AFTER a month of relentless scrutiny and criticism, particularly in the Western media, the FIFA world Cup, 2022 games finally came to an end on the 18th of December with an incredible display of sportsmanship, grit, and determination by two of the best teams- Argentina and France facing each other. The score-line reading 3-3 after 120 minutes of extra time, it is a pity that the outcome of the match had to be decided in a penalty shootout where Argentina prevailed 4-2 and thus lifted the coveted trophy. Heartbreak for one and jubilation for the other. How does one describe such a game in a few words. Let us leave that to the great man, the legendary Pelé:

" Today, football continues to tell its story, as always, in an enthralling way. Messi, winning his first world cup, as his trajectory deserved. My dear friend Mbappé scoring four goals in the final. What a gift it was to watch this spectacle to the future of our sport. And I couldn't fail to congratulate Morocco for the incredible campaign. It's great to see Africa shine… "

So, the beautiful game that is football lives on. And, it is precisely because of the beauty of the game that is now followed in more than 200 countries and its mass appeal, that the administrators of the game also generate enormous amounts of money and controversies in equal measure.

In the history of the world cup, there has almost always been controversies in relation to the awarding of the game to the host countries right from the first world cup that was hosted in Uruguay in 1930. But, the decision by FIFA to award the right to host the matches to Russia in 2018, Qatar in 2022, lead to allegations of corruption, investigation, arrests, and the controversy is not over yet.

Qatar's bid for the world cup in 2008 was astonishing considering that it is a very small country with a small population, no footballing history at all, not even an existing stadium. On top of it, this is a country where most of the summer time outside temperature hovers around 40-50 degrees Celsius and playing football is impossible in June-July which is the normal schedule for hosting the cup. The rules were bent and the game took place in November and December and Qatar promised to build 8 brand new air-conditioned stadia with all modern facilities. However, there were also questions about Qatar's human rights record, particularly in respect to women and the gay and other minorities. It was therefore no wonder that there was always the suspicion that big money changed hands, so that Qatar could indulge in "sports washing," a term we heard frequently during this world cup. Wikipedia defines it as: "a term used to describe the practice of individuals, groups, corporations, or governments using sports to improve reputations tarnished by wrongdoing. A form of propaganda, sportswashing can be accomplished through hosting sporting events, purchasing, or sponsoring sporting teams, or participating in a sport."

Qatar did build the stadiums at enormous cost and the press has been focussing on the treatment of the migrant workers, mainly from the sub-continent and also from Africa. There have been documentaries on the poor working conditions and starving wages, confiscation of passports by the contractors and more importantly deaths due to exhaustion working in extreme heat. Qatar responded by asserting that it had made changes in laws and that it is now a model for other Middle eastern countries in so far as working conditions of migrant workers are concerned. But as pointed out by John Oliver in his 'Last week tonight, ' the change came after 2018 when the stadiums have already been built. As the game neared, Qatar also resorted to intense lobbying to sell its point of view. In this context, as a side show of the world cup, was the very recent raid and seizure of stashes of cash by the Belgian Police from a Greek MEP and a Vice-President of the European Parliament Ms. Eva Kaili.

On the 21 st of November,2022, in her speech to the European Parliament she said:

" Today, the World cup in Qatar is a proof actually of how sports diplomacy can achieve a historical transformation of a country with reforms that inspired the Arab world. I alone said that Qatar is a front-runner in labour rights, abolishing Kefala, introducing minimum wage. Despite the challenges that even European companies are denying to enforce these laws, they committed to a vision by choice and they opened to the world.

Still some here are calling to discriminate (against) them. They bully them and they accuse everyone who talks to them or engages, of corruption. But still, they take the gas. Still, they have their companies profiting billions there. We do not have the moral right for lectures to get cheap media attention. And we do not impose our ways. We respect them ." (Video available at: https://atalayar.com/en/content/qatar-related-corruption-scandal-rocks-european-union)

The opening ceremony that took place on the 20th November in the presence of Heads of Governments of many countries of the region and the Secretary General of the United Nations, seems to have also included Ms Kaili who went there on a private visit.

Then as the game was in progress, came the news that on the 9th of December, 2022, the Belgian police staged 16 raids across Brussels as part of a probe into corruption and money laundering involving the EU assembly and 'a Gulf country'. It has been reported that the Belgian Police uncovered €1.5 million in cash . Belgian newspaper L'Echo reported that "several hundred thousand euros in a suitcase" were confiscated and that this money belonged to the father of Ms. Kaili, who was arrested when he tried to flee; another €150,000 was found in the apartment that Ms. Kaili shared with her partner, Mr Giorgi, both of whom were taken into custody. (Source: https://atalayar.com/en/content/qatar-related-corruption-scandal-rocks-european-union). Investigations continue. In the meantime, the European Parliament said it would suspend all work on legislative files relating to Qatar, notably on visa liberalization, a European Union-Qatar aviation agreement and planned visits, until the allegations have been confirmed or dismissed. They also stripped Ms. Kaili of her vice presidency.

