Sunday, July 12, 2009
The Real Reason That La Liga Is Preferred Over the Premiership: Tax
While Manchester United fans all over the world tell themselves that CR7, or CR9 as he is now known - Cristiano Ronaldo to you and me - left because he always wanted to play for Real Madrid, and that their time together was always counting down.
And as Rafael Benitez now strives to hold onto his two main midfielders, as they both make it known that they would like to follow CR9 to the sunnier climes of Spain.
The reason for all the transfer traffic towards Espana can now be explained. Of course, Real Madrid's massive bank loans are a major part of the equation, as too, is the fact that Barcelona's fantasy footballing team are the best footballing eye candy for footie fans the world over, and the weather ain't bad, either.
All of these combine to make our algebraic equation, but that mysterious "X" factor is still missing, the final piece of the jigsaw to give us all, the answer we are seeking.
Why do the best and brightest stars of the English Premier League all want to leave for La Liga? Tax...
The EPL has established itself as the premier league in Europe, if you'll forgive the pun. It provides one of the largest TV audiences the world over, almost every game is sold out.
The top four teams in the league are in debt up to their eyeballs as they spend, spend, spend, to attract the finest players from all over the world.
But you can see the sands beginning to shift.
Spain can now claim to have the best three players in the world, and others are following.
The real reason for Spain's emerging dominance in obtaining the biggest stars in world football is their taxation system.
Yup, you read that right. Tax.
Last October, with Britain's GDP not exactly doing the best, Gordon Brown raised taxes slightly. The high tax rate in Britain is now 50 percent, meaning that you pay half of what you earn to the government.
The Spanish government has historically employed a low taxation system, and the current high tax rate of 40 percent.
And on top of that, there is another loophole where high earners can acquire "foreign executive status," which will bring their tax rate down to a fantastic 24 percent.
Cristiano Ronaldo now earns around £125,000 a week in Spain. After tax in England, that would leave him with roughly £60,000 after tax. In Spain, he takes away around £90,000 per week.
50 percent extra for doing the same job, for a team you have always loved. Not to be sneezed at.
The latest player from England to make the jump to Spain is Jermaine Pennant.
Now, if a player like Pennant is going to Spain, how much is he worth?
Real Zaragoza think he's worth a lot. They have decided to pay him £45,000 per week, after tax.
And give him a villa, free of charge, along with a car.
Any English club wanting to sign Pennant would have had to pay him £90,000-per-week to match the deal he is now getting at Real Zaragoza.
The current taxation system in Spain is so favourable, that Zaragoza were even able to fend off interest for Pennant from AC Milan, of all teams.
Never mind your Kaka's and your Ronaldo's going to Spain, they're marquee players and as such, will always be in demand, so them moving to Spain to play for Real Madrid is hardly surprising.
But when a player like Jermaine Pennant is going too, then you have to stand up and take notice.
When other, better players cotton on to the lower taxation system, there could be a stampede of footballers making their way to Spain instead of England.
Even Andrei Arshavin has spoken of his disappointment at opening his wage packet and seeing his take home pay be far less than he expected, because of the higher tax rates. No wonder there are the rippling of stories linking him with Barcelona.
Indeed, Arshavin's manager at Arsenal, Arsene Wenger, has already warned the days of Premier League domination will "soon be over."
Wenger said recently: "The new taxation system, and the collapse of sterling, means the domination of the Premier League will go. That is for sure.
"It will be a financial problem for all the English clubs."
Manchester City are perhaps the only club in England who have the ability to pay players massive wages despite the tax system.
They have already offered Kaka a reported £500k per week and John Terry, £350k per week.
But the problem that they face is that they are outside elite competition within Europe, so they have found it hard to attract the very best in talent.
The John Terry transfer story makes a change to the norm in the type of player that City have been chasing so far. Kaka and Eto'o are in their prime, whereas Terry is nursing back problems, is 29, and has seen his best years behind him.
For him, this would be the chance to look after his family for the rest of their lives while still playing at a good level, not forgetting what a great player he still could be.
So there you have it.
Such a simple thing. One word, three letters, and a world of difference in your take-home wage.
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