Offshore FIFA: making governments crawl on their bellies and beg

BBC Panorama carried a superb investigation last night on British television of the corruption at the heart of the Féderation Internationale de Football Association (FIFA,) which you can see here if you are in the right area (or, if you can't, you can read the BBC story, which tells part of the tale).

We watched the programme, and would like to draw attention to some points from the TV programme that aren't in the text story. For there is a serious tax and offshore angle.

The Panorama investigation discovered a truly vast web of bribery - 175 payments totalling a truly gargantuan $100m. One angle concerns companies named Sicuretta and Sanud, based in Liechtenstein, about which it was very hard to get information because of offshore secrecy. The fact that FIFA is based in Zurich, Switzerland, helps deepen the secrecy. It gives the lie to appalling deals that Britain and Germany made with Switzerland recently, which let the Swiss get away with preserving their harmful secrecy practices, and focusing only on squeezing some taxes out of the illicit accounts. Tax matters, but this programme showed that secrecy is about far, far more than tax.

But there is much, much more in the programme that we need to pay attention to. Fifa has a set of eight "guarantees" that it forces on supplicant governments begging to be allowed to host the next World Cup - and Fifa insists the guarantees are kept secret. Visa rules are thrown out of the window. Workers’ rights are suspended. New laws may be needed to protect Fifa’s official sponsors.

And then there is the tax.

A while ago we blogged the story about FIFA's so-called African "tax bubble" whereby FIFA forced a poor African country to forego all its football tax revenues in order to funnel yet more money into FIFA's gilded Zürich headquarters. That story was enough to make any right-thinking person retch; Panorama interviewed some right-thinking Dutch observers who tend to agree with us. Professor Han Kogels of Erasmus University, Rotterdam, had this to say.

"They want to create their own tax haven. A fully exempt situation. That is, FIFA and its FIFA subsidiaries that are fully exempt from any tax whatsoever levied at every level – state level, municipal level. All sorts of taxes: consumption taxes, income taxes – you name it – it’s all exempt."

There are also tax breaks for FIFA’s official sponsors. The Dutch government calculated that if they win the bid, FIFA’s tax demands could amount to 300m Euros. Even for a developed country, that is hard to swallow. And why should anyone swallow this? Renske Leijten, a Dutch MP, put this in a wider context:

"As a government yo make laws for everybody and every situation. You are not going to make laws for just one situation – and that situation is the world cup. You do not make laws to protect organisation."

Well said that woman. Who do these FIFA people think they are? They are not gods - yet they behave as if they were. Two other commentators highlighted the sheer arrogance of this offshore organisation. When Panorama showed the leaked list of guarantees to Lord Corbett, a former member of parliament, the response from Corbett, who was visibly trembling with anger as he spoke:

“It is just indifensible”. That is the word for it. It is indefensible. And it is an insult to taxpayers in this county. Sign up here or your bid will likely be regarded as deficient. They have the audacity to seek to instruct the parliament that they will dance to the FIFA tune."

David Mellor, a former chairman of the football task force who knows what it is to bid for a World Cup, described what it is like:

"Logic has to be suspended. Normal standards of integrity and honesty have to be suspended. We have to go in on our knees to accept FIFA dictats: to crawl on our bellies to beg them to give us the World Cup."

Far better, he said, for England not to bid and instead insist on reform of FIFA, to make it transparent and accountable.

"Far more important than anything else in world football is to get a FIFA that is clean and fit for purpose. It astonishes me that FIFA continues the way that it does."

FIFA's arrogance comes from two main areas. The first is that it is a monopoly supplier of World Cups. With monopoly comes something that economists call rents: the unearned income of those who, as Adam Smith remarked, "love to reap where they never sowed." And economists agree almost universally that there is one very good recipe for what to do with rents: tax them at very high rates. And yet FIFA is a non-profit organisation, based in the tax haven of Switzerland. This is all wrong.

Fifa's arrogance also comes from another direction: its offshore status. The offshore sector tends to be a very hard nut: it is, as Simon Johnson recently described it,

"this part of the economy cannot be taxed"

And from this "you can't touch us" arrogance of offshore, flows all manner of abuse.

Time for this scandal to be addressed, head on.

Protests are now breaking out over tax avoidance in the UK. Although FIFA is based in Switzerland, its officials do visit the UK on a regular basis, and its presence is felt all over the place.

Time for the protesters to pay FIFA some serious attention. And take a look at this too.