specials | 2016-07-14
Explaining Lionel Messi's problems with the Spanish Tax Agency
An objective analysis was overdue, understanding the tax fraud case and its particularities
Because it couldn’t happen in any other way, the “Messi case” and his sentence for the crime of tax fraud has raised questions and generated opinions of all kinds, many of them with little basis on reality and more biased towards the club preferences than actual knowledge of what happened.
Nothing would be better than a chronology of the events to understand the case, its origins, the singularities of the judicial process and the uncommon sentence.
The year is 2005. Jorge Messi, the player’s father, trusts Rodolfo Schinocca with the fiscal optimization of the income via image rights of the promising Lionel Messi, who had just debuted with FC Barcelona’s first team at 17 years of age.
Fiscal optimization is nothing more than managing to declare the least taxes possible in a legal way. In order to do so, the management of those rights are sold to a company that will reduce the tax payments thanks to a network of partners created by their assessors, following the same logic that supports the system known as the Double Irish Arrangement, used by massive corporations to lower its tax liabilities.
In 2006, the Messi family broke their relationship with Rodolfo Schinocca, which they accused of taking part of the income from Messi’s contract with Adidas (Schinocca ended up sentenced for fraud by the Argentine justice system in 2013) and decide to trust the management of their finances to Juárez Veciana Abogados, who replicated a new structure similar to the previous made in 2007, with companies in Uruguay, Belize, United Kingdom and Switzerland.
In June 2013, the prosecution presents a complaint against Messi and his father for having defrauded more than €4m through such partner structure during the years of 2007, 2008 and 2009. The complaint was based on the accusation that the sale of his image rights (legal by itself) had been made by such a small sum that it really was nothing but a simulation done with the only objective of avoiding the payment of taxes, because the real ownership and the beneficiary of the income was still Messi. In the same complaint, Jorge Messi was acknowledged as being responsible of the defrauding initiative when Lionel was still under-aged.
Besides the player, his father, and their consultants claimed innocence considering the legality of the partner structure, and in August 2013, Messi paid the Treasury with the sum that was demanded plus the appropriate interests for the delay.
In September 2013, Messi and his father declared for the investigating judge in charge of the case, denying not only all intentions of fraud, but also any knowledge on the subject, which is why they trusted the management to their consultants. From the testimonies and evidence, the prosecution decide not to press charges of tax fraud against Lionel Messi, considering that, effectively, the player was unfamiliar about how his image rights and tax payments were managed, but the accusation is kept against his father because they consider him as the intellectual author of the felony.
A key part in the accusation against Messi from the prosecution being lifted was the testimony of two Treasury inspectors who testified that, effectively, Messi knew nothing about it. But the State Attorney, who represents the interests of the Treasury in the case, decided to keep the accusation against the player, opposing the declarations of their own witnesses and the prosecution’s criteria, which is why Messi ends up on trial for tax fraud after his appeals against the charges are rejected.
The trial took place in June 2016 and during their testimonies the parts kept their claims: Messi denies any kind of knowledge about the topic, his father exculpates him, acknowledging his own responsibility but shielding himself in his good faith to trust the family’s consultants, and the prosecution also exonerated the player but demanded 18 months of prison for the father as intellectual author. Meanwhile the State Attorney comes up as extremely harsh, not only keeping their petition of 21 months of prison for both Messi and his father, but also comparing the player to a mob boss who planned the whole thing. We have to keep in mind the fact that Lionel was just 17 years old when the first partner network is created:
“It’s the same as a mob boss, because in every criminal structure there is a hierarchy, and in every criminal structure there’s a division of roles, and on top of all, there’s the bigwig, the big shot, and this one never hears anything from his underlings.”
Finally, the judge rules in favor of the arguments of the State Attorney and confirms the sentence of 21 months for both Messi and his father and also a fine of over two million euros for the former, and one and a half million for the latter. Messi’s lawyers had already announced that they will appeal to the Supreme Court, so the sentence is not definitive yet and could become important jurisprudence, same as the Infanta Cristina case, as they are both cases of tax fraud with contrasting sentences.
