Madrid boss Ancelotti faces tax troubles, joins illustrious list
REAL Madrid coach Carlo Ancelotti is under scrutiny by Spanish authorities, accused of evading taxes, a fate shared by other football stars.
While Ancelotti can still contest the charges in court or negotiate to avoid trial, Spain has shown determination in pursuing high-profile figures like Lionel Messi, Cristiano Ronaldo, Jose Mourinho and even pop icon Shakira for alleged tax evasion over the past decade.
The wave of celebrities facing tax evasion accusations coincided with Spain’s gradual recovery from the severe economic downturn of 2008-13, a period marked by global recession.
Despite avoiding bailouts like those of Portugal and Greece, Spain implemented drastic public spending cuts in education and health services, leading to widespread discontent, protests and the emergence of an enduring anti-austerity movement.
Pere Soldevila, a legal expert and professor at Barcelona’s EAE Business School, suggests that Spain’s pursuit of these highprofile individuals serves as a stark reminder that even the privileged must fulfill their tax obligations.
“Politically, Spain’s two major political parties sold the idea that to the citizen who was suffered from spending cuts that they were going to go after those who made the big money,” Soldevila said. “People who have trouble making ends meet like that.”
Despite Spain’s current strong economic growth, the crackdown on high-profile fiscal wrongdoing continues. The Tax Office’s policy, initiated in 2012, of publishing a yearly list of people who owed the most in back taxes remains in place as a form of public shaming.
Ancelotti’s case, like those of Messi, Ronaldo and Mourinho, revolves around revenues from image rights, not salaries earned from their clubs. Many players and managers set up companies to manage their image rights for commercial purposes, but Spain’s tax authorities have targeted those using shell companies in tax havens.
Rafael Fernandez Montalvo of Cremades & Calvo-Sotelo law firm explained that the significant disparity between taxes for highwage earners and taxes paid by businesses in Spain creates a temptation for some football players to use shell companies.
“The existence of a progressively high income tax, which in Spain can reach 51.4%, compared to business taxes which are set at 25%, is traditionally the principal cause to explain why professionals recur to setting up companies under which they try to evade paying higher income tax rates,” he said.
Prosecutors accuse Ancelotti of using a company with “no real (economic) activity” in the Virgin Islands as part of an alleged scheme to defraud 1 million euros from image rights in 2014 and 2015. They are seeking a prison sentence of four years and nine months.
Ancelotti maintains his innocence, arguing he was not a fiscal resident of Spain during part of that time. Prosecutors disagree.
“I already paid the fine, the money is with them, and now the lawyers are talking to try to find a solution,” Ancelotti said. “Let’s see what the judge says.”
Martin Jacob, professor of accounting and control at IESE Business School in Barcelona, believes Ancelotti may have erred in his fiscal planning.
“Ancelotti cannot tell us that his image rights were created in the (Virgin Islands). It is a tough story to tell,” Jacob told The AP. “I mean look at LeBron James. It would be hard to argue his image rights were created in the Cayman Islands.
“I have the feeling that they (celebrities in Spain) thought that 10, 15 years ago this could work, and maybe it worked back then, but nowadays it is clear it doesn’t.”
Other football players caught up in tax evasion cases in Spain include Luka Modric, Javier Mascherano, Marcelo, Alexis Sanchez, Ricardo Carvalho, Angel Di Maria, and Radamel Falcao. The only high-profile player acquitted of tax fraud was Xabi Alonso.
Popular actors and singers in Spain have also faced successful tax investigations. The biggest star among them, whose fame rivals or even surpasses Messi and Ronaldo, is Shakira, who used to reside in Barcelona. The Colombian singer accepted a deal admitting she did not pay enough taxes.