However, these are only peripheral sideshows of this World Cup of football and will soon be forgotten. The main point here is that football is an extremely popular sport. It may therefore be interesting to briefly see its origin and spread throughout the world.

As per Britannica Online Encyclopaedia , modern football originated in Britain in the 19th Century. The rules of the game differed from club to club and came to be formalised gradually by a newly formed Football Association . The spread of football was linked to the urbanisation and industrialisation with the working class adopting it for their weekend leisurely activities. And its popularity eroded public interest in other sports such as cricket. And as the influence of working-class players rose in football, the upper classes took refuge in cricket and rugby union.

By the early 20th century, football had already spread across Europe. As for South America, it is stated that football first came in the 19th century through the port of Buenos Aires, where European sailors played the game. Brazil is believed to be the second South American country where the game was established. Charles Miller, a leading player in England, came to Brazil in 1894 and introduced football in São Paulo. In Uruguay, British railway workers were the first to play, and in 1891 they founded the Central Uruguay Railway Cricket Club which played both cricket and football. More or less similar story is found in respect of the other Latin American countries.

Similarly, European sailors, soldiers, traders, engineers, and missionaries brought football with them to Africa in the second half of the 19th century.

Football thus spread across the world and there was a need for an international organisation. On 21 May 1904, representatives from France, Belgium; Denmark, Netherlands, Switzerland, Sweden, and Spain met in Paris and the Fédération Internationale de Football Association (FIFA) was founded in the rear of the headquarters of the Union Française de Sports Athlétiques at the Rue Saint Honoré 229 in Paris. Much later, in 1932, It moved to Zurich because of Switzerland's location in the centre of Europe, its political neutrality and accessibility by train.

The FIFA Congress in Amsterdam on 28 May 1928 decided to stage a world championship organised by FIFA. Hungary, Italy, the Netherlands, Spain and Sweden and Uruguay submitted their candidatures. Uruguay was the favourite since, its national association was willing to cover all the costs, including the travel and accommodation of the participating teams. Any possible profit would be shared, while Uruguay would take on the deficit. The FIFA Congress in Barcelona in 1929 therefore assigned Uruguay as first host country of the FIFA World Cup while the other candidates withdrew. The first FIFA World Cup opened at the brand-new Estadio Centenario in Montevideo on 18 July 1930 (source: FIFA archives). Ever since, the world cup takes place every four years barring 1942 and 1946 due to the outbreak of World War II.

Streams of FIFA's income

FIFA records its revenue in a four-year cycle leading up to World Cups. In the last cycle, covering the period between 2015 and 2018, FIFA reported revenue of more than $6.4 billion. While the majority of this revenue came from licensing contracts, other sources of income included brand licensing and investment income.

According to Investopedia , FIFA sells licensing rights to television stations and broadcasting institutions, permitting them to broadcast football games and related events in particular regions. Because football is popular throughout the world, there is immense competition amongst bidders and most of FIFA's revenue also comes from television rights.

According to Investopedia again, the next important source of income for FIFA is Marketing Rights. There are four World Cup sponsorship levels: FIFA Partners, FIFA World Cup Sponsors, Regional Supporters, and National Supporters. FIFA Partners help develop the FIFA brand and engage in corporate social responsibility. FIFA World Cup Sponsors are given the rights to promote their brand at the World Cup. Regional and National Supporters are headquartered in various regions and/or the host nation and have the rights to promote their brands within those areas.

FIFA generated $600 million in licensing rights for the 2015-2018 cycle. This revenue comes from the sale of brand licensing contracts, royalty payments, and other similar sources.

The final significant component of FIFA's revenue stream consists of hospitality and accommodation rights, as well as ticket sales. Revenue from ticketing rights is 100% owned by a direct subsidiary of FIFA. From 2015-2018, FIFA reported $712 million in hospitality rights and ticket sales revenue.

With so many countries vying to host the World Cup, FIFA naturally gets a big bargaining chip and gets away with dictating most of the terms. FIFA's expenses are limited since it does not take any responsibility for the development of the infrastructure, which lies exclusively with the host nation.

Of course, FIFA pays the local organizing committee for organizing and conducting the World Cup. It also pays prize money to the participating nations, accounts for the travel and accommodation of players, and supports staff and match officials. Also, it makes available for the host country a FIFA World Cup legacy fund to be used in the future for the development of the game in the country.

For the 2022 World Cup, FIFA will pay out $440 million in prize money. The winning team alone will take $42 million . The runner-up will take home $30 million , while third-place and fourth-place teams will earn $ 27 million and $25 million , respectively. Pay-outs continue based on placement . And each of the 32 teams gets a piece of the prize money— even those who finish in the bottom half will take home $9 million each .

Professional clubs also get a share. As part of FIFA's Club Benefits Programme, intended to recognize the contribution of clubs—in terms of training and playing time—toward the tournament, FIFA will pay out $209 million to 416 clubs . Clubs will receive approximately $10,000 per player per day. And the compensation is paid to all clubs the player has played in the two years before the World Cup 2022.

