Bringing Fiscal Responsibility to Brazilian Soccer
Brazilian soccer has a storied tradition that celebrates creativity and flair on the pitch. Yet in the realm of finance, Brazilian soccer clubs have a different tradition. Fiscal mismanagement has become the standard for many clubs, but a new law seeks to make a change. Its goal is to help soccer clubs bring their finances in order.
Brazil’s Congress recently passed a fiscal responsibility law for soccer clubs. It gives them up to 20 years to repackage their debts and lowers fines for late payments. In exchange, clubs must modernize their financial accounts while also “increasing transparency and fiscal responsibility,” worldfootball.net reported. The government has pegged the debt of Brazilian soccer clubs at an estimated 4 billion reais, or about US$1.27 billion.
Soccer may be a sport, but the financial struggle of Brazil’s soccer clubs has an impact on the government. According to The Associated Press, rather than reduce their investments in soccer, many clubs have instead avoided paying taxes.
The Brazilian government has tried to address soccer’s fiscal issues several times. Under a draft version of the new fiscal responsibility legislation, soccer clubs could not have spent more than 70% of their total earnings on soccer. That obligation, however, was relaxed in the legislation ultimately approved by Congress. Under the approved version of the law, clubs may spend up to 80% of their earnings on soccer. Now they will have more money to fulfill their tax obligations.
The new fiscal responsibility law also has player support. Many of them have not been paid in months, and some have turned to lawsuits to demand payment of wages. Clubs do have incentives to comply with the law. Failure to follow the law will mean losing points and the risk of relegation to lower divisions. Common Sense FC, a union of players that lobbied for the bill, said the passage of the fiscal responsibility legislation was “undeniably a victory,” according to Reuters, adding that the approval was “a goal for Brazil.”
Approval of the law may be a goal, but the match has just begun. Brazilian soccer fell into financial disarray over the course of many years, so the sport now will need more goals than ever to achieve a financial victory.