Eto’o and Lionel Messi. And now it is alleged (but denied) that Jose Morinho has received a €4.4m for the same type of arrangements as used by “CR7”.

There are calls in the UK for an investigation into Mourinho’s financial affairs.  Quite how this will play out we don’t yet know since there are 18 million documents in the case and a lot of trawling to be done.  But as with the Panama Papers there is going to be a lot of blocking of details by people who are a little worried about how much of their affairs might become public.

But there are suggestions in the Sunday Times that it has evidence suggesting tax officials in Britain and Spain having been misled by Mourinho and his “advisers” in an earlier investigation.  The British MP Meg Hillier, who is chair of the powerful public accounts committee, said: “These revelations are extraordinary and warrant a close examination by the UK tax authorities.”

In Spain Julián López Milla, a member of  the Spanish parliament’s taxation committee asked for the case into Mourinho’s taxes in Spain to be reopened to “investigate whether Mourinho has committed the criminal offence of tax fraud”.

Gestifute, the company founded by Jorge Mendes, said, the allegations were “serious and malicious” and added,“Both Cristiano Ronaldo and Jose Mourinho are fully compliant with their tax obligations with the Spanish and British tax authorities. Neither Cristiano Ronaldo nor Jose Mourinho have ever been involved in legal proceedings regarding the commission of a tax offence.

“Any insinuation or accusation made to Cristiano Ronaldo or Jose Mourinho over the commission of a tax offence will be reported to the legal authorities and prosecuted.”  I make no insinuation or accusation – I am merely noting that these stories are appearing in papers overseas, even if not in the UK.

The European Investigative Collaborations consortium, which worked with Der Spiegel, to which the information was originally passed from Football Leaks, said the documents on which the accusations were made included photographs, spreadsheets and emails.

And this might not be all because it has said that there is more to come offering, “an unprecedented look into the gloomy depths of the modern football industry”.

We await with interest.

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