Tags: spain | soccer | lure | taxes

Tax Changes May Ruin Spain's Soccer Lure

Friday, 13 November 2009 11:06 AM EST

MADRID, Spain — The end of the Stars’ League. That is what some say will happen if a new law makes the best foreign soccer players in Spain contribute more of their salaries in taxes.

“The Spanish league, now one of the best in the world, will become a vulgar league unable to draw the best players,” said Javier Tebas, vice president of LFP, Spain’s professional soccer league.

Currently, foreign soccer players enjoy a legal exemption under which they are required to pay only 24 percent of their salaries in taxes. If the new legislation passes, they would be required to pay 43 percent — which is what Spaniards, including fellow soccer players, in that salary range pay.

The tax break was initially passed in 2002 with the goal of luring prized scientists, reputed academics and top-level executives. It applies to impatriates earning more than 600,000 euros a year. But it soon became known as “Ley Beckham,” illustrating who most notoriously took advantage of it.

British soccer player David Beckham was the first to see his salary taxed in a lower bracket when he signed for Real Madrid in 2003. Superstars signing up this year like Brazilian Ricardo Izecson dos Santos Leite, better known as Kaka, and Portuguese Cristiano Ronaldo — both Real Madrid players — as well as the Swede, Zlatan Ibrahimovic, who is a forward for Barcelona, enjoy a similar tax break on their salaries ranging from a reported $13 to $19 million.

In 2008, 43 out of 60 impatriates who declared salaries of more than 600,000 euros were soccer players, according to the Ministry of Economy.

These soccer clubs are taking the most advantage of the tax provision, because, in most cases, players negotiate a net salary, and the clubs pay the athletes' taxes.

Spain reportedly has the lowest income tax rate for foreign soccer players in Europe. But, if the amendment is approved the last week of December, then starting on Jan. 1, Spanish clubs would either have to put more money on the table to “import” new soccer stars, or future top foreign players in the Spanish league would have to accept lower salaries. The measure would not affect players who are already in Spain.

“This can do serious damage to the competitive capacities of our soccer,” said Barcelona’s president, Joan Laporta. He also said the sport is a big asset to Spain’s GNP. Spanish media reported Laporta saying that “those affected” by the new legislation should have been consulted.

But in a Telecinco TV interview, Jose Antonio Alonso, spokesperson for the governing center-left socialist party, PSOE, called a 600,000 euro salary a “brutal amount” and said the law change is “strictly a matter of equity, solidarity and fiscal fairness” in a time of economic crisis in which “everybody has to tighten their belt.” Regarding LFP’s threat to stop league play with a strike, Alonso snapped, “How can there be a strike so that those who have to pay taxes like everybody else don’t?”

The LFP held an special assembly Nov. 6, in which it unanimously agreed to not strike, at least for now, and to create a commission to maintain an “urgent and efficient” dialogue with the government and Parliament. In a press conference after the assembly, LFP’s president Jose Luis Astiazaran declined to elaborate on the terms of that negotiation and said the outcome will be announced in another assembly Nov. 19.

According to the LFP, 174 million people around the world watch the Spanish League on TV, making it the most widely seen competition in Europe and Latin America; 14 million people go to games in Spain.

The Spanish league contributes more than 9 billion euros to Spain’s economy and 85,000 direct and indirect jobs, according to the LFP.

But in 20-percent-unemployment Spain, where the government has recently announced a tax hike for next year, the controversy is not inspiring citizens’ sympathy.

“I’d like to pay 43 percent in taxes. That would mean I had a big salary. Instead, I work 12 hours a day to barely get by,” said Abel, a taxi driver. “A strike? That’d be total lack of respect toward Spaniards. Players earn millions while people have to do wonders to be able to buy a ticket to see those guys play on the field.”

More than 80 percent of the 38,000 online readers voting in a survey published by the daily El Mundo said the strike was not a good idea. Reader “SJ Barcelona” commented on an article in El Periodico's digital edition: “My company doesn’t pay my taxes.”

If the number of dedicated followers is any indication, soccer is probably closer to a national religion in Spain than Catholicism these days. But in times of crisis, the LFP seems more than a little out of touch with its own flock when issuing a press statement in response to the legislative move that reads, “Soccer contributes to equality among citizens.”

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Friday, 13 November 2009 11:06 AM
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