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Brazil soccer teams get 20-year lifeline over S$1.66 billion debts

Brazil — Brazil’s President Dilma Rousseff signed into law a provisional debt-relief program for the country’s soccer clubs, which have amassed as much as US$1.2 billion (S$1.66 billion) in unpaid taxes.

Brazil’s President Dilma Rousseff, speaks during a ceremony to launch measures for the modernisation of soccer, on Thursday, March 19, 2015. Photo: AP

Brazil’s President Dilma Rousseff, speaks during a ceremony to launch measures for the modernisation of soccer, on Thursday, March 19, 2015. Photo: AP

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Brazil — Brazil’s President Dilma Rousseff signed into law a provisional debt-relief program for the country’s soccer clubs, which have amassed as much as US$1.2 billion (S$1.66 billion) in unpaid taxes.

The legislation to allow clubs to repay debts for as long as 20 years comes with strings attached, including the threat of demotion to lower-tier leagues for delinquent payers.

“We are proposing a programme that will allow clubs to overcome financial difficulties and, at the same time, adopt good management practises inspired by entrepreneurial experiences and great examples of world football,” Mr Rousseff said in a statement published on the sport’s ministry’s website.

Mismanagement in Brazilian soccer has been in evidence for decades, and the government only recently decided to take action against teams for not paying taxes. Some of the nation’s biggest clubs, such as Rio de Janeiro-based Flamengo and Sao Paulo’s Corinthians, have tens of millions of supporters countrywide.

Clubs that join the refinancing mechanism must meet requirements including paying salaries and image rights agreements on time. Several teams in Brazil’s top league, including last season’s champion Cruzeiro, have struggled to pay wages punctually.

Teams will have 10 to 20 years to pay off their debt, with repayments limited to between 2 per cent and 6 per cent of annual revenue for the first three years. Failing to meet the obligations may result in transfer bans and could lead to teams being prevented from entering competitions for the following season after a breach.

Under terms of the debt refinancing agreements, clubs will also have to adopt management measures that include limiting payroll spending to 70 per cent of income and agreeing to publish audited accounts.

The accord will help clubs including Brazilian Cup winner Atletico Mineiro to balance their books. The team, one of the worst offenders at failing to meet tax obligations, had the entire US$27 million transfer fee it was due to receive from the sale of star player Bernard Duarte to Europe seized by authorities in 2013. BLOOMBERG

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