Paul L. Caron

Tuesday, July 3, 2018

Zucman: The World Cup Of Tax Evasion — If Ronaldo Can’t Beat Uruguay, The Least He Can Do Is Pay Taxes

New York Times op-ed:  If Ronaldo Can’t Beat Uruguay, the Least He Can Do Is Pay Taxes, by Gabriel Zucman (UC-Berkeley):

Ronaldo, who plays for Real Madrid, had acknowledged evading 14.7 million euros (about $17.1 million) in taxes between 2011 and 2014. That’s enough to pay for 800 full-time Spanish primary-school teachers for one year or to treat 1,000 patients with breast cancer.

And Ronaldo is far from an isolated case. In 2017, his archrival, Lionel Messi of Argentina — who plays for FC Barcelona — was given a 21-month prison sentence (which was changed to $2.5 million in fines) for the same crime.

In both cases, the Spanish authorities found the players guilty of dodging taxes on the income derived from their image rights. These rights — which they, like many other professional athletes, had transferred to shell companies in exotic tax havens — account for a large part of their income. For the top players on the planet, such rights can amount to many millions of dollars a year.

That some of the world’s most famous athletes could defraud tax authorities seems at first incomprehensible: They should know that their tax returns will be closely scrutinized, and being labeled tax evaders certainly does not enhance the value of their image or their popularity with fans.

But as the cases of Ronaldo, Messi and many wealthy individuals caught in recent leaks such as the Panama Papers and Paradise Papers illustrate, tax evasion is pervasive among the rich, deserving athletes or idle rentiers alike. Why? Not because they are evil people or impervious to the consequences of their actions, but because they are wooed by a global tax evasion industry. ...

Why should we care about Ronaldo’s income and tax affairs? Because they illustrate our collective failure to adapt to globalization, and the lessons we can draw from this example extend beyond soccer to the rest of society.

Over the past three decades, the winners of globalization have seen their income boom. Ronaldo’s image rights are worth more than a billion dollars because his brand is particularly valuable to a company like Nike with a worldwide customer base. But the tax rates of these winners, instead of rising, have fallen dramatically. From 1930 to 1980, the top marginal income tax rate in the United States averaged 78 percent; today it’s 37 percent. Instead of redistributing the gains from globalization, the tax system has concentrated them into just a few hands. This path is unlikely to be sustainable, economically or politically. ...

European soccer — with its tax evasion, unfettered tax competition and unconstrained inequality — is one possible path for the rest of our societies, and the one the United States is currently favoring. We can keep going down that path. Or we can emulate the N.B.A. instead of mimicking the U.E.F.A. In professional sports, as in the rest of the economy, inequality is a choice: Policies exacerbate it or prevent it. Some countries do better than others, and we can learn from others and from the past.

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