“Enjoy these players while you can, because we will never reach this level again.” With this warning, the Barcelona University professor and head of the Sports Economic and Finance Commission at Barcelona’s association of economists, (CEC, in Catalan), José Maria Gay de Liébana -talking about Messi and Cristiano Ronaldo- introduced the presentation of the economic and financial study of Europe’s five big football leagues. The reason for such an apocalyptic prediction is simple: Spain is a place of fiscal uncertainty for footballers, to the point that some of them run the risk of prison. “We should not be surprised if one of the reasons for Neymar’s leaving is fear of this uncertainty,” suggests the professor.
The situation arises out of the lack of clarity over the tax legislation as it applies to footballers. Since 2012, footballers with a minimum of 85% of their income from their salary –without advertising contracts or image rights- can derive the rest of their income from third parties, thus paying a tax rate of 28% on this part of their income instead of the established 47% income tax rate. According to the expert, the rule is open to interpretation and favours the tax office that, through inspections, can go on to find irregularities. “In most cases, footballers are right to complain about their situation; there have even been scenarios in which the administration has interpreted as taxable work the commission that footballers earn from signings.”
“We should not be surprised if one of the reasons for Neymar’s leaving was fear of this uncertainty,” says Liébana
For the professor, the solution would be to establish a clear rule, following the example of the English Premier League. “There they know the rules of the game: they pay 40% of income tax and no one will ever come to ask for more. Security is vital to attracting big stars,” he points out. The legal consultant of the Spanish Footballers Association (AFE, in Spanish), Ángel Rodríguez, agrees with Gay de Liébana’s analysis and points to the continuous dialogue the institution has had with the tax office and the Professional Football League (LFP, in Spanish) to set up a tax framework that guarantees the security of sports people.
The Premier wins in business
Yet taxation is not the only threat to holding on to the great stars of the Spanish league. According to the report, the Premier League in 2015-16 presented personal expenses –mainly of the players- of 2.8 billion euros, compared with 1.4 billion euros in the Lliga BBVA, 1.3 in Italy’s Serie A, 1.2 in the German Bundesliga and 1.0 in France’s Ligue 1. “Many players prefer the English second division (Championship) for the fact that in England the clubs can pay double while guaranteeing that the next day you won’t be charged by the tax office,” says Gay de Liébana, who points out that at the moment, the Championship is the world’s 7th biggest league.
The English league also tops the rankings of accumulated debt, with 6.5 billlion euros of debt shared among the 20 clubs in the competition. It is a stark figure, but not so alarming when we think that the Premiership leads the list of total assets, with 8.8 billion euros, and with the support of a multi-millionaire behind just about every club that allows the entrance of significant revenue from different sources. “The Bundesliga is the other league that has a debt that is balanced with net available assets, while the Lliga BBVA has a high level of debt (3 billion euros) for low net assets (1 billion), and Serie A lives constantly on the verge of bankruptcy,” says Gay de Liébana.
Television and marketing, the key games
If the Premier League has had the best business model since 2009, it is thanks to the great value of its product. It is a league with global aspirations, with a carefully handled televisual product, and with a competitive equality that can work miracles, such as the modest Leicester City being crowned champions a couple of seasons ago; it is a situation that is unthinkable in other leagues. The economic results of this strategy is reflected in two areas: the revenue from television rights and marketing.
For the sale of television rights, English clubs get a total of 2.5 billion euros, for Serie A it is 1.1 and it is 946 million for the Lliga BBVA. “The English club that gets the least from the sale of television rights earns 87 million euros, while the third team in Spain and twice Champions League finalist, Atlético, only gets 68.7 million for TV rights,” says the professor.
One of the reasons for this imbalance is the how the money from television rights is distributed. While in the Premiership Manchester City takes the largest slice of the cake, with 8.5% of revenue from television, in Spain, Madrid and Barça take more than 35%, with the rest distributed among the others.
Madrid and Barça take more than 35% of TV money with the rest distributed among the others
The other factor that marks the difference is marketing. While Spanish football underachieves in this area, with total earnings of 816 million euros, the Premier League makes 1.4 billion. “In the Premiership, any team can attain revenue of 30 million euros from marketing thanks to international sponsors and the global business that the league has become, and that is how you manage to create competitive teams. In Spain, Barça obtains 323.4 million euros and Madrid 212.6, but mid-table clubs like Celta or Betis bring in only seven million from marketing.” Gay de Liébana thinks that the British are unbeatable when it comes to selling their product in Asia and their former colonies, and believes that the Lliga BBVA should focus its efforts on the United States, the last great market left for football to exploit.
The result of this panorama is that in the 2015-16 season, the Premier league invested 4.8 billion euros in signings, compared to “only” 2.2 billion spent in the Lliga BBVA. It is something that suggests the next Messi and Cristiano will have British accents.