Corruption Risks in Hungarian Sports Financing

Spectacle team sports received HUF 200 billion in tax credit in four years – what we don’t know is from which companies. One sports club benefited especially!

The government introduced the new support system for the five spectacle team sports (football, basketball, handball, water polo and ice hockey) four years ago. Since 2011, businesses can decide to pay a portion of their corporate tax not into the state budget but to one of the spectacle team sports clubs. The Hungarian state forgoes this money, meaning state tax revenue is reduced by this amount. From this source alone, HUF 200 billion in public funds has gone into sports sponsorship in Hungary.

There is no problem with the government providing incentives for businesses to sponsor certain goals, even if the extent of this is debatable. The main problem is that the government handles sports sponsorships that reduce state tax revenue as corporate private donations, thus neither the companies nor the sports clubs have to give a detailed account of this kind of support.

Equals, “more equals,” “most equal”

Transparency International Hungary’s (TI) report titled “Corruption Risks in Hungarian Sports Financing” and presented today shows that sports clubs have received HUF 200 billion over the past four years in an intransparent manner. It is unknown which company sponsors precisely which sports club, and this not only carries the risk of corruption but also provides an opportunity for companies – since they can keep who they support a secret – to give a disproportionately large amount of money to certain clubs.

A significant portion, HUF 75 billion, of the HUF 200 billion in tax credit distributed over the past four years went to football. More than 1,100 football clubs received a share of this amount, but in far from an equal measure. Thirteen football clubs received close to one-third, or HUF 21 billion, of all the support distributed in football. The lucky thirteen includes, among others, FTC, Újpest, Vasas, Honvéd, ZTE, Debrecen and Diósgyőr, but for example the Szolnok MÁV FC was also a big beneficiary of the tax credits.

Even the 13 teams at the top were not successful in equal measure, as there is one team that received an unimaginable amount of money. During the four years of the corporate sports sponsorship system that allows for a corporate tax allowance, the Foundation for Felcsút Youth Football Development was by far the most supported sports organization each year. The football organizations operating in Felcsút received a total of HUF 9.2 billion in tax credit over four years, meaning they collected 12% of all the support distributed in football. Felcsút proved to be extraordinarily successful in securing tax credit, as it won no less than 44% of the support given to the top 13 privileged football clubs. With this exceptional performance, Felcsút towers well above the others in first place not only in football but among the clubs of the other five sports as well.

Corruption lies in the details

“The government created the corporate sports sponsorship system in a way that sports clubs favored by politicians can gain uncontrolled access to funds that decrease the state’s tax assets, and moreover, they can do this in a manner that is completely legal,” noted Gyula Mucsi, the author of the TI report on sports corruption risks.

Sports clubs wishing to receive tax credit must have a sports development program that is approved by the relevant sports federation. The sports federation decides which team can receive corporate money that decreases state tax income and in what amount, but this decision process is completely closed and intransparent. The political and public connections of the heads of the federations of the spectacle team sports are obvious. The handball federation is led by Máté Kocsis, the Fidesz mayor of Budapest’s 8th district, while the similarly government-allied mayor of Szolnok is the president of the basketball federation. The Hungarian Football Federation is led by Sándor Csányi, perhaps the richest businessman in Hungary.

In any case, the government did not leave the transparency of the uniquely Hungarian corporate sports sponsorship system to chance. Amendments to the Sports Act that entered into effect this January declared that it is sufficient for sports organizations to provide information on their received sponsorships by the “provision of aggregated data.” As a result it is impossible to find out which company provided support to exactly which sports association and in what amount.

This is the cronies’ stadium

The government does not deny either that it is spending mostly public funds on building new stadiums. The exposure to corruption is clear in this case as well: it is regularly businesses belonging to the economic orbit of the government that win contracts to build stadiums. The stadium in Felcsút, for example, was built mostly by companies belonging to the interests of the town’s mayor Lőrinc Mészáros, who has amassed a fabulous wealth.

It is likely that political contacts are behind the seemingly completely senseless stadium investments as well. For example, the football club of the town of Kisvárda, population 16,000, recently advanced from the Hungarian third division NB III to the second division NB II, and has never played in the first division NB I, but it has now been awarded a luxury stadium capable of hosting Europa League qualifiers. It is unlikely to be a coincidence that the state increased funding for the stadium construction from HUF 120 million to nearly HUF 1 billion after Miklós Seszták, the Member of Parliament representing Kisvárda, became Minister of National Development. Mezőkövesd, which also has a team in the NB II, benefited similarly, with the government approving HUF 800 million in taxpayer funds for the building of a stadium for the town that will be capable of hosting international matches. This is also probably not unrelated to the fact that the president of the local football team is András Tállai, who is also the town’s parliamentary representative and a state secretary at the Ministry for National Economy.

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If you have any questions relating to the press release, please contact Gyula Mucsi at the email address gyula.mucsi@transparency.hu or by phone at +36 70 421 5191.

The project was carried out with support from the European Union and the Embassy of the French Republic.

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