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Messi’s conviction, local sports stars and Nigeria’s tax laws

By Christian Okpara and Gowon Akpodonor
25 July 2016   |   4:18 am
On July 6, 2016 Barcelona superstar, Lionel Messi, was given a 21-month jail sentence for tax evasion. Messi and his father, Jorge, who is also his representative, received the same sentence because they were found guilty of failing to pay tax...
 Barcelona football star Lionel Messi arriving to the courhouse in the coastal town of Gava near Barcelona on September 27, 2013 to face judges on tax evasion charges. Argentina star Lionel Messi, one of the world's highest-paid athletes, goes on trial in Barcelona on May 31, for allegedly defrauding Spain of over four million euros in unpaid taxes. / AFP PHOTO / LLUIS GENE

Barcelona football star Lionel Messi arriving to the courhouse in the coastal town of Gava near Barcelona on September 27, 2013 to face judges on tax evasion charges.<br />Argentina star Lionel Messi, one of the world’s highest-paid athletes, goes on trial in Barcelona on May 31, for allegedly defrauding Spain of over four million euros in unpaid taxes.<br />/ AFP PHOTO / LLUIS GENE

The conviction of the iconic footballer, Lionel Messi and his father Jorge, has drawn attention to the seriousness of tax evasion in Europe. But how serious is the crime of tax evasion in Nigeria? CHRISTIAN OKPARA and GOWON AKPODONOR report.

On July 6, 2016 Barcelona superstar, Lionel Messi, was given a 21-month jail sentence for tax evasion. Messi and his father, Jorge, who is also his representative, received the same sentence because they were found guilty of failing to pay tax on income earned by the world footballer of the year.According to the prosecution, the Messi defrauded Spain’s tax authorities a total of £3.19m from 2007-09. Aside the jail term, Messi was also ordered to pay a fine of around £1.7m and his father to pay £1.27m.

The pair was accused of using tax havens in Uruguay and Belize to hide more than £3m in earnings from image rights from the Spanish tax authorities.The case involved image rights and agreements between 2007 and 2009, which the footballer had with Adidas, Pepsi-Cola, Danone, Procter and Gamble, Banco Sabadell and the Kuwait Food Company.

Although Messi has appealed the judgment and if the appellate court affirms the sentence, the footballer will serve a suspended sentence because in Spain, people handed sentences of less than two years are not normally required to serve their sentence, unless they are being punished for violent crime, if they agree to a fine. But the case shows how seriously developed countries frown at tax offences. It is just one of the numerous cases involving super stars in Europe and the Americas across all sports.

In January, Messi’s Argentina and Barcelona team mate, Javier Mascherano, received a year sentence over £1.2million tax fraud. He was reported to have admitted the offences last year and paid back the amount with interest. He did not serve because he paid £625,000 fine.Brazilian super star, Neymar, who also plays for Barcelona, was reported to have legal cases in Spain and Brazil concerning the issue of tax evasion, but insists he is not a criminal.

The Federal Court of Sao Paulo in his native Brazil ordered his assets worth about €45 million to be frozen in February.In 2013, Manny Pacquiao got into the unenviable position of facing tax charges in not one, but two countries; both the Philippines and the U.S., who want a piece of Pacquiao’s fortune. Combined they’re asking for $68 million.The Philippines took action by freezing his bank accounts, just as the United States takes a cut out of every purse he wins in the ring.

Former Wimbledon champion, Boris Becker, once served a suspended two-year jail sentence for tax evasion.The judges also gave him a 500,000 euro fine, and the entire cost of his trial.The German had pleaded guilty to evading about 1.7 million euros tax by claiming to live in the “offshore” haven of Monte Carlo at a time when his main residence was really in Munich.

While Becker was found guilty for tax evasion, there are other stars, who relocate to tax havens to avoid paying taxes, and are referred to as tax exiles. They include Michael Schumacher, Michael Stich, Guus Hiddink and Franz Beckenbauer, among others.In 2007, Holland’s former manager, Guus Hiddink, received the scare of his life when he was facing a 10-month sentence for tax fraud. By claiming to be a resident of Belgium, Hiddink skipped out on $1.4 million in taxes.