How the prize money is distributed amongst the players differs from country to country. In case of some professional footballers who already earn huge amount from their clubs, this additional amount may not matter.

FIFA's website has a model agreement for the 2026 World Cup, there are seven Government Guarantees and One Government Declaration to be given by the host government. For our purpose, the most important of these is the Government Guarantee #3 relating to tax exemptions and foreign exchange undertakings.

In terms of this agreement, the Government must grant a general tax exemption for FIFA , the 2026 FWC Entity, the 2026 FWC Subsidiaries (if applicable) and any other FIFA subsidiary limited to the period of preparation, delivery, and wrap-up of the Competition.

The general tax exemption must comprise all taxes that may be applicable in the Host Country . The sole exception to the general tax exemption is taxation on the sale of tickets to third parties but limited to VAT, sales tax or the like at a unified rate of a maximum of 10%. No other taxes may be charged on any revenues or profits generated through the sale of tickets. In case of Qatar, this might have been irrelevant since it does not levy any VAT.

Besides, the Government must grant a general tax exemption for the Host Association /Host Associations, the continental football confederations, and FIFA's member associations during specific periods.

FIFA reasons that there will be a multitude of cooperation and delivery structures in relation to the Competition and Competition-related events. Any taxation on the provision of such goods and services and/or related activities would result in indirect taxation costs for FIFA , Thus, the Government must grant a limited tax exemption for the FIFA Host Broadcaster and FIFA's service providers during a period commencing on 1 January 2022 and ending on 31 December 2027. The tax exemption must not be made conditional upon establishing a special-purpose vehicle for carrying out the related activities . However, the tax exemption does not prevent the regular taxation of profits generated by such entities or salaries and wages of their employees.

With respect to the taxation of certain designated individuals , the Government must grant a limited tax exemption ensuring taxation procedures which (i) are in line with the regulations of the OECD Model Tax Convention . The limited tax exemption for designated individuals comprises the following benefits:

The salaries and further payments effected by foreign entities to any non-resident individuals – with the sole exception of players – who enter and leave the Host Country or the Host Countries within the period commencing 35 (thirty-five) days before the first match, and ending 35 (thirty-five) days after the final match of any Competition must be exempt from any taxation in the Host Country/Host Countries. This exemption is in line with the "183-day rule" established by article 15 of the OECD Model Tax Convention. This tax exemption also applies for referees and individuals forming part of team delegations (e.g. doctors, coaches and masseurs ).

With respect to the taxation of players, to avoid complex tax declaration procedures and legal uncertainties , the tax exemption will narrow the interpretation of article 17 of the OECD Model Tax Convention and the taxation of players must be limited to base compensation and prize money paid to the players by FIFA's member associations in relation to the players' participation in the Competition.

Contrary to its stand on taxation of business, the OECD Model is very strict in respect of artistes and sportspersons and generally gives taxation rights to the country where the performance takes place. It is not clear whether such a stipulation regarding the narrow interpretation of Article 17 was there for earlier tournaments. However, Qatar does not levy income tax, so the question might have been irrelevant.

Lastly, all compensation in cash or otherwise (e.g., through the delivery of goods and services) to volunteers must be tax exempt.

Thus, in so far as taxation of the World Cup related events, the host country is bound to give exemption not only to FIFA but also to other related entities in terms of the agreement signed with the government. The income of the players normally should be taxable in terms of article 17 of the OECD Model tax Convention unless the host country gives exemption through its domestic law.

As for FIFA's taxation, we note that sports bodies based in Switzerland enjoy association status. Associations not obliged to register with the state or to publish their accounts. They are granted tax breaks and flexible legal terms that allow them to govern their own affairs. (https://www.swissinfo.ch/eng/politics/law-change-rejected_fifa-retains-low-tax--non-profit-status-despite-billions/44522840). FIFA's own document states that it qualifies as a not-for-profit association, although all profits generated by FIFA globally remain subject to the ordinary taxation regime for associations in Switzerland.

As of now, it seems that FIFA has a great business model. Apparently, it enjoys a tax-exempt status in Switzerland and it binds the host governments in exempting all its income and even of its associates, contractors etc. That way, it can utilise the entire profit for the spread and development of football. In the opening Ceremony of this world cup, it has been declared that FIFA has earned a record 7.5 billion USD in this World Cup. However, because of the controversies around this world cup, particularly the banning of 'one love' armband and the like, and the statement of FIFA president Gianni Infantino , defending certain labour practices in Qatar: "What we Europeans have been doing for the last 3,000 years, we should be apologizing for the next 3,000 years before starting to give moral lessons ", has ruffled many feathers and trouble seems to be brewing even in Switzerland.

There is also the question of the applicability of the Global minimum tax @ 15% since the revenues of FIFA exceed the threshold of 750 million Euros. But FIFA's accounts are done on a four-year period and such accounting is not perhaps envisaged in the Pillar two agreement. (Source: https://switzerlandtimes.ch/politics/fifas-fear-of-higher-taxes/). One has to keep a watch on further developments in this area.