'The changes needed to tackle financial secrecy in football are the same that are needed to lift the secrecy that affects the developing world.'

The 2010 Christian Aid Week Report looks at how financial secrecy to minimise tax liabilities and accountability is affecting those in extreme poverty, and what connects this to some top football clubs.

There seems little to link millions of impassioned football fans in the United Kingdom and Republic of Ireland with the poor and powerless in the developing world
– on the face of it at least.

But there is a connection – and it’s one that is growing ever stronger, disadvantaging football fans and further blighting the lives of those enduring extreme poverty.

The difference between their lives is vast, but football fans and those in need in poor countries are victims of the same phenomenon: the use of financial secrecy by business entities in a way that minimises their tax liabilities and accountability.

This secrecy – core to which is the anonymity offered by tax havens – has hidden the financial meltdown of a number of football clubs from view until too late.

Betrayed

Stakeholders, club supporters in particular, have been betrayed and the football authorities caught napping. In the developing world, the same web of secrecy is used by unscrupulous companies to dodge tax. There, its impact is deadly.

Companies operating in the developing world that cook the books cost poor countries about US$160bn every year in unpaid taxes, Christian Aid has estimated.

That sum, around one-and-a-half times the size of the international aid budget, could, if used according to existing spending patterns, save the lives of some 350,000 children under the age of five a year.

To establish the scale of secrecy in football, Christian Aid tried to find the true owners of every club in the English, Welsh and Scottish leagues, as well as the Irish League in Northern Ireland and League of Ireland in the Republic of Ireland.

We discovered that a total of 14 English Premier League members and a further five in the Championship, together with one in League One and two in the Scottish League, are now based offshore. Until recently, that was also the case for one of the clubs in the League of Ireland.

The locations of ownership of a further English Premier League club, a Championship club and a League One club were impossible to verify.

Secrecy

It isn’t just the curse of financial secrecy, however, that links football fans in the UK and the Republic of Ireland and people living in grinding poverty in poor countries.

The changes needed to tackle financial secrecy in football are the same that are needed to lift the secrecy that affects the developing world. Those who care about football, and those who care about eradicating poverty, should together demand three major reforms.

Tax dodging in poor countries could be greatly reduced if companies trading internationally were required to declare
the profits made and the tax paid in every country where they operate. That way, tax anomalies could be quickly spotted and investigated

A similar rule, if applied to the owners of football clubs and their companies, would enable supporters and football’s ruling bodies alike to see where club owners’ assets and liabilities are held, and to know the size of both.

Armed with that information, fans would be far better placed to judge whether those with the resources of the club at their disposal amount to fit and proper owners.

Measures are also needed that would trigger far greater transparency in the business world. The ownership or control of each company, corporation, trust, partnership,limited liability partnership, charity and other entity created under law should be a matter of public record.

Transparency

Association could make a much larger contribution in this area, however, by supporting our demands for greater financial transparency.

The FA’s international relations programme was set up in 2000 when England’s £11m bid to host the 2006 World Cup ended in failure. An extensive report from the Football Association following their post-mortem into what went wrong said that during the bidding, ‘English football... had adopted an insular attitude.’

It was seen by some members of UEFA (Union of European Football Associations) and the organisation within whose gift the World Cup lies, FIFA (Fédération Internationale de Football Association), ‘as stand-offish and even arrogant’.

Campaign groups that champion football supporters such as the Football Supporters’ Federation and Supporters Direct, an umbrella body set up by the UK government to make football clubs and the game’s governing bodies more democratic and accountable, would welcome such a move, as would Christian Aid.

Such a stand would be an important move in the battle against global financial secrecy.

The report looks at the finances of league football in the UK and the Republic of Ireland – throwing into sharp relief the boardroom shenanigans that have brought a number of clubs to their knees – and it analyses the impact of financial secrecy on football and the developing world.

Shift

We are not suggesting that anything illicit or untoward is taking place in the clubs that we identify. We also recognise that some people will use tax havens to reduce tax, rather than conceal information, and that tax reduction will sometimes reflect a genuine shift of economic activity, rather than hidden tax abuse.

Our concern, however, is that the opaque nature of tax havens masks the truth, whether or not there is anything to hide.

With the World Cup in mind, we also present the host country South Africa as a case history, looking at what financial secrecy means to the most powerful economy on the African continent.

• Download or read the full report (PDF)

• Read the research into Manchester United and Leeds United

• Read the reports recommendations

• Visit the Christian Aid Week website - Poverty: Let's End It

• Look at actor Nicholas Hoult's report from Kenya