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Khadija Sharife: FIFA’s Love of Tax Havens

July 6, 2010

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By **Khadija Sharife**

From former Federation Internationale de Football Association (FIFA) President Stanley Rous’s alleged fixing of the 1966 World Cup to guarantee a UK victory to the spanking new stadiums in African nations like Angola built by the Chinese, soccer often reflects pathologies of power. In South Africa, soccer organizations like the Football Association of South Africa (1892) and the African Bantu Football Association (1933) were racially segregated in the same way as the state. And when the deracialized South African Football Association (SAFA) achieved membership status at the 1992 FIFA Zurich Conference, after decades of being banned, it was one of the earliest “official” recognitions that nation was breaking free from the confines of apartheid. Two years later, the country held its first democratic elections. It should come as no surprise then that FIFA —the world’s not-for-profit governing soccer body, was also shaped by power plays.

Membership, for instance, systematically marginalized African nations until the 1970s. This changed only when Brazilian business magnate João Havelange strategically carved a campaign for FIFA’s presidency by challenging Rous’ Eurocentric ‘conservatism’ and overt support for the apartheid regime. Rous’s politics catalyzed his demise, and, as president from 1974 to 1998, Halvelange embraced newly liberated African nations. These days, however, football under the watch of FIFA President Sepp Blatter marches toward a deliberately “depoliticized” goal: profit.

Blatter has generated billions by capitalizing on commercial rights. “Let’s be clear,” said FIFA General Secretary Jerome Valcke, “The World Cup in South Africa has no financial problems for FIFA.” During the 2010 World Cup, FIFA has generated $3.3 billion in revenue chiefly via television and marketing rights—the highest ever recorded.

Although the Swiss parliament has allowed FIFA to keep their non-profit status, the international soccer organization will certainly be cashing in during the 2010 World Cup, thanks to the set of financial conditions that they impose upon all host countries.

“From the perspective of what we spent as a country and from what the country stands to make in terms of revenue and profits it is almost negligible,” said the South African Revenue Service’s (SARS) Adrian Lackey. SARS has declared the mega-event a “non-profit” one. Thus far South Africa has spent over $9 billion on the World Cup —750% above the original budget. Much of the investment went to developing new stadiums in “aesthetically pleasing areas” such as Cape Town’s Greenpoint, since, in the words of a FIFA official, “A billion television viewers don’t want to see shacks and poverty on this scale.”

Although the Swiss parliament has allowed FIFA to keep their non-profit status, the international soccer organization will certainly be cashing in during the 2010 World Cup, thanks to the set of financial conditions that they impose upon all host countries. Profit-making is facilitated by the “supportive financial environment” that extends to all of FIFA’s “claimed territories”, which include “ten World Cup stadiums, any FIFA-designated exclusion zone, and any official tournament parking area.” This “supportive financial environment” is a set of exemptions and accommodations that the host country must make for FIFA’s World Cup.

Though the Vice President of FIFA has said that his organization paid taxes in host countries, this is largely untrue. In addition to exemptions that free FIFA from the state’s taxes, over $78 million worth of goods are imported “tax free” by “FIFA, FIFA subsidiaries, FIFA national associations (except for SAFA) and FIFA confederations.” The tax bubble also extends to most commercial and merchandise partners, and to hospitality providers as well.

Yet if Blatter has proved closed-fisted with host countries, when it comes to family, generosity is the name of the game. The Swiss-based Match exclusively manages the World Cup’s hospitality packages and counts Blatter’s nephew, Philippe, as one of its minority shareholders via InFront Sports and Media Corporation (ISM). ISM held global media rights for the 2002 and 2006 Cups and now holds the lucrative Asian broadcast rights for 2010 and 2014. Meanwhile, Match’s principal shareholder, Byrom PLC, was awarded the status of official accommodation provider without any sort of bidding process. Thanks to Match, the cost of accommodation in South Africa during the World Cup initially increased by as much as 1000%; though Match would later dump 450,000 pre-booked rooms on the markets.

Despite Blatter’s worry that, “we might not have the same return of investment as we had at the last World Cup in 2006,” FIFA’s income in 2010 is actually double that of the 2006 Cup. This income also goes completely untaxed in Switzerland, the country in which FIFA is based. For the 50% of South African citizens who live in poverty, the World Cup model is yet another instance of progress being inhibited.

Copyright 2010 Khadija Sharife

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Khadija Sharife is a writer living in South Africa

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