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Rangers Crisis: 5 Reasons the SPL Giants Went Bust

Colin StoneContributor IIIFebruary 22, 2012

Rangers Crisis: 5 Reasons the SPL Giants Went Bust

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    Glasgow Rangers FC are in administration.

    This is the sentence the fans of the Bears never thought they'd see.

    Owner Craig Whyte has lied to fans, directors and everyone else, and many people put the blame solely on him for Rangers' current monetary predicament.

    However, there are several reasons why the club from Govan are now sitting in the mire of financial instability

    Let's look at the top five factors.

    Enjoy?

Craig Whyte

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    The current Rangers owner has been on the end of some incredibly vitriolic and acerbic verbal assaults in the past few days due to what many fans perceive as his lack of financial nous.

    Details are still sketchy, but it appears that Mr. Whyte has held back more than £9 million in tax revenues and VAT from HMRC simply to help the club operate from day-to-day.

    Her Majesty's Revenue & Customs are still investigating the financial dealings pertaining to Whyte's initial takeover of the club, and are also still looking for a reported £50 million pounds in tax from the days of David Murray.

    From the outset, it looks like Whyte has voluntarily put the club into administration to pay off its egregious debts, whilst also giving some of the cash to HMRC to keep them at bay.

    But Craig Whyte is not the only Rangers owner with a black mark on his record.

David Murray

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    Former chairman and owner David Murray has to take his fair share of the blame for the club's current problems.

    The free-spending Dick Advocaat-era of the late '90s and early '00s saw the club splash out £12 million on Tore Andre Flo, £4.4 million for Ronald De Boer, £6.5 million for Michael Ball (of all people!) and £5.5 million for Andre Kanchelskis, as well as several others.

    £82 million was spent in total, and from the looks of things, some of the tax revenues were held back from HMRC, which the government authority is now chasing.

    It's clear that Rangers have been in deep trouble for some time, but there's more.

EBT

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    The biggest bill that Rangers owe comes from the EBT—the Employee Benefit Trust.

    Between 2001 and 2010, the club paid £48 million into an EBT.

    With EBTs, an employer pays money into a trust and that money is then paid out to the beneficiaries in the form of loans. These loans are not subject to income tax and in some cases, aren't taxed at all.

    However, for an EBT to stay legal, these payments cannot be made on a contractual basis, because this would therefore make them wages and therefore, subject to usual tax deductions.

    In essence, this is what the club was doing.

    You still with me?

    HMRC says that Rangers' EBT was, essentially, a tax scam to cheat the authority out of a massive amount of money.

    Last year, the taxman hit the Govan side with a bill for £35m in unpaid tax and interest, as well as £14m in penalties.

    This is one of the main reasons for Rangers' current insolvency situation.

PAYE

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    PAYE (pay-as-you-earn) tax is another factor in Rangers' administration.

    In fact, it was the match that sparked the flames of administration.

    In the current financial year, Rangers failed to pay nearly £9 million in unpaid tax and PAYE to HMRC, which the club's administrators confirmed last week.

    No reason has been given as yet for the club's failure to pay the bill, but it is just another point in a plethora of reasons for Rangers' financial crisis.

The Fans

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    The Rangers' support have been clamouring for years for the spending of their club to match that of arch rivals Celtic.

    Whilst Neil Lennon's side have splashed out in recent times on the likes of Mo Bangura, Anthony Stokes and Beram Kayal, Rangers have been relatively quiet in the transfer window.

    Fans again were disgruntled, but as they all now know, there were bigger things going on behind the scenes.

    The years of big-spending and humongous wages are long gone—but the only thing the fans hope for now is simply that the club survives.

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