Spanish league soccer players won't strike over taxes - yet
by Nov 10th 2009 3:00PM
Spain's Professional Football League, the governing body that manages the major professional football leagues in Spain, has been making noise about going on strike. The organization is more or less the equivalent of the MLS here in the US since football in Europe is really soccer; the U.S. version of football is referred to as, well, American football.
Soccer is much more popular in Spain than in the US. Much like we like to think of football as a religion in this country, soccer is considered a religion in Spain, with well attended games and near paparazzi-like coverage of the players. A strike would be a really big deal.
Nonetheless, the owners of the top two tiers of the SPFL had threatened to strike last week over government reforms targeted to foreigners. The reforms are made up of tax increases, raising income tax for foreigners earning more than €600,000, or $890,000 U.S., per year to a rate of 43% - nearly double the prior rate of 24%.
Spain is desperate to bring in additional revenue to deal with increasing economic losses. The Spanish economy, formerly the fifth largest in Europe, has taken a beating after years of moderate growth. Spain's GDP is expected to shrink by as much as 3% in 2009. It also holds the not so great distinction of having the second largest current deficit in the world, after the United States, of course.
In the midst of the crisis, unemployment has skyrocketed. Unemployment in Spain is at a whopping 19.3%, nearly double the rate in the U.S. Spain is estimated to be losing jobs at three times the rate of the U.S.
Other economic indicators are just as bad. As the housing market tanks and auto sales spiral downward, Spain is turning to alternative methods of attracting revenue. An obvious solution? Do away with existing tax breaks for the wealthy. In particular, Spain wants to eliminate a 2004 tax break that was originally meant to lure talented foreigners to the country. The break offered lower tax rates -- a startlingly low 24% -- for foreigners doing business in Spain (that rate is about 10% lower than that of Spain's counterparts in Europe). Once those foreigners resided in Spain for at least five years, the rate crept back up.
The 2004 tax break, which was intended to attract talent across the board, appeared to benefit soccer teams the most. The break was referred to as the "Beckham law" in Spain, so named after David Beckham (Posh's husband, for those of you who don't follow soccer -- or underwear campaigns). Beckham was thought to receive the biggest boost from the law when he signed to play for Real Madrid. Beckham's four-year contract with Real Madrid was worth about €35 million ($52 million U.S.) with Beckham earning about €19 million ($28 million U.S.) per year.
It looks like Beckham's former teammate, Cristiano Ronaldo, will have the honor of having the increase named after him. News outlets in Spain cheekily refer to the planned tax increase as the "Ronaldo law." Ronaldo, who plays for Real Madrid, holds the distinction of being the most expensive player in football history after having transferred to Real Madrid in a deal worth €94 million ($132 million U.S).. His contract reportedly made him the most expensive player in the world, provoking Ronaldo to remark, "The great players cost a lot of money and if you want them you have to pay it."
Ronaldo's previous millions are safe, however. The proposed tax, if it pushes through, is not retroactive and goes into effect next year. That means that Spain's foreign footballers will have to pay up effective Jan. 1, 2010.
But don't expect sympathy for Ronaldo -- or other players -- outside of La Liga. The media, the public -- and even the players -- have voiced dissent over the intended work stoppage. Those who are out of work already view the pushback from club owners as greedy. Club owners, of course, have a different view. The president of La Liga, José Luis Astiazarán, defended his organization, saying, "We had to rebel because they suddenly want to break the system that has allowed Spanish teams to become so successful."
Despite the rich history of soccer in Spain -- and Astiazarán's biased but largely accurate view of the role of economics in the sport -- a soccer strike is likely to produce more anger than sympathy. Recent maneuverings with the Spanish government have resulted in budget cutbacks and tax increases across the board for Spanish citizens.
The bottom line is that eliminating a tax cut for wealthy soccer players won't score any points with the public -- especially for a team that lost to the Americans this summer in the run up to the World Cup. That's right. Americans. The Spanish don't even think we like soccer (though rumor has it we do like taxes).