Mourinho, Ronaldo and tax evasion
Judging by recent news stories, José Mourinho seems to have found managing his financial affairs as difficult as managing Manchester United.
I was saddened by reports that the Spanish courts have handed the famous football manager a suspended prison sentence and a fine of more than €2m. Before vilifying a convicted tax evader, it may be a good idea to investigate the context.
You don’t have to surf the internet for long to discover that Mourinho has followed in the golden steps of Cristiano Ronaldo, recently fined almost 10 times as much and subject to a longer suspended prison term.
This kind of news certainly does nothing for the reputation of football, where I might playfully suggest that the cheating should remain on the field.
One wonders whether two of the most high-profile men in the world really needed this kind of publicity. This is the issue that always comes to my mind when I hear about rich clients who wish to gull the tax authorities by entering schemes that are far closer to evasion than avoidance, let alone those who knowingly set out to flout clearly stated law.
It is one thing to push tax regulations to the limit and remain just inside the boundaries, ideally with the (very expensive) assistance of lawyers, accountants and that universal get out, “top legal counsel”. It is quite another to break the law wilfully, as Mourinho, Ronaldo and others appear to have done.
There are a number of obvious consequences. If I were running a tax department in any of the many jurisdictions where these esteemed gentlemen have worked over the years, my first step would be to launch a detailed investigation into their financial affairs, assuming that these have not gone beyond statutory time limits. Even that last proviso might be irrelevant, given the nature of this kind of tax fraud, which probably facilitates full-scale investigation regardless of age.
If (say) José Mourinho was my client, I might start by looking at my PI policy and then consult colleagues about the reputational risk involved in continuing to act for a convicted felon. Assuming that he remained on the books, my advice would be to consider all of his financial affairs and, should there be any similar offences that have not yet come to the attention of the authorities anywhere in the world, come clean at once.
The point about the PI policy might be the most relevant, since it seems hard to believe that any reputable adviser with experience of this kind of client would act on behalf of a famous individual in the sporting arena and fail to notice that they had declared no income from image rights. In fact, if the stories in the press are correct, it is actually more likely that guilty parties entered into arrangements set up by advisers that failed.
In this country, one might expect a top footballer or manager to syphon image rights through a company introduced specifically for this purpose, with one of the more obvious goals to limit the amount of tax paid on what could otherwise be regarded by the tax authorities as supplementary salary. Apparently, in Spain, the relevant companies formed a chain that led to BVI and the Nirvana of zero tax, at least until the authorities prosecuted.
At this point, I wonder whether any of the following actions might ensue.
- José Mourinho et al could sue their Spanish accountant/tax advisers.
- The Spanish tax authorities might launch an investigation into those advisers if they have not already done so.
- The Spanish body responsible for regulating the advisers i.e. their equivalent to ICAEW or CIOT would be negligent if it failed to take a look at this in great detail.
All that I can say is that I hope Mr Mourinho and his peers have taken great care to ensure that all payments in the United Kingdom, including those for image rights, have been properly declared to the tax authorities.
Alternatively, if the powers that be at HMRC can drag themselves away from the problems that leaving Europe will undoubtedly be causing, perhaps a fruitful source of additional revenues might be yet another look at the tax affairs of footballers and their managers, especially Messrs Mourinho and Ronaldo.