Journalists reported over the weekend that the Premier League is considering abolishing points deductions for breaches in financial and sustainability rules. A ‘luxury tax’ was suggested as a replacement punishment.
The rules were applied recently, and points were taken off clubs – the most important currency in this elite context given the wealth of several owners. We then all saw how quiet the January transfer window became.
The current application of the rules make me wonder whether clubs have implicitly imposed a salary cap on themselves. This is not a traditional salary cap per se but rather a dynamic one, that varies across clubs based on revenues. Perhaps the motivation to abolish points deductions is based on the argument that elite talent may move to other leagues as the rules are effectively constricting wages. Having the best talent in world playing in the EPL is obviously in the interest of the clubs and broadcasters.
Sticking within the current rules, even with some type of shadow salary cap that favours bigger clubs, would be my preference (as a fan anyway). A luxury tax would likely cause greater inequality and license Manchester City, Newcastle etc. to splurge. These clubs would likely prefer overspending while weaker clubs, trying to compete, will likely encounter financial difficulties covering the tax. Sustainability rules may achieve the opposite of their stated purpose. Luxury taxes exist in other sports (e.g NBA) but their logic is based on a consistent salary cap across all franchises. I'm unsure of how the rules work in terms of historical applications, but it is coincidental these rule changes are being proposed when Manchester City are facing hundreds of alleged charges.