When the verdict was eventually rendered he was ordered to pay a $45,000 fine, which is a little over three per cent of the payments he was caught avoiding.Monaco is one of the countries that harbour many rich tax dodgers, because none French nationals are not required to pay income tax.Other tax free countries are United Arab Emirates, Qatar, Oman, Kuwait, Bahrain, The Cayman Islands, The Bahamas, Bermuda and Saudi Arabia.

Although Nigeria is not one of the tax havens, there is no specific law on what sportsmen should pay for endorsements or other earnings.An official of the Federal Inland Revenue Service, who pleaded anonymity, told The Guardian that sportsmen, like every other Nigerian, are expected to pay their income tax as soon as they receive their salaries.

“It is the duty of their employers, which are the clubs, or in majority of the cases, the states governments to deduct their taxes before the players are paid.“In some cases, where the players get additional income from other sources, they are also expected to pay taxes on such incomes. They are subject to withholding tax and every other payment, including Vat, that other citizens pay,” he said.

MTN’s Public Relations Manager, Funso Aina, who interfaces with some of the stars endorsed by his company, also affirms that every endorsement by the telecommunications outfit is subject to taxation.According to Aina, “The laws stipulate that we deduct the income tax from the total sum of the endorsement and the stars know this. At the end of every term, we remit the taxes to the tax authorities.

“Although I am not directly involved with the tax issues, I Know that MTN ensures that the law is obeyed to the letter.”Igwe Onuoha, who is the Media Officer of Abia Warriors Football Club, told The Guardian that players in the club are treated like every other employee of the side when it comes to tax issues.“We deduct the tax from the players’ salaries before they get their pay because as a responsible club, we know that such taxes go a long way in helping government meet its responsibility to the citizens.

“However, unlike European leagues, our local players do not have much endorsement from the private sector. Aside such of the established players in Europe, I don’t know of any home-based player that is endorsed by the big companies. We have not developed to that level, but we shall get there one day,” Onuoha said.

Former Green Eagles winger, Adegoke Adelabu, believes that Nigerian footballers will always be lucky to escape from prosecution or arrest over tax evasion because sports in Nigeria is run like social responsibility by companies, especially the government.Speaking with The Guardian, Adelabu, a sports scientist, said Nigerians are yet to understand the concept of sport economy and how to create wealth out of sport.

“When we talk about sport and taxes in Nigeria, it is a case of can anything good come out of Nazareth? How can an unpaid footballer pay tax? How many athletes are earning their living from sport, compared to how many officials are enriching themselves from sport votes?“Recently, players in some clubs owned by the state governments embarked on strike for unpaid salaries. Obviously, Nigerian footballers are not treated as professionals. Professionals are expected to be on contract and they know roughly how much they are going to earn in a year, which will make it possible for them to make provision for taxes,” he stated.

The former IICC Shooting Stars of Ibadan winger added: “The issue of taxes in the country is not given the desired relevance in the management of the health and wealth of the citizens. It carries the same connotation of the relationships between the ‘agberos’ and danfo drivers exploitation. In advanced countries, it is easy for the government to account for what the taxes are used for; but in Nigeria, it is difficult, hence people do not see why they should pay taxes.

“In the case of footballers in advanced countries, a lot of them are ignorant of how their money is managed. Most of the times, the problem of tax evasion comes from the accountants who in the process of trying to cut the amount payable may cross the borderline to evasion. In advanced country, you can find a way of reducing the amount of taxes you have to pay, but you should not evade paying taxes. The higher you earn, the more taxes you pay!

“In Nigeria, it is expected that taxes by sportsmen are taken care of by the employers who may even get rebate from the government because they see sport as a form of charitable venture. The club owners should be responsible for the payment of taxes.”Adelabu said that the question Nigerians need to ask is, how much do we make from football matches or sporting events? We need to consider how much the government commits into sponsoring sporting events and see whether our level of development correlates with our spending.

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