Bloomberg News

France to Apply 75% Tax to Soccer Players’ Compensation

April 02, 2013

Paris Saint-Germain Striker Zlatan Ibrahimovic

At least 12 members of Paris Saint-Germain make more than 1 million a year, according to France Football magazine. They include Swedish striker Zlatan Ibrahimovic, at 15 million euros a year. Photographer: Franck Fife/AFP/Getty Images

Paris Saint-Germain, France’s richest soccer club, will have more on its agenda than controlling Lionel Messi when it takes on Barcelona, the world’s best team, tonight.

PSG’s Qatari owners also have the tax man to think about. After conflicting messages by government officials, Prime Minister Jean-Marc Ayrault’s office issued a statement today confirming that a 75 percent surcharge on salaries above 1 million euros ($1.3 million) will apply to soccer clubs.

“This new tax will cost first-division teams 82 million euros,” France’s Football League said in a statement. “With these crazy labor costs, France will lose its best players, our clubs will see their competitiveness in Europe decline, and the government will lose its best taxpayers.”

At least 12 members of the Paris team make more than 1 million a year, according to France Football magazine. They include Swedish striker Zlatan Ibrahimovic, 15 million euros a year, and Italian coach Carlo Ancelotti, at 12 million euros.

Former England captain David Beckham would escape the tax because his five-month stint at PSG doesn’t qualify him as a French tax resident. While Beckham is soccer’s best-paid player with 36 million euros this year, only 5 percent of that comes from salary, according to France Football.

President Francois Hollande made the 75-percent tax a cornerstone of his successful presidential campaign last year, saying the wealthiest had to make a special contribution toward cutting France’s deficit.

Many soccer players would already be taxed at France’s top marginal rate of 49 percent, which kicks in at 500,000 euros a year. Teams would then pay a surcharge to bring the effective tax rate on salaries above 1 million euros to 75 percent.

Court Ruling

A first attempt to put the tax into law was shot down by the constitutional court last December because the tax applied to individuals and not households. While the government then said it would rewrite the tax for 2014, the country’s top administrative court said any rate above 66 percent could be rejected as confiscatory.

In a television interview last week, Hollande revived the tax, saying the rate would remain 75 percent, though it would be paid by corporations, not individuals, circumventing the courts’ objections.

That solution left open the question of whether self- employed artists and athletes would be taxed, as well as whether a football team is a company.

In an interview with Journal du Dimanche March 31, Ayrault avoided the question, saying that some companies paid “indecent” salaries and joking that actor Gerard Depardieu, who has left France for Belgium, thought taxes are already too high in France.

Contradictions

“The assurance has been given that only salaried workers will be affected,” Small Industry Minister Fleur Pellerin said on France Inter radio today. “Football clubs are a bit above the revenue that one would use to define a small business. But non-salaried artists and non-salaried athletes won’t be affected.”

Qatar Sports Investment, a Qatari government fund, bought PSG in 2011, and spent 200 million euros to lure Ancelotti and Ibrahimovic, as well as other Brazilian, Argentinian, Italian and French stars.

Tonight’s PSG-Barcelona match is the first leg of the Champions League quarterfinals. The second leg will be played in Barcelona on April 10, with the winner on aggregate goals going on to the semi-finals.

Barcelona, with World Player of the Year Messi in its ranks, is a four-time European champion, while PSG has never gone beyond the semi-finals and last appeared in the quarter- finals in 1995.

To contact the reporter on this story: Gregory Viscusi in Paris at gviscusi@bloomberg.net

To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net


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