SBD Global/July 25, 2013/Finance

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  • F1 Uses British Tax Loophole To Pay Only $1.5M In Corporate Tax On Revenue Of $1.5B

    Bernie Ecclestone's F1 made a net contribution of $1.5M in corporate tax in '11.

    The company that runs F1 "has used a complex technique to legally avoid paying tens of millions of pounds in corporation tax despite racking up annual profits" of £305M last year, according to Christian Sylt of the London INDEPENDENT. F1 made a net contribution of £945,663 ($1.5M) in corporation tax in '11 on revenues of £980M ($1.5B) -- even though the majority of its commercial operations are based in the U.K. The company "has been able to substantially reduce its tax liability by taking out loans from other companies in the same group," as part of a complex arrangement with U.K. tax authority HMRC. Details "of money-spinning motorsport’s tax arrangements have been disclosed in a prospectus for the planned flotation of F1 on the Singapore stock exchange." Total corporation tax contribution from businesses linked to F1 -- including by F1 itself, the eight teams and the two engine manufacturers headquartered in the U.K., and the Silverstone circuit which hosts the British Grand Prix -- was just £1.9M in '11 despite total revenues of £2.1B (INDEPENDENT, 7/24).

    U.K. RELIEF
    : In London, Simon Cass reported the standard rate of cooperation tax in the U.K. is 24% of a company’s profit. But F1 "has slashed its tax bill" by taking out £2.5B ($3.8B) worth of loans from offshore companies within the group. The interest on the loans, which amounted to £387.7M in '11, "is tax deductible and thus F1 has managed to engineer a mammoth saving in the U.K." The flotation prospectus states that F1 has "an efficient tax position," adding, "The group’s tax charge is materially dependent on the amount of U.K. tax relief available to it for interest expense on certain intra-group loans. We expect our aggregate cash tax payments to remain broadly consistent with prior years" (DAILY MAIL, 7/24).

    POLITICAL WAR: Also in London, Kevin Eason reported F1 "could now join a roll of shame that includes Starbucks and Google, who have been targets for the anger of politicians." British PM David Cameron "is waging a campaign against corporate tax avoiders while the Organisation for Economic Co-operation and Development is also pushing countries to update their tax laws to pull companies into line." Although these fresh revelations "will damage F1’s standing at a time when anger is growing at multinationals that deliberately avoid paying tax, it could perversely attract investors looking for smart ways to spend their money on highly profitable businesses with very low tax liabilities." It remains to be seen whether British motorsport "will also suffer embarrassment from the revelations." The government "has latched onto F1 and motor sport as a world leader in technology with a raft of proposals to develop the industry and push export growth." It is estimated that 3,500 businesses employing about 40,000 people generate motorsport sales worth £7B ($10.8B) (LONDON TIMES, 7/24).

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  • Juventus Takes Home Biggest Slice Of UEFA's $1.2B Champions League Payout

    Bayern Munich's Arjen Robben, left, celebrates with teammate Thomas Muller during the Champions League final in May.

    A total of €905M ($1.2B) was distributed to teams competing in the Champions League last season. Bayern Munich, which was crowned champions after a 2-1 victory over Borussia Dortmund in London in May, picked up a combined €55M ($73M) in payments from UEFA. This sum consisted of €36M ($48M) in participation, match and performance bonuses covering the group and knockout stages, including the final, as well as €19M ($25M) from the TV market pool. Dortmund earned a total of €54M ($71M), which comprised €32M ($42M) in participation, match and performance payments, plus €22M ($29M) from the TV market pool. All 32 participants were entitled to a minimum €8.6M ($11.4M) in accordance with the distribution system. Additionally, performance bonuses were paid in the group stage: teams received €1M ($1.3M) for every win and €500,000 ($661,000) for every draw. The clubs that advanced to the round of 16 were each assigned an additional €3.5M ($4.6M), the eight quarterfinalists an extra €3.9M ($5.2M), and the four semifinalists a bonus of €4.9M ($6.5M) (UEFA).

    JUVENTUS TOPS: The AP reported Serie A Juventus topped the Champions League prize money table, collecting more than €65.3M ($86.4M) from UEFA despite losing in the quarterfinals to Bayern Munich. UEFA shared €905M in group-stage payments to 32 teams in the "first of a three-year cycle of commercial contracts." Juventus was helped to the top by a near-€45M ($60M) share of Italian broadcast rights. Serie A AC Milan, "beaten in the last-16 by Barcelona," collected €51.4M ($68M) as "only two Italian clubs reached the group stage and shared the TV payments." Real Madrid got €48.4M ($64M), Barcelona got €45.5M ($60.2M) and Paris St. Germain received €44.7M ($59.1M). ManU, "another last-16 loser," topped English clubs in the Champions League with €35.5M ($47M) (AP, 7/24).

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  • Finance Notes: Puma Reports Falling Earnings As Sales In Europe, China Decline

    Puma reported "lower-than-expected second quarter results, hurt by falling sales in China and southern Europe as well as the effects of the weak yen in Japan, its second-biggest market." Puma said on Tuesday that sales in the Asia/Pacific region fell by 7.2% (REUTERS, 7/24). ... Dutch tax authorities have "laid a claim on nine properties and a parking spot" owned by former footballer Ruud Gullit for not paying enough income tax in '10. The properties are all located in Amsterdam, "and include a house located in the southern part of the city where Gullit’s estranged third wife, Estelle Cruijff, lives, according to Dutch Land Registry documents." The documents did not "make clear how much money Gullit owes the Dutch state" (BLOOMBERG, 7/24).

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