UK's Tax Regime Deters Top Footballers From Joining British Clubs

by Robert Lee, Tax-News.com, London

11 January 2006

Several of the world's most talented and best paid footballers, including FIFA World Player of the Year, Ronaldinho, are said to have been deterred from joining British soccer clubs because of the UK's unfavourable tax regime for those on high incomes.

This is the conclusion drawn by Roy Saunders, chairman of International Fiscal Services, the international tax consultancy, who is urging Chancellor of the Exchequer Gordon Brown to relax taxation rules for sports stars in order to attract the best talent to Britain.

Mr Saunders argues that the Treasury would benefit from a review of tax laws relating to high-income sport stars by ultimately taking more in tax receipts if the rules were changed.

It is estimated by IFS that the players in "Gordon Brown's dream team" such as Portugal's Luis Figo, who opted to play for Inter Milan over European Champions Liverpool, and FC Barcelona's Ronaldinho, who has in the past been linked with a move to Manchester United but preferred to move to Spain from his native Brazil, would have contributed almost GBP20 million in tax revenues had they been playing for British clubs.

Under the UK's tax laws, income over GBP32,400 is taxed at 40%, but because of social security contributions British clubs would have to pay a footballer GBP100,000 in gross income for him to earn GBP50,000 in net income. In Spain, a club would have to pay just GBP66,000 gross income for a player to earn GBP50,000 after tax.

Furthermore, certain other European countries are more attractive to the well-paid from a tax perspective because their governments allow more income to be held offshore.

"It is no surprise that England lags behind Spain (in attracting high profile footballers), stated Mr Saunders, who added that the current UK tax system is "unattractive to high-earning sportsmen and is preventing the UK from luring and retaining talent".

"The impact on footballers ... is an effective tax burden of around 50% of gross salary." Mr Saunders observed.

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