From the whole picture of what happened, we can extract various conclusions and it’s important to look at all of them before passing judgement:
Messi’s father wanted to benefit from a scheme of tax avoidance. These systems (like the Double Irish Arrangement) can be considered immoral, because they allow people and companies with massive income to pay less taxes than mere workers with no resources to have access to these complex tools of fiscal savings. But besides the immorality, they are legal instruments. In other words, Jorge Messi wanted to pay the less taxes possible in a legal way.
Messi’s consultants still defend the legality of the whole network, and, as an example for the absence of intention to hide it, they use the fact that when the player reached the legal age of 18, they made him sign the contract of release his rights image rights in from of a notary, which gives it public validity. Even so, they were not careful in their execution, because they did it in a way that it could be interpreted as a simulation, as a scam, and that's a reason that led to the tax fraud accusations. If it wasn’t, the complaint wouldn’t have gone far.
Many jurists are surprised by the developing of the case for different reasons:
1-The case went on a punitive avenue when the usual occurrence in similar cases is the administrative alley. For example, Mourinho closed his tax evasion case with the payment of the quantities demanded by the Treasury, interests for delay and a fine. Iker Casillas didn’t even have to pay a fine because, in his case, the Treasury considered there was no intention of defrauding the treasury. Other cases were settled quietly such as Xabi Alonso and Rafael Nadal.
2-Messi received a harsher sentence than his father, who the prosecutors identify as the intellectual author of the scheme. It contrasts with other recent case of similar media repercussion in Spain: In the Nóos case it was considered that the Infanta Cristina (a bank director) at adult age and with solid qualifications was innocent for her ignorance, but here the judge accepted the claims of the State Attorney that a 17-year-old Messi who hadn't finished Mandatory Secondary Education was not only fully aware of what his father and consultants made him sign, but that he actually was the main author of the felony, turning his father into a mere necessary collaborator.
3-The State Attorney kept their accusation towards Messi against the prosecution’s criteria. We have to consider that the duty of State Attorney in the process is defending the interests of the Public Treasury and these are focused in the recovery of defrauded quantities with their appropriate interests. Therefore, the threat of prison is commonly used to achieve a deal that avoids the trial and thus accelerates the payment to the Treasury of the defrauded sum. In this case, however, the State Attorney sought the prison sentence, which is unusual.
It's the exceptionality of Messi case when compared to the similar cases that led many Barcelona fans to become suspicious and question the case. Although the clumsy institutional campaign started by FC Barcelona in support of Messi can lead to misunderstandings, as it’s able to be interpreted as a justification of a criminal act, the vast majority of Barcelonistas do not pretend to justify Messi’s behavior. They’re not asking for a beneficial treatment for the Argentinian star, but they do condemn the viciousness brought on man who has been a victim, especially from the State Attorney, driven to get the player to sit on the accused bench, using the “newscast penalty” to damage his image, and then achieving a harsh prison sentence for him which contrasts with the usual agreements previous to trial and limited to the payment of the debt plus a fine.
The fact that the director of the juristic service of State Legal Service is Marta Silva de Lapuerta, renown Real Madrid supporter and member of Florentino Pérez’s directive board between 2000 and 2006, does nothing more than leading the suspicions of discriminatory treatment against the one that, in the end, is the person that is currently the leading tax contributor in Spain, the person that pays the most taxes in Spain, with over €100m paid.
We hope this piece helps to clarify Lionel Messi's issues with the tax agency in Spain, adding context and bringing vital knowledge to an extremely touchy subject when most of the public are mislead by reports that lack a semblance of journalistic integrity, prioritizing pageviews and increased television ratings.
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WRITTEN BY: Xavier Codina
Die hard Barça fan and football lover specially interested in tactical analysis, Xavier also writes for Perarnau Magazine and Banquilleros.