Is the Spanish Liga the best in the World?

The last few years has seen a growing rivalry between Spanish and English football as to who has the best League. After all, Premier League clubs seem to be lording it over their Spanish counterparts. That is, until Barça won the Champions League last May. Even then, one has to ask whether Barça were the exception, rather than the rule: the other Spanish clubs had, for the most part, disappointed.

And then, over the Summer, there was a load of guff generated since Real Madrid and Barça had managed to attract the biggest names in football. Barça engineered a swap with Inter whereby Zlatan Ibrahimovic and Samuel Eto`o changed clubs, with a huge sum of money travelling from Cataluña to Lombardy. But it was, of course, Real Madrid`s arrogant and immoral spending spree that was the main source of the idea that the Liga was now the bestest in the World: Cristiano Ronaldo was prised away from Manchester United, Kaka from Milan, Karim Benzema from Lyon, Xabi Alonso and Alvaro Arbeloa from Liverpool in a spending spree unprecedented in history.

The gist of the Spanish guff is that the Spanish Liga is clearly the best in the world since all the best players want to play there, and that they were ditching the big other Leagues (particularly the Premier League) to go to Spain. With a load of chest beating, the line was that the Primera Liga had wrestled the title from the Premier League for the title of best in the world.

Never mind that there was no evidence of that quality on the pitch, or that, frankly, since the season begun, that evidence has been as hard to find as Saddam Hussein`s weapons of mass distraction.

And in fact, the truth of the attractiveness of the Liga to those foreign players has been revealed, through a political spat generating a lot of headlines in the mainstream press. Cristiano Ronaldo hasn`t swapped Salford for the white-knuckle excitement of pitting his step-over skills against Sporting Gijon, Almeria, let alone Osasuna. It`s the Spanish tax laws that make the Liga particularly attractive for foreign players.

According to a special fiscal regime that applies to foreign workers in particular professions (hilariously called the 'Beckham law`), foreign (i.e. non-Spanish) players are subject to a 24% tax rate. By contrast, Spanish players are subject to a 43% tax rate. One can understand why foreign players find it attractive to play in Spain or that clubs have an interest in hiring non-Spanish players, these rates compare to the current 40% tax rate applied to persons earning more than £150,000 in the UK. And that is the truth about the attraction of the Spanish Liga compared to the Premier League: people earn more money there, particularly if one factors in the decline of Sterling compared to the Euro over the past 12 months.

This is a 'competitive advantage` (another way of describing it is tax dumping) that has been the subject of complaints by a number of other countries: the French and the Italian leagues have been quite outspoken about a form of market distortion.

But look, the economic crisis is biting, and it has hit Spain particularly badly. The government is therefore planning to close this loophole. The plan is that foreign workers` tax rates be aligned on those of their Spanish counterparts from January 1st. According to the planned fiscal reform, however, this will not be retroactive, so that any existing contracts signed before January 1st will still benefit from the favourable tax rates. Further more, the levelling of rates between Spanish and foreign players will only apply to players earning more than €600,000 per year.

The original law was approved by the right-wing Partido Popular when in government. It is no irony that the text is called the 'Beckham Law`: the measure was facilitated by then Prime Minister José Maria Aznar, who was a Real Madrid supporter. Indeed, at one point Aznar (who is out of a job) was mooted as a possible president of Real Madrid. He was also a big friend of Madrid President Florentino Perez, who is an eminence in the Partido Popular. No wonder that, during Florentino`s first reign as Madrid President, he managed to persuade his friends in government to adopt a tax regime that was particularly favourable to Madrid. For, make no mistakes about it, whilst Madrid and Barcelona are huge clubs who will pay their players considerably more than €600,000 per year, they are in an elite group of 2. Atlético Madrid pay their players handsomely (but a select few), and Valencia can also afford to offer a handful of contracts at that rate. We are fairly sure that some Sevilla players are also above that rate, but the rest of the Liga are, however, minnows and can only pay their players at rates considerably below these tax bands. The 'Beckham Law` was a measure destined to increase the gap between the top clubs (essentially Madrid and Barça) and those below. And it was designed to favour Florentino`s galactico project.

It is therefore entirely predictable that the current socialist government, whose head, Jose-Luis Rodriguez Zapatero is open about his Barça sympathies, is proposing to change this tax facilitation (despite Barça President Joan Laporta having come out against it). In that particularly moronic way that characterises Spanish politics in general, and the Partido Popular in opposition in particular, the PP is violently against the measure. It doesn`t matter that they are pissing in the wind, the government is going ahead with it and has the necessary support in parliament. It will happen.

More worrying, however, is the reaction of the Spanish LFP (the equivalent of the F.A.), who are planning an extraordinary meeting to consider 'suspending the League` if the tax reform is adopted. "The Spanish League would lose power and would stop being the best in the world to the detriment of others" said the LFP President, José Luis Astiazarán. We`re not sure when exactly the Spanish League actually became the best in the world (on the pitch, rather than in the deluded Spanish media), but you can see how worried they are.

Then again, Real Madrid only have themselves to blame. So grotesque was their summer spending that a Parliamentary Commission was set up to examine these transfers, and the conclusion was that the club was clearly abusing a fiscal measure that was intended to attract elite foreign workers. The measure, however, has been pitiful in attracting scientists of businessmen, or for that matter sportspersons in other disciplines. It has, however, been heavily successful for footballers for very few clubs. Is it fair? One can only judge from the positions of the Association of Spanish Footballers and the FIFPro international players union, both of whom testified to the parliamentary commission that the differential tax regimes had to be abolished. In fact, in a move that will probably get him into trouble with his boss, Real Madrid`s captain and poster boy, Raúl, has come out in support of the reform of the Beckham Law: "we all have to play using the same norms" he declared.

So the text is expected to be adopted in time for an entry into force on January 1st next year. It will be devastating for the biggest clubs, in particular for Real Madrid and Barça, and the players playing there. In fact we fully expect a flurry of contract renegotiations before the end of the year to grandfather the favourable fiscal regime. After January 1st, there will be no incentive to renegotiate those contracts, with the subsequent upping of salaries: it is simply too costly for all involved. For, in Spain, footballers` contracts stipulate a net salary that a player receives. In practice, the club pays the players` tax. Changes to tax rates effectively means passing on a substantial tax bill increase to the clubs. Given the huge wage bills assumed by Madrid and Barça, the result is a disaster; should it be applied at once, it could give Madrid a good €25 million extra bill in taxes.

For the rest of the Primera Liga, however, which consists of some 16 clubs that cannot dream of paying players more than €600,000 per year, the amendment will have no difference to their finances. It will, however, make them feel that they are fighting in a somewhat less unfair competition where the unfairness is institutionalised in this kind of tax favour.

For the rest of Europe, the big clubs can at least breathe a sigh of relief that a market distortion has been addressed. If a player really wants to go to Madrid, it is because he wants to play there, not because it ends up cheaper for Madrid than clubs in other countries.

And hopefully, in Spain, this will be reflected in a different discourse. The best League in the World? It`s not happening where it really matters, i.e. on the pitch. And as for the idea that the Primera is the best because it attracts the best players, that is not because of the quality of the football. It`s the tax rates for non-Spanish players. In my book that`s not really cause to beat your chest about the 'bestest League in the World`.

Click here to join in the debate on the club forum.