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Why Ronaldinho plays for Barcelona

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18th Jan 2006
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Simon SweetmanSimon Sweetman looks at a tax story in the national press and wonders if they know what a sanity check is

There it was last week, splashed about the newspapers. The Premiership is missing out on top foreign players because they have to pay far too much tax in the UK. Name checks followed for Ronaldinho and Luis Figo, apparently prevented from coming to the UK by 'draconian' tax rules. This was based on a report from Roy Saunders, reported in the Guardian. The Guardian said he was from IFS but did not add that this was International Fiscal Services Ltd rather than any more familiar IFS.

IFS was formed 30 years ago as a niche international tax practice. Its website says: "Our clients are entrepreneurially driven international companies and individuals, who have business interests in any number of jurisdictions.

"Our aim for all our clients is the minimisation of all forms of foreign taxes, deferral of domestic taxes, and the avoidance of tax wherever possible, through legally acceptable means.

So we know what part of the jungle they inhabit, and what their interest is here. It's telling the na¯ve innocents who presumably run premiership football clubs how they could do better.

Let's look at this a little. First of all the direct comparison is with Spain, and at the end of the story it suggests that it is not so much that UK tax rates are high as that Spain has an edge on Britain, France and Germany : Italy, surprisingly, is not mentioned.

In the real world ' well, planet football ' top players are looking at one of three countries these days, because outside Spain, Italy and England the money is not so big. In Spain that means Barcelona and Real Madrid, in Italy it means Juventus and A C Milan, and in England it means Chelsea, Manchester United, Arsenal and Liverpool. Even the rest of the self proclaimed elite of the G14 group will struggle to say with these when it comes to money.

So what is the evidence here ? Two players are named: Ronaldinho, who chose Barcelona over Manchester United, and Luis Figo, who went to Internazionale rather than Liverpool. Figo was on his way out from Real Madrid, and the way out was down. Ronaldinho might be assumed to have made his choice for cultural rather than financial reasons - if you were offered the choice of working in Manchester or in Barcelona, which would you choose?

So did David Beckham choose Real Madrid for tax reasons? It seems unlikely. What about all the other English players turning out for continental sides'er, like who ? Doesn't this effect work that way?

And why have good Spanish players been so ready to join Liverpool? Have they not been warned about the rapacity of HMRC?

So what are the figures? IFS claim that to produce a wage of £50,000 a week an English club will have to find £100,000, while a Spanish one will get away with £66,000 (looks remarkably like '100,000 to me). That is the figure assuming the payment is straightforwardly a payment of remuneration to the individual. But we have a secret weapon in the domicile rules. Although they may not have much effect on employment income, for years and years all leading sportsmen have been paid through personal service companies, and incoming footballers will not bring their companies with them:they will leave them in Luxembourg or Monaco or Andorra.

I am not privy to the tax secrets of the football stars, but I suspect that among other things the average contract contains large capital sums for image rights and remarkably little that will appear on the weekly payslip. And of course Arsenal, for one, have form in this area of creative accounting ' see O'Leary v McKinlay.

But this article is not really about football. It is about the way in which the national press understands tax so little that it will regurgitate a press release like this one even when what it says is arrant nonsense. So it goes.

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By User deleted
23rd Jan 2006 11:22

And it was qualified...
I did say that it was in Planet Football not the real world.

All of the constiuent parts of the United Kingdom are individual members of both UEFA & FIFA!

Why don't people read things properly before they try to pick holes?

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By IanRiley
23rd Jan 2006 10:45

I think what he meant was...
that England has it's own National football team.

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By User deleted
23rd Jan 2006 09:31

England is not a country
Have you ever seen an English passport?
Do England enter the Olympics?
Is England on the UN Security Council?
Is there an English parliament?
Why are Welsh and Scottish MPs at Westminster?
Is the English Army in Iraq?
Is England a member of NATO?

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By AnonymousUser
20th Jan 2006 16:46

Your meaning is not clear

QUOTE: Don't you love a pedant.

Is this post meant to be a question? If so then it should end in a question mark, rather than a full stop. As it stands it appears to be an exhortation.

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Dennis Howlett
By dahowlett
19th Jan 2006 20:05

Yes

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By AnonymousUser
19th Jan 2006 13:21

Get it right

QUOTE: In the real world – well, planet football – top players are looking at one of three countries these days, because outside Spain, Italy and England the money is not so big.

In the real world England is not a country; it is part of the UK.

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By User deleted
20th Jan 2006 11:32

Pedants
Don't you love a pedant?

Corrected. Thank you Mr Rees.

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Dennis Howlett
By dahowlett
18th Jan 2006 23:36

As an ex-pat...
I speak with some authority on this having been taxed in the UK, US, France and now Spain.

The headline tax rates have very little to do with this because as Simon quite rightly points out, there are plenty of ways to mitigate UK, especially if you're non-domiciled.

As someone who has 'gone the other way' I took my initial decision to move to France, not for fiscal reasons, but for quality of life. Where else could we have bought a 19th century farm with several acres of woodland, river frontage, 5 bedrooms...you get the picture - for less than the cost of an ex-council house in Bradford?

The headline French tax rates are lower for a couple earning up to around €75K. If you have 3 or more children and earn average wages then your tax bill in miniscule.

But...if you're self employed then French social security costs are eye watering - think 20ish% from the get go. For employers, double it and then some. For that reason, the French fisc believes up to 30% of all SE income is 'black.' The system is inefficient, but if you are dropped on by the 'fisc' expect any cash, jewelry and bank accounts to be sequestered. Before you get to state your case.

But if you fall ill, the French health system kicks in and you get what in the UK would be considered star treatment.

In both France and Spain, the minimum socsec costs are around €200 per month, regardless of income. And like the UK, there is a sophisticated systems of stealth taxes.

In Spain, the direct tax system is chaotic. So they get you on house transfers and 'annual wealth taxes' that are calculated on total asset valuations. As you might expect, evasion thrives and local officials are part of the collusion. Although 'Hacienda' is stamping out the more overt abuses.

None of that gets reported in the national UK or overseas press. Misreporting is nothing new.

What do we get for our money? One of the best climates on the planet. A low cost of living compared with the UK - think night out, meal for 2 in a good restaurant including wine €40 max. If you're strapped for cash €20. Health and education systems that work and relatively low crime rates.

Having lived abroad for more than 8 years - I ain't never coming back. Not for tax reasons but because both France and Spain provide a quality of life that are far superior to anything we could have in the UK. Manoevuring around the tax system is a price I am prepared to pay for the privilege.

The best part is it allows me a different lens on what happens in the UK.

For those interested in living the ex-pat life, I've written a short explanation of essential info you won't find on any French living website. I have a plan for a website called either the Costa Packet or Costa Ripoff. No decision yet.

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By User deleted
20th Jan 2006 16:59

In Planet Football....
..... England is a country.

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By mikewhit
19th Jan 2006 18:56

Hyphen
I presume Mr. Howlett is an "expat" (expatriate, 'living in a foreign land '), rather than an "ex-pat" ...?

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