Who Really Bears the Risk of Hosting the World Cup?

When a city is selected to host the FIFA World Cup, the announcement is framed as a civic triumph. Officials point to global visibility, tourism, and long-term economic benefits. Renderings of upgraded stadiums and revitalized neighbourhoods are flashed to the media. The message is clear: hosting is an investment; the payoff will follow.

Public debate tends to focus on the most visible costs – new venues, transit upgrades, or short-term security spending. Less attention is paid to the legal architecture that underpins the event itself – the contracts that quietly determine who will bear the financial risk when costs rise, revenues disappoint, or obligations expand beyond what was originally anticipated.

Many believe that FIFA avoids local costs through clever corporate structuring, by setting up non-profit entities in host countries that allow it to sidestep taxation. That story is appealing in its simplicity, but it turns out to be incomplete. The more consequential mechanism is not the legal form of FIFA’s local entities, but the contractual allocation of risk embedded in hosting agreements with cities and governments.

One clause in particular illustrates this dynamic with unusual clarity. Buried in the fine print of host city agreements is a provision that, in plain terms, requires host cities to absorb municipal taxes imposed in connection with the tournament; even where those taxes are legally assessed against FIFA or its subsidiaries. The result is a subtle but powerful shift: statutory liability may formally attach to FIFA-related entities, but the economic burden is transferred to the local public sector.

Tax is only one example. But it is a clean, documented case study of a broader pattern. One in which downside risk is localized, while control over the event remains centralized. Understanding that distinction is essential to understanding what cities actually agree to when they bid to host the world’s biggest sporting event.

The Myth of the Non-Profit

Ask how FIFA avoids local costs, and the familiar explanation often comes up, that it sets up non-profit entities in host-countries, and non-profits don’t pay tax. The implication is that the financial burden of hosting is reduced through corporate form; that FIFA avoids local obligations by choosing the right legal vehicle. There is a bit of truth in this account, but it obscures more than it explains. 

The absence of a uniform structure matters. If non-profit status were the primary tool for avoiding local costs, one would expect to see the same approach replicated across jurisdictions. Instead, what emerges is a patchwork of legal forms producing remarkably similar outcomes.

More importantly, non-profit status doesn’t accomplish what most people assume it does. In most jurisdictions, non-profits are not automatically exempt from all taxes. They may still be subject to income tax on certain activities, indirect taxes, payroll taxes, and other obligations depending on how they operate. The legal label alone does not determine ultimately who bears the cost.

Focusing on entity form misses the real story. The consistent feature across host countries is not how FIFA incorporates locally, but how hosting agreements allocate financial risk. To see that clearly, you have to look beyond corporate registries and into the contracts that govern the relationship between FIFA and host cities themselves.

The Clause That Makes Cities Pay

The mechanics of risk transfer become clearest in the provisions of host city agreements dealing with taxation. These clauses do not announce themselves as extraordinary. They are framed as technical, administrative terms – easy to skim past in a document hundreds of pages long, but their effect is significant.

In essence, host cities agree that any municipal taxes arising “directly or indirectly” from the World Cup will be borne by the city itself. This applies even where those taxes are legally imposed on FIFA or its local subsidiaries. If FIFA is required to pay such a tax in the first instance, the city must reimburse it. If a tax authority seeks payment, the city must indemnify FIFA against the cost.

The distinction here is subtle but crucial. Tax law determines who is legally liable to pay a tax. Contracts determine who ultimately bears the cost. Host city agreements deliberately separate the two. While statutory liability may attach to FIFA-related entities under local law, the agreement reallocates the economic burden to the host city.

The structure is not accidental. It is an explicit allocation of risk negotiated in advance. FIFA does not need to be exempt from municipal taxation to be protected from it. The protection comes from the city’s contractual promise to absorb the cost.

Once understood in these terms, the focus on corporate form starts to look misplaced. Whether FIFA operates locally through a non-profit, a standard subsidiary, or another legal vehicle, the financial outcome at the municipal level is largely the same. The downside risk is transferred to the local public authority as part of the price of hosting.

