tax news — July 15, 2014

The Check Cashed Round the World

by Bob Williams

FIFA Prize Money

There’s a new currency making the rounds all over the globe. By some standards it’s not that significant. But it’s noteworthy because it seems to be spread to countries great and small.

It’s not Visa; it’s not MasterCard; it’s not American Express.

It’s World Cup cash. Prize money, actually, for teams finishing at the top of the heap in the 2014 World Cup tournament. And there’s quite a lot to go around.

Germany, of course, being the world champions, deserves the biggest paycheck. And they get it: a whopping $35 million from FIFA, the governing body of world soccer. FIFA, by the way, stands for Federation Internationale de Football Association. FIFA dates back to 1904, when it started with just seven member associations, all in Europe.

The Big Money

Now fast-forward to 2014, where FIFA has over 200 member associations (each one from a different country) scattered around the world. And the money figures have grown with the scope of the organization. This year’s World Cup tournament earned a reported $4.5 billion for FIFA through broadcast rights, corporate sponsors, licensing and hospitality rights.

Contrast that with the fact that in order to garner host status for the tournament, countries have to guarantee FIFA total tax-free status for the entire tournament, for all its activities – from television ads to ticket sales to souvenirs. And since FIFA is a registered non-profit corporation in Switzerland where it’s based, it doesn’t pay any taxes there, either.

From that $4.5 billion, FIFA is expected to pay out $400 million to Germany and the rest of the 32 national sides that qualified for the World Cup Tournament.

After Germany, runner-up Argentina gets $25 million (despite getting skunked by the Germans). Third-place Netherlands lands $22 million and the hosting Brazilians have a $20 million bright spot in what was otherwise a disappointing World Cup for them.

The Rest of the Best

From there, of course, the paydays get smaller. France, Colombia, Costa Rica and Belgium – all taken out in the quarterfinals – get $14 million each. The teams sent home from the group of 16 – Mexico, Chile, Uruguay, Nigeria, Greece, Switzerland, Nigeria and the U.S. – will receive $9 million each.

The remaining teams in the original tournament bracket will each get $8 million.

FIFA also shelled out $1.5 million per squad to each of the 32 national teams taking part in the tournament before it started so they could organize training camps and other preliminary events.

A note about Brazil. Some estimates say the Brazilians lost up to $25 million in tax revenue because of FIFA’s tax-free status. Some estimates put that loss much higher. Add to that lost revenue the cost for building stadiums for the tournament, and Brazil’s deficit starts to get ugly. And critics, both inside and outside of Brazil, are calling for an end to the free ride for FIFA.

We in the U.S. may not be able to make an objective assessment of whether FIFA should remain outside taxation or not. We hear the numbers, but we are largely removed from the good the association does in the rest of the world. Perhaps it’s best not to view them through our own lens, so to speak.

On one hand, the organization makes an insane amount of money from every World Cup. World Cup revenues come in once every four years (the next World Cup is in 2018), but that income has to last the organization until the next Cup competition.

On the other hand, FIFA has succeeded where governments have failed, by unifying the diverse countries of the world once every four years in a competition that brings respect, honor – and even a paycheck – to every team that takes part, not just the winners.

And FIFA has a lot of support worldwide. More than 4 million soccer players are registered with FIFA in the U.S. alone. Worldwide, that number is over 260 million. Nearly half the world’s human population consider themselves soccer fans.

The performance of the American team in the World Cup will win new fans for the sport in the U.S. And maybe one day we will all celebrate as Germany does now – as World Champions.

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