Taxation and the Impact on Footballers

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During the transfer window, football fans all over the world get overwhelmed with daily rumours of potential player movement. Inevitably, when discussing football finance we often talk about players and their salaries, given that it is the highest expense of a club’s budget.

Footballers, when it comes to taxation, are treated as employees of their clubs. As a result, when a club pays a player’s salary, they are obligated to deduct: income tax, pension contributions, employment insurance, etc. Each country has different tax rates and different forms of deductions.

The club acts like a tax agent who must withhold these amounts in trust, keep separate from its operating funds and remit to the government.

Countries with lower taxation give their clubs a competitive advantage as they can pay the salaries of their players at a lesser cost than their peers. The advantage can be two fold: it can allow a club to put a higher bid on a player, or have more money available for other acquisitions.

We often call footballers overpaid bunch of divas playing the game, they love the most. But when we talk about why the footballers are getting paid so much then we have to consider the fact that it depends on the demand and supply in the European football industry. It’s a multibillion industry which is growing at a very fast rate.

Cristiano Ronaldo is arguably the highest paid player in the world and he doubles his yearly income with many high profile endorsement deals. But how much the footballers have to pay in relation to tax? Well, for that we have to look at different leagues and we will take the example of £200,000-a-week salary in every league to see the differences and amount of money footballers are paying as taxes

 INFORMATION  DETAILS
Top League Premier League
Example Salary  £200,000-a-week
Tax Rate  45%
After tax Salary £110,000-a-week
Average EPL Salary  £30,000-a-week
ENGLAND

Players Like Eden Hazard, Sergio Aguero, Paul Pogba are getting paid in the access of £200,000-a-week salary which means their weekly earnings after tax comes down to half of the actual salary. Which means a footballer on the wages of around £200,000-a-week is annualy paying more than £4 million just in taxes.

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 INFORMATION  DETAILS
Top League Spanish Primera Liga
Example Salary  £200,000-a-week
Tax Rate  52%
After tax Salary £96,000-a-week
Average La Liga Salary  £22,000-a-week
SPAIN

In Spain the top tax rate is 52% and that was the reason why Ronaldo wanted a new contract with Real Madrid last season, now he is on weekly salary of £288,000-after tax which means Real Madrid have to pay around £600,000-a-week to have Ronaldo in their squad.

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 INFORMATION  DETAILS
Top League Bundesliga
Example Salary  £200,000-a-week
Tax Rate  47.475%
After tax Salary £105,050 a-week
Average Bundesliga Salary  £20,000 a-week
GERMANY

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 INFORMATION  DETAILS
Top League Italian Serie A
Example Salary  £200,000-a-week
Tax Rate  46.29%
After tax Salary £107,420-a-week
Average Serie A Salary  £17,000-a-week
ITALY

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 INFORMATION  DETAILS
Top League Russia Premier League
Example Salary  £200,000-a-week
Tax Rate  13%
After tax Salary £174,000-a-week
Average RPL Salary  £10,000 a-week
RUSSIA

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 INFORMATION  DETAILS
Top League French Ligue 1
Example Salary  £200,000-a-week
Tax Rate  45%
After tax Salary £110,000-a-week
Average Ligue 1 Salary  £14,000 a-week
FRANCE

 

 

For the big clubs that have a significant operating budget, the issue of taxation may not be so problematic. On the other hand, middle to lower level clubs will have more difficulty as they have a smaller budget to work with.

This can explain one of reasons why Portugal and France have been a net exporter of players. Over the years they have developed talent at a low cost, and then sell the players for a profit as their new wage demands are too costly for their limited budget.

Spain was in the midst of an unprecedented economic boom, a perfect playground for “galacticos” of the likes of Zinedine Zidane and Luis Figo, before the arrival of Cristiano Ronaldo and the emergence of Barcelona prodigy Lionel Messi.

But in 2010 the Beckham Law was scrapped for salaries of more than €600,000, and since then tax inspectors have begun to wise up to the use of complex financial operations using offshore shell companies to get around tax laws.

“The line between avoidance and evasion is very fine in these cases. In the past few years Spain’s tax agency has intensified its control over footballers and their companies, checking to see if they are mere fronts or whether they are really active economically,” explains Carlos Cruzado, president of tax inspectors’ union Gestha.

The Messi and Ronaldo cases are similar. Both are accused of avoiding tax on sale of image rights by using offshore companies. However, the Portuguese was registered as a non-resident taxpayer under the Beckham Law, while the Argentine has spent his entire adult life registered in Spain

Prosecutors accuse the Real Madrid star of evading tax of €14.7m between 2011 and 2014 via an alleged shell company called Tollin Associates, registered in the British Virgin Islands but the case is still ongoing.

LaLiga latest edition of the Professional football financial report   underlines the contribution made by the professional football industry to the state coffers in the form of tax payments, which are estimated to have amounted to €1.2606bn in the 2015/16 season. Is a happy time for Spain as a country but certainly not to the professional football industry.

 

 

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