By Paul O'Sullivan
Interesting developments in French football at present as AS Monaco have mounted a legal challenge to the decision of the French Football Federation (FFF) and the Ligue de Football Professionnel (LFP) to require that, from June 2014, all teams competing in Ligue 1 must be resident in France and subject to French tax law or face possible suspension from the league (see here, here and here for further information on this story). A judgement is expected from the French Conseil d’Etat by the end of the year.
What has driven the FFP and LFP decision is the combination of Monaco’s tax-free status, a proposed 75% tax on French incomes over €1m, possibly to be paid by clubs, and AS Monaco’s billionaire owner, Dmitry Rybolovlev. It is claimed that these give AS Monaco such a competitive advantage in the transfer market that the club could dominate the French League, thereby reducing competitive balance and, possibly, long-term fan interest in the league.
In the principality of Monaco, non-French residents are not subject to any income tax. On the other hand, France and Monaco have an agreement that French nationals resident in Monaco, including football players, pay income tax at the prevailing French rate. This situation has existed for many years without blowing up into a major issue in football. With the arrival of the Russian billionaire Rybolovlev, however, AS Monaco can now compete financially with any of the richest European clubs, including current French champions and Qatari-owned PSG, as well have having much more resources than recent champions like Montpellier and Lille.
In the principality of Monaco, non-French residents are not subject to any income tax. On the other hand, France and Monaco have an agreement that French nationals resident in Monaco, including football players, pay income tax at the prevailing French rate. This situation has existed for many years without blowing up into a major issue in football. With the arrival of the Russian billionaire Rybolovlev, however, AS Monaco can now compete financially with any of the richest European clubs, including current French champions and Qatari-owned PSG, as well have having much more resources than recent champions like Montpellier and Lille.
In the last few years, AS Monaco has struggled. Even though they reached the Champions League final in 2004, they recently spent two seasons in Ligue 2. With its new-found wealth, however, AS Monaco has returned to Ligue 1 and recruited top ‘foreign’ players like Ramadel Falcao and Joao Moutinho at considerable cost in terms of transfer fees and salaries. What makes the AS Monaco situation unique is that, relative to any French-based club, its tax-free status allows it to a pay any player a given net salary at a much lower total cost, thereby giving them a huge competitive advantage in attracting big-name ‘foreign’ players. Such players have recently joined Monaco even though the club is not involved in this season’s Champions League, usually a major requirement for top players to join a club.
Another possible complication is the proposed 75% tax on French incomes over €1m that would give AS Monaco an even greater advantage. Though the initial tax was declared unconstitutional, it may be imposed on the clubs, rather than players, in future. While the FFP and LFP are against such a high tax rate, on the basis that French clubs would be at a disadvantage vis-a-vis clubs in other European countries, they are also united in their determination to reduce Monaco’s tax-free advantage.
Monaco is also unique among top French clubs in that it has an extremely low, but possibly relatively rich, fan base. Monaco were relegated from Ligue 1 in season 2010-2011 with an average attendance of just under 7,000 and had an average of approximately 5,000 during their two seasons in Ligue 2. In contrast, in season 2012-2013, PSG and Lille averaged over 40,000 while both Marseille and Lyon averaged over 30,000. In their opening home game in Ligue 1 this season, complete with new acquisitions, AS Monaco’s attendance was 14,573 (information on French football attendance is available here). While there may be a novelty affect of seeing the new signings for the first time, it is possible that increased quality will lead to a permanent increase in attendance which will further strengthen Monaco’s
position in the transfer market. Even so, Monaco can argue that a rich owner and tax-free income helps to ‘level the playing field’ with the larger French clubs.
In seeking to ‘punish’ Monaco for their new-found advantage, some have criticised the FFP and LFP for taking a very short-term view. In the longer term, it is argued, a successful Monaco, complete with top foreign players, may increase worldwide support for Monaco and, by extension, interest in the French League, thereby benefitting all French teams. As well as that, the preference of many football fans may be for a successful Monaco as it will increase overall quality in the League and give fans of other teams the chance to see world-class players on a regular basis.
Even if AS Monaco is successful in its legal challenge, the effect of any Financial Fair Play (FFP) regulations may be to ensure a similar outcome to that envisaged by the FFF and LFP. For a club with such low gate revenue, FFP regulations may limit AS Monaco’s ability to invest large sums on transfers and wages.
Another possible complication is the proposed 75% tax on French incomes over €1m that would give AS Monaco an even greater advantage. Though the initial tax was declared unconstitutional, it may be imposed on the clubs, rather than players, in future. While the FFP and LFP are against such a high tax rate, on the basis that French clubs would be at a disadvantage vis-a-vis clubs in other European countries, they are also united in their determination to reduce Monaco’s tax-free advantage.
Monaco is also unique among top French clubs in that it has an extremely low, but possibly relatively rich, fan base. Monaco were relegated from Ligue 1 in season 2010-2011 with an average attendance of just under 7,000 and had an average of approximately 5,000 during their two seasons in Ligue 2. In contrast, in season 2012-2013, PSG and Lille averaged over 40,000 while both Marseille and Lyon averaged over 30,000. In their opening home game in Ligue 1 this season, complete with new acquisitions, AS Monaco’s attendance was 14,573 (information on French football attendance is available here). While there may be a novelty affect of seeing the new signings for the first time, it is possible that increased quality will lead to a permanent increase in attendance which will further strengthen Monaco’s
position in the transfer market. Even so, Monaco can argue that a rich owner and tax-free income helps to ‘level the playing field’ with the larger French clubs.
In seeking to ‘punish’ Monaco for their new-found advantage, some have criticised the FFP and LFP for taking a very short-term view. In the longer term, it is argued, a successful Monaco, complete with top foreign players, may increase worldwide support for Monaco and, by extension, interest in the French League, thereby benefitting all French teams. As well as that, the preference of many football fans may be for a successful Monaco as it will increase overall quality in the League and give fans of other teams the chance to see world-class players on a regular basis.
Even if AS Monaco is successful in its legal challenge, the effect of any Financial Fair Play (FFP) regulations may be to ensure a similar outcome to that envisaged by the FFF and LFP. For a club with such low gate revenue, FFP regulations may limit AS Monaco’s ability to invest large sums on transfers and wages.
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