Bloomberg News

Soccer Needs NBA-Style Luxury Tax for Richest Teams, Report Says

February 06, 2013

Soccer’s richest clubs such as Real Madrid and Manchester United should pay a levy on bigger transfer fees to address a revenue-sharing system in the sport that’s “skewed” in their favor, according to a report commissioned by the European Commission.

Europe ruling body UEFA adds to “existing supremacies” in the sport by redistributing less than 6 percent of revenue from the elite Champions League to teams that don’t qualify, according to a copy of the report by Brussels-based policy consultancy KEA European Affairs. The U.S.’s National Basketball Association has a so-called luxury tax for teams above a certain payroll, the report says.

European soccer may be “slowly embracing a system of closed leagues,” the KEA report says. The 261-page report is scheduled to be published tomorrow by the European Union’s regulatory arm.

The European Commission, which helped rewrite transfer rules with soccer ruling body FIFA in 2001, is seeking to encourage a review by soccer authorities of the 3 billion-euro ($4.1 billion) player-trading market after a boom in spending, according to EU sports policy officials. The biggest clubs would fight a luxury tax, Simon Chadwick, a professor of sports business strategy at Coventry University, said.

“Manchester United would go straight to court,” Chadwick said. “They would say BMW isn’t subject to a luxury tax, why should we be?”

United and other English Premier League teams already pay a 4 percent levy on transfer fees, with that money going to a player pension fund.

Real Madrid’s press office said the team had no comment on the report. Manchester United spokesman Philip Townsend didn’t immediately return a call and e-mail seeking comment.

Record Sales

The European player transfer market has increased sevenfold in value since 1995, the report says. Real Madrid, the world’s biggest soccer club by sales, broke the spending record when it paid Manchester United 80 million pounds ($126 million) to sign Cristiano Ronaldo in 2009.

A few clubs such as Real and United dominate domestic competition: In England, Spain, Portugal and Italy, 92 percent or more of league titles were won by the three most successful teams between 2001 and 2012, the report says.

“The current transfer rules do not fight effectively against competitive imbalance,” the report says.

Under rules introduced under the supervision of then European Competition Commissioner Mario Monti in 2001, teams who developed a player between the ages of 12 and 23 share 5 percent of a transfer fee when he is traded. That amount should be raised to 8 percent, with a higher percentage for fees above a certain threshold, the KEA report says.

Teams’ Rights

The report also recommends that, in an effort to counter transfer inflation, fees should be capped at 70 percent of the gross salary owed by a club to a player over the term of his contract.

The European Commission should supervise FIFA as it reviews rules on investors acquiring stakes in the transfer value of players, the report says. The practice is banned in the English Premier League and France’s Ligue 1.

“The rules should not disproportionally hinder financial investment in sport and should be compatible with the EU rules on free movement of capital,” the report says.

To contact the reporters on this story: Alex Duff in Madrid at aduff4@bloomberg.net.

To contact the editor responsible for this story: Christopher Elser at at celser@bloomberg.net


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