By Ben Schneiders
Hat-trick hero Jason Cummings was the star of the A-League grand final in June, when the Central Coast Mariners beat Melbourne city 6-1.Credit: Getty
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Australian professional soccer’s major shareholder owns its slice of the game via a series of offshore tax havens including an infamous PO box in the Cayman Islands.
Private equity group Silver Lake Partners owns its 33 per cent stake in the A-Leagues, bought in late 2021, through a network of companies in jurisdictions with zero or low rates of taxation and limited transparency including the Cayman Islands, Singapore and the US state of Delaware, an investigation by this masthead has found.
In the Caymans, the registered address for Silver Lake’s A-Leagues shell company is a PO box at Ugland House, a small building that is home, on paper, to nearly 20,000 companies. Former US president Barack Obama repeatedly said it was either “the largest building in the world or the largest tax scam”.
Bronwyn McCredie, a multinational tax expert and senior lecturer in accountancy at Queensland University of Technology, said the Cayman Islands offered secrecy as well as tax advantages.
Australia’s best known player, Sam Kerr, started her professional career in the A-League Women.Credit: Edwina Pickles
“I really don’t know why you would run a corporation through the Caymans, unless there is a benefit [tax or secrecy] for you in doing so,” she said.
The Cayman Islands ranks second on the Tax Justice Network’s list of the most secretive global tax havens, with no tax paid in the Caymans on capital gains or income, and no public transparency on company shareholders.
Its government strongly disputes this categorisation and says its system of “tax neutrality” stops the double taxation of companies across different jurisdictions.
This masthead’s investigation traced Silver Lake’s A-Leagues ownership structure from Singapore — where corporate documents show the Silver Lake entity has an arrangement with the government to pay no tax — and then on to entities in the Cayman Islands.
The corporate documents show there are intercompany loans between the entities in Singapore and the Cayman Islands — a measure that can be used to reduce taxable income.
The investment is then linked from the Caymans back to Delaware in the United States — a state with low tax and limited corporate regulation and which is regarded as a tax shelter. The Delaware address for the holding company is the Corporation Trust Centre, a small building that is the address for more than 200,000 companies.
The Corporation Trust Centre in Delaware, US is the registered address for more than 200,000 companies.
Both Silver Lake Partners and Australian Professional Leagues, which owns and runs the A-Leagues competitions, declined to comment.
This masthead is not suggesting that any of the parties to the A-Leagues structure have broken any tax laws or acted improperly.
Assistant Minister for Competition, Charities and Treasury Andrew Leigh said it was important that multinational companies paid their fair share of tax.
“Since company taxes comprise 19 per cent of Australia’s revenue base, to accept accounting tricks multinational firms engage in would have a massive impact on Australia,” he said.
“Among the shenanigans we’ve seen are shell companies created in low or no-tax jurisdictions, allowing multinationals to funnel huge profits into secret locations where they have zero employees and no physical office.”
Assistant Minister for Competition, Charities and Treasury, Dr Andrew Leigh, says it is important that multinational companies pay their fair share of tax.Credit: Martin Ollman
In 2021, there were 456 companies operating in Australia with an ultimate holding company in the Cayman Islands, according to an Australian Securities and Investments Commission database obtained by this masthead.
The private equity business model can be controversial, often involving the significant use of debt to reduce taxable income, heavy cost-cutting and directing investments through no-tax jurisdictions, such as small Caribbean islands, that can deprive major economies of tax revenue.
Private equity has been a growing influence on European and North American professional sport, buying whole clubs, such as Chelsea FC, or stakes in major competitions.
The Silver Lake investment in local soccer comes as Australian rugby union has also explored deals with private equity that could involve selling off revenue streams in return for investment. Cricket has also held preliminary discussions with investment banks.
In New Zealand, the All Blacks recently sold a stake of its commercial operations to Silver Lake, with that investment also routed through the Cayman Islands. Silver Lake is also a minority investor in the City Football Group, which owns English champion team Manchester City and the A-Leagues’ Melbourne City.
Private equity’s growing role in sport has also led to concerns about whether the interests of fans, players or the long-term future of the sport are being protected. Last year, the A-Leagues’ decision to sell its grand final to Sydney was attacked by many fans as undermining the previous merit-based system where the top team would host the final.
While Australia’s national football teams — most spectacularly the Matildas at the recent women’s World Cup — have drawn record TV audiences and huge crowds, the domestic professional game has struggled. The A-League, which started in 2005, was an initial success but crowds and interest tailed off before the pandemic.
The opening round of the women’s competition at the weekend set attendance records in the wake of the Matildas’ World Cup success. The men’s competition kicks off on Thursday. Its matches are attracting about half the fans of 15 years ago.
The A-Leagues were spun out from Football Australia in 2020 after a long battle for control between the clubs and Football Australia. The Australian Professional Leagues then sold a third of itself to Silver Lake for $140 million the following year.
Professional Footballers Association co-chief executive Beau Busch said private equity provided opportunities and risks. He said the A-Leagues needed to be the “economic engine of the sport” with “little margin for error”.
It was important that players shared in any growth in revenue and the asset value of the leagues, he said.
“We have seen in US sports an increasing discussion about players sharing in enterprise value. Our simple view is that players should share in all value they create, and this ensures that players and management have an aligned framework for progress.”
Professional Footballers Association co-chief executive Beau Busch.Credit: Jason South
“Within Australian football, we need to be incredibly disciplined,” he said. “Like great players, we need to work incredibly hard at getting the fundamentals right, such as fan engagement, creating a world-class workplace for players and attracting and retaining talent.”
The A-Leagues are unusual in Australian sport as they are run on a for-profit basis — meaning they are liable to pay tax — unlike the much larger not-for-profit AFL or NRL. In 2022, the AFL paid no company tax on a $113 million profit derived from $944 million in revenue. The A-Leagues’ biggest club, Melbourne Victory, had revenue of $15 million in 2022.
World Players Association co-founder Philip Jennings, a former global trade union leader involved in sports human rights campaigning, said private equity had become increasingly important to the world economy.
In the US about 7 per cent of the labour force is employed in private equity-owned firms. The rate in Australia is about half that.
“We are talking about the global financial elite,” Jennings said. “They don’t want you to know whose money goes into these funds and even less into the conditionality into which these deals are struck.”
He said private equity investors expected significant financial returns and had been attracted by the rising brand values of sport.
“They claim they are in it for the long term … the reality is, a lot of these deals are flipped at relatively short intervals,” he said. “The restructuring can be savage, it can change headcount, and it can change the way the business operates.”
Silver Lake have also bought a stake in the All Blacks via the Cayman Islands.Credit: AP
One of the most spectacular private equity sport investments was CVC Capital Partners buying Formula 1 and more than doubling their money when they sold in 2017. One estimate put its returns at more than 400 per cent.
A senior team official, Bob Fernley of Force India, in 2016 accused CVC of “raping the sport”. “All their actions have been taken to extract as much money from the sport as possible and put as little in as possible,” he said.
Tax Justice Network Australia spokesman Dr Mark Zirnsak questioned why there was any need for the largest shareholder of professional soccer in Australia to structure itself through the Cayman Islands.
“Are you trying to hide someone in the ownership structure because no one knows who is behind the company?” he said. “Is there some sort of tax angle, either avoiding or evading what they should be paying in tax?”
Dr Zirnsak said there could be sport integrity issues for soccer as part of its ownership was unknown because it was based in a secretive jurisdiction.
“This is such a bad look, it just strikes me as crazy for any sporting body.”
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