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Why Spanish teams always sign the best

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I found this very intreresting....but then I'm a bit of a nerd


When it pays more to get paid less

By Gabriele Marcotti


NOTE TO READER: THE FOLLOWING column is about taxes, a subject many find either dull or frightening and thus, if you wish to skip to something else, nobody will be offended. Those who appreciate that it is tax deadline day tomorrow, read on . . .


In football, wages are often liberally discussed, taxes less so. Which is a shame, because they can make an enormous difference, both to footballers and to clubs. Take Rio Ferdinand, who in August extended his contract tying him to Manchester United for another four years, at a reported wage of about £100,000 a week. That’s £5.2 million a year, which, based on Britain’s highest tax rate of 40 per cent, means he takes home about £3.1 million once the taxman gets his cut.


But what if Ferdinand moved to, say, Lyons, and wanted to continue earning £3.1 million after tax? In that case, given that France’s highest tax bracket is close to 60 per cent, Lyons would have to pay him about £7.6 million, or £2.4 million more than he costs United. Over the life of his four-year contract, he would cost Lyons nearly £10 million more than an English club. That is enough to make a downpayment on two Theo Walcotts.


For English sides, this is a massive competitive advantage over other European leagues, and one that is rarely talked about. While the discrepancy is greatest with France, it also gives the Barclays Premiership a large edge over Serie A and the Bundesliga (Ferdinand would cost a club £6.2 million over four years in Italy and £6.5 million in Germany).


Until recently, this was the case in La Liga as well, as the country’s marginal tax rates are comparable to those on the Continent and far higher than Britain. But that changed when José Luis Rodríguez Zapatero took office two years ago and passed a series of tax breaks aimed primarily at attracting foreign executives. Essentially, it offered foreigners who come to live in Spain a massive tax break. This means that, with a clever accountant, a foreigner in Spain can pay as little as 5 per cent on a sizeable chunk of his income and only slightly more than that on the rest.


Among the first clubs to pounce on this were Real Madrid when they signed Antonio Cassano from AS Roma this month. The forward turned down the Italian club’s offer of £4.2 million a season and accepted Real’s offer, which was lower, £4 million a year. Cassano was able to do this because, thanks to the Zapatero legislation, he will be taking home £3.2 million a year after taxes, whereas at Roma his net wages would have amounted to £2.1 million.


Tax breaks of one kind or another have helped to turn around ailing economies and create gleaming financial centres where previously there were only smugglers and coconuts. The idea is simple: lower taxes so that you attract foreign investment, which helps your economy to grow. Then, even though your tax rate is lower, you will be raising more money because the total economic pie will be bigger. At least that i s the idea.


Yet it is one thing for a government to do this to save jobs or to revitalise an economy. It is quite another when it amounts to the kind of direct subsidy that the European Union has deemed illegal in the past. Thanks to this legislation, Spanish clubs now have an enormous competitive edge over the rest of Europe, including the Premiership.


While there is a certain logic to the tax breaks when applied to executives and managers in corporations — without them the companies might not invest in Spain at all — football is obviously a different story. Cassano, like Zinedine Zidane or Ronaldinho, cannot be compared to a German banker or the Swedish manager of an Ikea superstore. His presence does not create jobs and it does not make the Spanish economy any more productive. All it does is make Real better — at least, in theory — which benefits, above all, Real fans and their president, Florentino Pérez.


It is only a matter of time before Uefa will need to take a serious look at this. Tax harmonisation within the EU is something that Germany and France have been demanding for some time. On a wider scale, it is an issue for the economists. But in the context of football it is something that ought to be addressed right now. Because the simple truth is that Real are competing with United, AC Milan and Bayern Munich as much as against Barcelona. And it is just not fair that they should enjoy such a massive economic advantage, particularly when it is simply the function of a tax loophole.


The European Union has abolished tariffs and subsidies within the Common Market. Few markets are more common than football. Perhaps that is where talk of tax harmonisation should begin . . .



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no wonder beckham wants to stay in madrid.


in theory, a club could set up a 'training base' in spain and then fly to the uk for its matches.


if your not resident in the uk then you dont pay tax.

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