And tax, importantly, is only the most visible example of this approach.

Tax is a Clear Example, but Not the Only One

Municipal tax allocation is a useful place to start because it is concrete. Taxes are quantifiable, unavoidable, and documented in black & white contractual language. There is little room for interpretation.

But tax is only a case study. The same logic – allocating downside risk to the local public sector while preserving FIFA’s operational control – appears throughout the broader hosting framework.

Consider security. Host cities and national governments are typically responsible for policing, crowd control, emergency services, and public safety measures tied to the event. These costs are inherently uncertain and difficult to cap in advance. When requirements expand, as they often do, the financial exposure remains local.

Infrastructure obligations follow a similar pattern. Cities commit to delivering stadiums, transport upgrades, and surrounding facilities on FIFA’s timeline and to FIFA’s specifications. Cost overruns, construction delays, and long-term maintenance obligations sit squarely with local authorities, even though the infrastructure is built to serve a global event over which they have limited control.

Legal and political risk is also localized. Disruptions, labour disputes, public backlash, or unforeseen regulatory hurdles are managed by host governments, not FIFA. When expectations are not met, whether financial, logistical, or social, the consequences are borne by local officials accountable to voters.

Tax stands out because the mechanism is explicit and easy to trace. But it is representative of a broader design principle. Hosting agreements are structured so the most unpredictable costs, the ones that carry genuine downside risk, are absorbed by host cities and governments, while FIFA retains discretion over how the event is delivered.

Seen this way, the tax clause is not an anomaly. It is a window into how risk is distributed across the entire World Cup project.

Risk Without Control: The Structural Imbalance

Once municipal tax allocation is understood as a form of risk transfer, a broader pattern comes into focus. The World Cup is not structured so that risk and control travel together. They are deliberately separated.

FIFA retains control over the competition’s core elements. It sets the technical requirements, determines timeliness, approves venues, and reserves broad discretion over how the event is staged. These decisions shape the scale, complexity, and cost of hosting, but they are not made by the cities that bear the financial consequences when plans change or expand.

Host cities, by contrast, assume responsibility for outcomes they do not fully control. They commit to delivering infrastructure, security, and public services to standards defined elsewhere. When costs increase, as they often do, the exposure remains local. The same goes with changing timelines, cities absorb the pressure. When projections fail to materialize, local governments answer for the shortfall.

The imbalance is not limited to finances. Political and reputational risk also sits with host governments. Public backlash over spending, displacement, or unmet promises is directed at city officials and national authorities, not at FIFA. Legal disputes, regulatory hurdles, and emergency responses are similarly managed at the local level, even though they arise from the demands of a global event.

The result is a hosting model in which cities carry the downside risk of uncertainty, while FIFA maintains centralized authority over delivery. Municipal tax indemnities are simply one of the clearest examples of that model. They show, in contractual form, how responsibility of unpredictable costs is pushed outward, away from the organization that designs the event and toward the communities that host it.

Understanding this structure matters because it reframes the questions cities should be asking. The issue is not whether hosting generates benefits in the abstract. It is whether the allocation of risk is proportionate to the degree of control cities actually retain.

One Clause, Bigger Questions

The World Cup is celebrated as a partnership between FIFA and host cities. In practice, it is a carefully structured lop-sided allocation of responsibility.

Municipal tax indemnities offer a rare, transparent glimpse into how that allocation works. They show that FIFA does not need to be formally exempt from local taxes to be insulated from their cost. Protection comes instead from contracts that shift economic burden onto host cities as a condition of hosting.

Cities are not misled or coerced. Host governments enter these agreements knowingly, motivated by prestige, political incentives, and the hope of long-term benefit. But the trade-offs are rarely discussed in public forums. Risk is treated as an administrative detail, even though it shapes the true cost of hosting far more than headline numbers ever do.

Tax is one clause in a much larger agreement, but it raises questions that extend well beyond the World Cup. If cities are expected to absorb the downside of uncertainty, what level of control can they reasonably demand in return? What risks are reasonable to socialize, and what should remain with the organization that designs the event?