Saturday, March 24, 2012

Sympathy for Spanish football clubs in short supply

He shoots!  He scores!  He pays tax!  Er, or he should do.  It's actually more common in Spain and other continental leagues for the clubs to pay a star player's taxes for him.

So recent rises in income tax rates for the super rich are causing more of a problem for Spain's La Liga clubs than their players. 

There are two measures that are biting the most: a rise in the top rate of income tax to 52% for anyone earning more than £300.000 and an end to a special low tax regime for foreign workers in Spain who earn more than €600.000. 

This last measure, making the tax loophole known as Beckham's Law non-applicable for big foreign stars, was a particular blow.  It has always been used by the big clubs to make their overseas stars' tax bills more affordable. It's nickname relates back to the time when David Beckham was at Real Madrid.

It used to mean foreign players wages were taxed at 24% but now they will be paying 52%. Ouch.  Although the burden might initially fall on the clubs presumably players who are due to renegotiate their contracts will suffer financially.

To top it all, both the Spanish tax office and the social security agency are chasing the clubs for unpaid tax and social security totaling €1.3 billions which makes Rangers unpaid tax liabilities look like small change.

Many of these top clubs are weighed down by debt as it is.  A couple of years ago some figures came out suggesting the teams collectively owed €3,5 billions and no one believes things are on an improving trend.

I can't see the football clubs getting much sympathy from the Spanish public still suffering from "El Crisis" which looks to be worsening if anything.  Everyone is being hit by higher taxes with even the lower rate going up:

Massive Tax Rises in Spain for 2012

So when you see Barca and Madrid advancing to the Champions League final, as they probably will, and read of Messi and Ronaldo's incredible goal-scoring feats, remember that Spanish football is not in quite such rude health as it appears.

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