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October 2020
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Another football scandal looms as law officers raid the German FA’s offices

by Tony Attwood

Around German law enforcement officers and government officials  have entered and searched the offices of the German Football Association (DFB), in around half a dozen locations, as part of their investigation into corruption in football.   The key reason, according to the media outside the UK (as ever media within the UK will not cover this story as it is happening south of the Isle of Wight) is over serial tax evasion by senior management and executives in the DFB.

According to the authorities six unnamed individuals, are suspected of deliberately under-declaring the income from advertising within various stadia.   As a result they paid around £4m less tax than they should have done.

It is also being reported that the tax authorities in Germany claim that they informed clubs and the German League several years ago that they felt that the income from the advertising was being mis-reported in the financial returns of the clubs.

However it seems the failure of the trial of the DFB leaders Theo Zwanziger, Wolfgang Niersbach and Horst Schmidt along with Urs Linsi of Fifa, meant that football clubs in Germany have felt that they can now run their tax affairs without any concern of state interference.

That is interesting in that there appears to be a similar view among some football clubs in England, due both to the general inability of the FA to gets its own financial house in order (as revealed when Sport England withdrew its financial support for the FA, and also when the Charity Commission seriously reprimanded and fined the FA over the running of the Charity Shield), and the perceived lack of action over the financial affairs of Newcastle United and West Ham United in 2017.

The huge difference between Germany and England however is that these affairs are followed up in Germany by the media.  Indeed as Süddeutsche Zeitung, says today, “The German Football Association (DFB), as we have learned in recent years, is always good for a scandal…. such as Beckenbauer’s “summer fairy tale” millions… through to that watch gift that cost President Reinhard Grindel his office in 2019. But while the DFB leadership pretends that it has been relentlessly dealing with the affairs of the previous leadership, along comes the next scandal.”

The paper adds, “It is almost part of the sport-political tradition: In the morning hours of Wednesday, a total of two hundred officers went to the officers the German Football Association and collected computers, files and documents there…. This time it is about suspicion of serious tax evasion. Specifically, that those responsible “deliberately incorrectly declared revenue from the perimeter advertising of home national team games in 2014 and 2015 as income from asset management “- and thus withheld tax payments of around 4.7 million euros from the tax authorities.

Interestingly, the DFB recently “amicably” ended its cooperation with its Swiss-based marketing agency Infront after almost 40 years after reports emerged of possible financial irregularities.

The starting point of all this appears to be a contract concluded at the end of 2011 between the DFB and Infront, through which the agency was obliged to not grant any rights to perimeter advertising at Germany’s home international matches to competitors of the then general sponsor (Mercedes) or the general supplier (Adidas).  That, I think, would be against the competition laws of Germany.  (The FA in England need have no worries about things like that because no one takes any notice of what the FA does in England, and besides those competition laws derive from the EU, and the UK is now outside the EU).

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Spokespeople for the marketing world in Germany make the point that it is patently evident that big advertising partners are taken into account when doing deals with firms whose advertisements appear in the stadia.  If there were Adidas on the players’ jerseys, but Nike on the boards, “there would be lawsuits non-stop,” says an industry insider.

But this would appear to be a restrictive practice against European competition laws, so there are two possible battles being fought, one on anti-competitiveness, and one in terms of tax liability.

However there is more…

200 people were deployed in this raid, and raids in Germany have to be proportionate to the possible crime.  So would the police really send in 200 people for a dawn raid relating to perimeter advertising? Or, as the newspapers are asking this morning, might they been looking for something else?

DFB President Fritz Keller, who was elected only a year ago, has repeatedly said that the DFB stands for transparency and openness, wanted to “cooperate fully” and welcome the “state support” in the investigations. At the same time, Keller admitted that he lacked a full overview of quite what was going on in the DFB.

Back in England, in January this year HMRC revealed it was investigating the tax affairs of 330 footballers, 55 clubs and 80 agents.  This compares with 173 players, 40 clubs and 38 agents in January 2019, adding that they had recovered £396m from football in unpaid tax since 2015.

Football clubs in England are obliged to send the Football Association details of all payments made to agents, but this does not include payments to sub-agents – and the FA have done nothing to close this loop-hole.  

According to the BBC, however, Deloitte’s figures suggest Premier League and EFL clubs have been paying an increasing sum of VAT, National Insurance and PAYE on wages every year for the past decade – the suggestion being this increase is more than any amount that might be explained by rising prices and rising wages.

It appears that tax officers in both Germany and England have the clubs in their sight.

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