The Spanish government announced proposals last Tuesday to axe the "Beckham Act" which currently affords tax relief for foreign stars who are plying their trade in La Liga and earning over a €600,000 a year.
Amid the worsening global economic crisis, politicians have tabled a motion to increase the tax rate from 24 percent to the standard rate of 43 percent—a move which will affect some of football’s biggest global stars. Predictably, the proposal has received a negative reaction in Spain.
It has sparked fears that an increase in tax rate would be detrimental to Spanish football and would force some of the game’s top players to move elsewhere. It would also leave many Spanish clubs facing inflated wage bills.
The legislation was first introduced in 2002 by the Spanish government. The aim was to attract business executives into the country. The likes of Real Madrid and Barcelona exploited the new law to their advantage.
David Beckham, who moved to Real Madrid in 2003, became the first foreign footballer to take advantage of the 24 percent income tax and subsequently it soon became known as the "Beckham Act."
Overtly, those employed in the Premier League are taxed at a rate of 43 percent. It is a notable difference for those lucky enough to earn the ludicrous wages which have become the norm in modern football.
The fear is that prestigious talents will now be deterred from moving to Spain with the new tax hike. As a result, it has been suggested by some quarters that it will diminish La Liga’s global appeal.
Barcelona president Juan Laporta added: “This could bring very negative consequences. It would prevent La Liga from being the best of the world and would have negative impact on other aspects, such as the amount of people in stadiums and it would make our product less attractive to television.”
The director general at the Bernabeu backed up the claims by his Catalan rivals. Jorge Valdano spoke to Spanish radio this week saying: “It’s clear that this would weaken our league compared to the English Premier League, and we can’t resign ourselves to coming second,” he said. “You can’t take action of this sort without consulting anyone in the soccer world.”
It would also leave the bigger clubs in Spain with major headaches regarding the wages of some of their top stars like Real’s Ronaldo and Barcelona’s Ibrahimovic.
Generally, the clubs negotiate contracts with players in terms of net wages opposed to gross wages. The change would leave clubs with bigger contracts with Ronaldo’s deal costing Real Madrid a reported €2 million extra a year.
Should the Socialist party ratify its plans to increase the rate, it would come into law on Jan. 1, 2010.
Upon the revelations of the plans of the Spanish government, La Liga bosses threatened to take industrial action. However today, after the LFP met with 42 representatives of the teams in Spain’s top two divisions, it announced that it would not be contemplating going on strike.
Instead, in the intermittent period between now and next January, the LFP hopes to come to an agreement with the organisation when the two parties meet on Nov. 19.
Real Madrid striking legend Raul has contradicted the opinion of his director general, stating his belief that players will still want to come to La Liga.
“The great players will keep coming.”