Fifa’s fear of high taxes

The World Cup in Qatar was a super meltdown for FIFA’s image. President Gianni Infantino (52) has even become a “world villain” (“Tages-Anzeiger”), at least in the western hemisphere.

However, from a financial standpoint, the World Cup in the desert is a complete success for the governing body of world football. Even before the opening game, they proudly announced that they had a record revenue of $7.5 billion in connection with the tournament in Qatar.

But for Fifa, this enthusiastic message also has the potential for a shitstorm. Because the world asks itself the question: Who benefits from this money and how much of it goes back to society as taxes?

The flamboyant “House of Fifa” in Zurichberg

Fifa has been tarnishing its reputation for years because it gives almost nothing to the tax authorities. An accusation also leveled against Switzerland, cementing its reputation as a tax haven. After all, the controversial association has an ostentatious “Fifa House” in Zurichberg.

Fifa CFO Thomas Peyer defends himself against these “stubborn rumors” in an interview with SonntagsBlick, stating clearly: “Unlike other Swiss-based international sports associations, we are not tax exempt.” Especially during the World Cup years, when Fifa generates big income, one becomes a good taxpayer and handing over double-digit millions to Swiss tax authorities.

FIFA’s tax rate is 1.6 percent

Peyer’s statements are verified by looking at financial reports prepared in accordance with International Financial Reporting Standards (IFRS) and controlled by the audit firm PWC. Accordingly, world football’s governing body paid approximately US$36 million in taxes and duties between 2015 and 2018, the last four-year World Cup cycle. 29 million of this was to be paid at the 2018 World Cup in Russia.

$29 million sounds like a lot. However, the fact that FIFA reported 1814 million profits in the year of the World Cup puts the figure in perspective tremendously. The tax rate for 2018 was therefore only 1.6 percent.

CFO Peyer points out that the individual tax assessment paints a skewed picture because the four-year cycle of the World Cup relates to Fifa’s accounting, emphasizing that Fifa is taxed at the statutory tax rate for clubs and does not distribute separately. snow. Peyer: “Instead, the excess proceeds from the World Cup will be used to maintain global football funding on an equal footing during the World Cup non-World Cup years.”

Global tax reform is changing practices

It is difficult to remotely control whether the funds that the association distributes to member countries are always used in accordance with its intended purpose. At least in the past, that wasn’t always the case. But it is a fact that the governing body of world football spends much more than it does in three of the four years. For example, between 2019 and 2021 there was minus 1.180 million CHF.

Swiss tax authorities take this into account. In this way, business-related losses can be deducted from previous assessment periods. This is fundamental to Fifa as the revenue and profit distribution is consistently inconsistent.

But now this practice is in jeopardy because the Confederation wants to participate in the global tax reform of the Organization for Economic Cooperation and Development (OECD). In parliament, reform is accepted as “there is no alternative”.

More than four years?

At the heart of OECD plans is a minimum tax rate of 15 percent on corporate profits. Affected are organizations with a worldwide turnover of over €750 million, and Fifa is one of them.
Reform plans in the World Football Federation are causing overtime. “We are now clarifying what the introduction of the global minimum tax will mean for us,” says CFO Peyer. Fifa’s point is that the OECD minimum tax does not provide a multi-year perspective. “So it’s an option, in the future we will try to better distribute our income over the next four years.”

If that doesn’t work, it could be expensive for FIFA. The sample calculation for the 2018 World Cup shows that if 1814 million US dollars of excess income were taxed at 15 percent, Fifa would have had to pay about 270 million US dollars. This challenge puts Switzerland under pressure as well. Once again, the federal government must find an internationally accepted solution that will not alienate anyone.

Not just a tax advantage for Zurich

Fifa CFO Peyer emphasizes that the world football federation is not just a tax advantage for Switzerland: “More importantly, we bring about 400 million francs per year to the Zurich location and all of Switzerland in value creation.” On the one hand, through the payment of approximately 900 employees, as well as orders from local service and commercial companies.

The advantages of this added value are indisputable. The only question is whether this will be enough to make up for FIFA’s negative headlines. Finally, their antics also cause a loss of image for Switzerland.