The Offshore Game

Football’s a funny old game, or so it’s been said. The people’s game. The beautiful game. The offshore game? £3 billion says so, according to the new TJN project which launched with a splash in The Guardian today.

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The Offshore Game

The new project, The Offshore Game, will focus on a range of financial secrecy issues in sport around the world – from match-fixing to administrative corruption, and from tax dodging to the lack of accountability to fans.

In this first major report, we focus on the extent of offshore finance – through both equity ownership and the provision of loans – in the English and Scottish football leagues, using the most recent full accounts plus additional data in the public domain (that is, information that fans could reasonably access in order to see who is in control of their club). [Here’s the methodology.]

A major finding is the total of £3 billion of offshore money, much of it through some of the most financially secretive jurisdictions around the world. The clubs involved range from giants like Manchester United, to minnows such as Dumbarton.

The report highlights the range of risks – not least for fans, tax authorities and sporting integrity – that are exacerbated through greater exposure to financial secrecy.

The Offshore League Table

The league table follows TJN’s Financial Secrecy Index in ranking clubs according to the combination of scale and secrecy: how much offshore money is involved, and how secretive are the particular jurisdictions?

Full details are in the report, including responses from clubs where they provided them, and detailed studies of the top five’s financial secrecy and possible risks.

TOG league table

 

Thanks and kudos to George Turner for driving the project forward, and writing the report. And to Christian Aid, who provided the space for the fore-running 2010 report, Blowing the Whistle.

Next steps?

Where The Offshore Game goes next will depend, in part, on the opportunities that arise. There are, for example, some very interesting developments in the field of match-fixing analytics that offer the potential of identifying the extreme abnormalities associated with rigged matches in various sports.

We are already receiving tip-offs and suggestions about individual cases of hidden ownership, and associated criminality; while there is clearly scope for financial scrutiny of major international sporting institutions such as the International Olympic Committee and FIFA.

Give us a shout if you have an idea or some info you think we should see (secure options available). It’s all over the world, this stuff…

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Offshore ownership in the UK

Transparency International has a new report out on the extent of secretive offshore ownership of London and UK property – and the consistent appearance of more secretive jurisdictions in investigations of corrupt ownership. Back of the envelope calculations suggest the tax implications could be substantial too…

A few top lines:

  • The scale of offshore ownership is large, covering 40,725 London properties. (Or per the Financial Times last year, at least £122 billion across England & Wales; for Scotland, check Andy Wightman’s blog and book.)
  • Secrecy is a common feature. 89% of these properties (36,342) are held through TIUK 2015 POCU incorp locsecrecy jurisdictions, with more than a third due to the highly secretive British Virgin Islands alone.
  • Secrecy jurisdiction structures account for 5-10% of properties in the richest parts of the city including Westminster and Kensington & Chelsea: see map.
  • To the surprise of nobody, secrecy jurisdictions dominate the ownership of property in the Metropolitan Police’s investigations of corruption too.

The report is well worth a look, and details a lot more of the ways in which secrecy jurisdictions are used to make ownership anonymous, and how that facilitates all sorts of corruption.

Just for fun, I took a couple of the stats and checked to see what the potential capital gains tax (CGT) implications might be – because of course if a property is owned through an anonymous company, you can sell the company rather than the property and potentially skip the tax.

A lot of offshore ownership will be entirely unsullied by any intention to launder the proceeds of crime, or to dodge tax. But to get a sense of scale, it’s still informative to think in terms of the potential CGT at risk.

Example 1: the report notes that in 2011 alone, BVI companies bought £3.8 billion of UK property. Assume that property rose in value according to the government’s average house price index (although we know this is mainly high-end property, so this is likely to be conservative), then the rise in value by 2015 would be around 11.8%. Applying CGT at 28% would yield around £125 million of revenues – from the offshore ownership via one jurisdiction and in one year alone.

Example 2: taking the same approach to the FT’s figure of £122 billion owned offshore in England & Wales last year, we have an average rise in value of around 1.9%, with a potential CGT yield for the year of nearly £2.3 billion.

Of course, in neither case do we expect all CGT to have been unpaid; and the liability would only arise were the property sold. Still – the potential scale suggests TI’s final recommendation might well pay for itself, or indeed do rather better:

The Land Registry should publish the ultimate beneficial ownership of these properties freely to the public, on the same basis as Companies House is set to do under current UK legislation. Accordingly, companies registered overseas would be required to update beneficial ownership information on the same basis as UK registered companies.

And so say all of us.