THE SOCCER PLAYERS' REVOLT

August 27, 2009

Why have players been rejecting hefty fees to play in the English Premier League, the world's most celebrated soccer league?  It's all Gordon Brown's fault.  In April, the British government passed a measure that increases Britain's top tax rate from 40 percent to 50 percent.  The enormous hike applies not just to wealthy soccer stars (the average base salary for a Premier League player is £1.1 million a year, equivalent to about $1.6 million USD) but to anyone making over £150,000, says the Weekly Standard.

The move is part of Brown's effort to soak the rich in order to make up for revenues lost in the recession:

  • Three-hundred thousand Britons will be affected by the increase, which is expected to raise an extra £2.1 billion.
  • Brown's plan also involves borrowing some £600 billion over the next five years and bringing Britain's public debt to 79 percent of GDP by 2013.

The result is that Britain's tax rate is now the highest in the professional soccer world:

  • In Italy, players pay 43 percent on income.
  • In Germany, 45 percent.
  • In France, 40 percent.
  • In Russia, only 13 percent.

But the real winner is Spain, says the Standard:

  • Spain's top tax rate is 43 percent. In 2005, however, Spain amended the law to include a provision for high-earning "foreign executives," which would require them to pay only 24 percent.
  • And not only did they create a massive loophole, they backdated it to 2003, which was, coincidentally, the year David Beckham left Manchester United to join Real Madrid.
  • Beckham became the first man in Spain to acquire "foreign executive" status; the tax break came to be known as "the Beckham Law."
  • And it has become an almost insurmountable advantage for Spanish soccer teams.
  • Deloitte Sports Business Group estimates that between the falling pound, the higher British tax rate, and the Spanish tax break, U.K. clubs would have to pay 70 percent more in order to match a player's take-home pay in Spain.

Source: Jonathan V. Last, "The Soccer Players' Revolt; It turns out that tax policies have on-the-field consequences," The Weekly Standard, Vol. 14, Issue 44, August 10, 2009.

 

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