Identifying Solutions for Overcoming the Underground Economy in Iranian Professional Football

Document Type : Research Paper

Authors

1 PhD Student in Sports Management, Tarbiat Modares University, Tehran, Iran

2 Assistant Professor of Sports Management, Tarbiat Modares University, Tehran, Iran

3 Associate Professor of Sports Management, Shahid Bahonar University, Kerman, Iran

Abstract
Background and Purpose
Sports economics is a specialized field that applies economic theories to analyze sports activities, focusing on the optimal allocation of resources across three main sectors: sports performance, sports production, and sports development. A sports economy can be dynamic and beneficial when it operates transparently and without corruption, ensuring equitable outcomes for all stakeholders involved. However, the presence of substantial financial resources in professional sports, particularly football, has unfortunately led to increased corruption and the entry of profiteers seeking illicit gains. This phenomenon undermines the integrity of the sport and distorts economic benefits.
The Financial Action Task Force (FATF), in its 2009 report, was the first international body to highlight sports, especially football, as a highly attractive sector for money laundering activities (Levy, 2015). One of the key avenues for laundering money within football is betting on matches (Kotrba & Holman, 2021). Despite this recognition, reliable statistics on the prevalence and scale of money laundering through football betting remain scarce (De Sanctis, 2014). A review of the literature reveals clear signs of an underground economy thriving within football, characterized by unregulated financial flows, illicit transactions, and opaque economic practices.
Given these challenges, the present study aims to identify the components of the underground economy in Iranian professional football and propose effective strategies for its management and mitigation. The research seeks to fill a critical gap in the academic and organizational understanding of financial corruption and illicit economic activities within the Iranian football context.
 
 
 
Materials and Methods
The study was conducted using a qualitative research methodology with an exploratory nature and thematic analysis approach. Purposive sampling combined with snowball sampling techniques was employed to select knowledgeable participants for semi-structured interviews. Twelve interviews were conducted with individuals deeply familiar with football economics, including researchers, top managers, and officials from the Iranian Football Federation and professional football clubs. Interviews continued until theoretical saturation was reached, ensuring comprehensive coverage of the topic.
The data collection instrument was a structured interview guide designed to elicit detailed insights into the underground economic activities within Iranian professional football. To ensure the reliability and validity of the data, expert reviews and category validation techniques were applied. This rigorous process ensured that the emerging themes and categories accurately reflected the complex realities of the underground economy in football.
 
Findings
The thematic analysis identified eight key strategies to combat and overcome the underground economy in Iranian professional football. These strategies encompass a broad spectrum of economic, legal, organizational, and technological interventions.
The development of a tax culture emerged as a foundational strategy. Taxation is recognized as one of the most powerful economic tools with multiple regulatory functions. Promoting a culture of tax compliance among clubs, players, sponsors, and other stakeholders is essential. The study emphasizes that tax laws should be clear, simple, and the tax collection process should be reasonable and transparent to encourage compliance and reduce evasion.
The structure and formulation of laws to combat tax evasion specifically tailored to the sports sector were identified as critical. Legal frameworks must be robust and enforceable, with clear penalties for violations. This legal infrastructure should be supported by effective judicial oversight and coordination among relevant authorities.
The acceptance and management of betting in football represent another vital strategy. Given the cultural and religious context of Iran, the study suggests that betting should not be outrightly prohibited but rather regulated with rules that align with national values. Proper regulation can reduce illicit betting activities and associated money laundering risks by bringing betting into a transparent and controlled environment.
Planning and development of cyberspace were also highlighted. The digital domain has become a significant revenue source for football, but without transparency and taxation, cyberspace revenues can fuel the underground economy. The study advocates for transparent management of online revenues and the prevention of monopolistic control by sponsors or entities that could exploit cyberspace for illicit gains.
Privatization and financial reform within professional clubs were emphasized as mechanisms to enhance accountability and financial transparency. Encouraging clubs to join the stock market and adopt corporate governance practices can improve financial discipline and reduce opportunities for illicit financial flows.
The development of supervision and enhanced laws to combat money laundering were identified as necessary. Strengthening regulatory bodies, improving monitoring mechanisms, and fostering cooperation between financial, legal, and sports authorities are essential to detect and prevent money laundering activities.
Observance of the principles of football commercialization as an industry is vital. Football clubs must be managed as commercial entities with clear financial reporting, ethical standards, and professional management to align with international best practices.
Management development and international alignment with new football management trends were underscored. Training managers in modern sports management techniques and aligning with global standards can improve governance and reduce corruption risks.
Finally, financial flow control and the development of football contract supervision were recognized as crucial. Monitoring financial transactions, enforcing contract transparency, and ensuring fair compensation for players and staff can mitigate underground economic activities.
 
Conclusion
The study concludes that taxation plays a pivotal role in regulating the sports economy and combating the underground economy. Promoting a tax culture requires clear, simple rules and reasonable tax collection procedures. Regarding betting, the study recommends regulated acceptance tailored to Iran’s cultural and religious context to reduce illicit activities. Cyberspace revenues must be transparently managed and taxed to prevent their exploitation.
Financial flows, particularly investments from major industries such as oil and mining, should be closely monitored and held accountable within the football sector. Judicial reform and enhanced coordination among regulatory bodies are essential to intensify the fight against corruption, especially within the private sector.
Accounting practices in football clubs should transition from traditional to electronic methods, with standardized financial reporting guidelines and anti-corruption enforcement mechanisms established. Privatization must be comprehensive, encompassing all clubs, and based on principles of free competition to ensure equitable opportunities.
Fair and timely payment of players is critical to preventing their involvement in underground economic activities. Compliance with Asian Football Confederation (AFC) rules, particularly regarding financial management, must be improved through infrastructure development and comparative studies.
The study advocates for the creation of club and coaches’ unions to oversee performance and enforce regulations, ensuring accountability and transparency. Lastly, managerial development should focus on appointing clean, knowledgeable managers capable of systematic supervision to prevent the underground economy’s emergence.

Keywords


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Volume 16, Issue 87
May and June 2024
Pages 71-98

  • Receive Date 13 February 2022
  • Revise Date 08 June 2022
  • Accept Date 11 June 2022