The taxing issue affecting La Liga

The Spanish league could very soon lose one of its handiest advantages, an advantage which puts its clubs in pole position in the European transfer market - namely the low tax charges foreign players enjoy in La Liga. This week Spanish football was hit hard with a government decision.

The Spanish league could very soon lose one of its handiest advantages, an advantage which puts its clubs in pole position in the European transfer market - namely the low tax charges foreign players enjoy in La Liga.

This week Spanish football was hit hard with a government decision. A painful blow to all the top clubs and one that has put them all on alert, to the extent that rumours of a potential strike are flying around.

No one likes financial interference and that is precisely the mindset of the millionaire clubs in the country.

It was back in 2004 when, coinciding with the arrival of star David Beckham, Spain decided to lower the taxes for foreigners working in the country in an effort to encourage the arrival of top scientists, investigators and other qualified workers in the hope that a lax tax system would be an attraction for all kinds of world class stars.

This Ley Beckham - the Beckham Law - worked wonders in football at least. It opened up the market for Spanish clubs as the most expensive players could be offered juicier contracts knowing that they would have to pay just 24% tax, applicable on their first six years working in the country.

Clubs have revelled under the comfortable tax law and even pay the players’ taxes, a very attractive situation for the very best footballers on the continent. But now the government has had a change of heart and will increase that 24% to 43% by 2010.

That is why the Spanish League Association has quickly positioned itself by saying that if the law is approved, the competition will go on strike.

The government admitted recently that the Beckham Law, approved to favour the arrival of ‘the gifted ones’, hasn’t worked at all and all that has happened is that football clubs have made the most of the situation by offering very high wages.

At the moment, foreigners in Germany pay 45%, the highest taxes in Europe, followed by Italy’s Serie A with 43%, the English Premier League and the French Ligue 1 with 40% and Holland with 30%.

However, England will move to the top of that table in April when the country moves to a 50% tax band.

Spain has been, and is still, a football fiscal paradise. This summer has been a perfect example. Kakà, Cristiano Ronaldo, Karim Benzema and Zlatan Ibrahimovic never wavered when the offer from Spain came their way.

They all have net wages and, as usual, the clubs take care of paying their laughable taxes every year.

The Beckham Law could be abolished on January 1, 2010. Fortunately for Real Madrid and FC Barcelona, it won’t be applied retrospectively, leaving the aforementioned stars untouched, but meaning all the foreigners working temporarily in Spain, having resided in the country for less than 10 years and earning more than €600,000-a-year, will, from then on, pay 43% tax.

In England, the 50% rate will apply to earnings over £150,000.

“At the Spanish League Association we are very worried,’’ said its president, José Luis Astiazarán. “This new regulation could have very negative consequences.

It would stop this league from being the best in the world and would affect, negatively, in other aspects such as the stadium attendance figures and lower the television viewers. This new law would cost Spanish football around €100 million.”

Portuguese midfielder Simao, from Atlético de Madrid, voiced his concern too. Although he is not affected because he has been working in the country for 12 years now, he did point out that “the same thing happened in Portugal and it was detrimental for players, having to pay so much tax. It’s a delicate matter.’’

In any case, and judging by Mr Astiazarán’s words, anyone would say that the Italian, French, English and German leagues are, therefore, weak, non-attractive and ‘cheap’, since they can’t afford to pay foreigners. But the truth is that all those leagues have a lot more foreigners in the competition than the Spanish Liga.

The Premier League has 65.5% foreigners, the Bundesliga has 43.7%, Serie A has 41.7%, Ligue 1 has 41.9 % - the Spanish Liga has 35.8%.

The figures don’t really justify a strike or the claims from Astiazarán regarding the catastrophic effects tax would have on the competition.

The new law has yet to be approved in the Spanish Parliament, and if it is, be prepared for a full-blown tantrum in the Spanish league.

Ends

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