The English Premier League has dominated European soccer in recent years. Nine of the last 12 Champions League semifinalists have come from the Premier League, and an English team has been in the final for each of the last five years (two played each other for the trophy in 2008). The Premiership's top teams--Manchester United, -Arsenal, Chelsea, and Liverpool--are four of the sport's ten glamour franchises, and the league is easily soccer's richest. Yet over the last few months, star players have been rejecting offers from the Premier League hand over fist.
In January, Manchester City made a £100 million offer for the Brazilian midfielder Kaká. He spurned the overture in order to stay at AC Milan, but then in early June accepted a £68.5 million transfer to Real Madrid. Then Manchester United sold Christiano Ronaldo to Real Madrid. Ronaldo, the highest-paid player in soccer history, had requested the trade and calls playing in Spain "a dream." Looking to fill the goal-scoring gap, United tried to lure the Lyon striker Karim Benzema. In July, Benzema went instead to Real for a £30 million transfer. Desperate to fill the hole, United extended a £25.5 million offer to Barcelona striker Samuel Eto'o and would have made him the highest-paid player in England. He's now on his way to Inter Milan.
Liverpool's Jermaine Pennant left for Spain's Real Zaragoza. Valencia's star striker David Villa simply said no when the English came calling, as did Bayern Munich midfielder Franck Ribéry, Valencia defender Raúl Albiol (who later said yes to Real Madrid), Inter Milan right back Maicon, and the Juventus midfielder Felipe Melo. The only high-profile player to sign with the Premier League this summer has been the defender Thomas Vermaelen, who went to Arsenal.
Why have players been rejecting hefty fees to play in the world's most celebrated soccer league? It's all Gordon Brown's fault. In April, the British government passed a measure that increases Britain's top tax rate from 40 percent to 50 percent. The enormous hike applies not just to wealthy soccer stars (the average base salary for a Premier League player is £1.1 million a year) but to anyone making over £150,000.
When the tax increase first passed Arsenal striker Andrei Arshavin demanded that the team renegotiate his contract, calling the hike an "unpleasant surprise." Ronaldo's agent noted that it would mean an extra £670,000 a year in taxes for the star (who was then still with Manchester United). Arsène Wenger, the manager of Arsenal, matter-of-factly explained that the higher taxes would decimate British professional soccer. "[W]ith the new taxation system, with the collapse of sterling, the domination of the Premier League on that front will go," Wenger told the Times of London. "That is for sure."
The move is part of Brown's effort to soak the rich in order to make up for revenues lost in the recession. Three-hundred thousand Britons will be affected by the increase, which is expected to raise an extra £2.1 billion. Which hardly seems worth the bother, because Brown's plan also involves borrowing some £600 billion over the next five years and bringing Britain's public debt to 79 percent of GDP by 2013.
The result is that Britain's tax rate is now the highest in the professional soccer world. In Italy, players pay 43 percent on income. In Germany, 45 percent. In France, 40 percent. In Russia, only 13 percent. But the real winner is Spain.
Spain's top tax rate is 43 percent. In 2005, however, Spain amended the law to include a provision for high-earning "foreign executives," which would require them to pay only 24 percent. And not only did they create a massive loophole, they backdated it to 2003, which was, coincidentally, the year David Beckham left Manchester United to join Real Madrid. Beckham became the first man in Spain to acquire "foreign executive" status; the tax break came to be known as "the Beckham Law." And it has become an almost insurmountable advantage for Spanish soccer teams. Deloitte Sports Business Group estimates that between the falling pound, the higher British tax rate, and the Spanish tax break, U.K. clubs would have to pay 70 percent more in order to match a player's take-home pay in Spain.
Predictably, no one is happy with the situation. British papers are full of stories lamenting the demise of the Premier League. Also predictably, Britons seem more outraged by Spain's lower tax rate than by the increase in their own.
The leftists in Spain are also unhappy. After Real Madrid acquired Ronaldo (and agreed to pay him £10.4 million a year), Spanish prime minister José Luis Zapatero called the salary "excessive" and his Socialist party introduced a proposal in parliament to repeal the Beckham Law. (A few days later the Socialists dropped the proposal as a reprisal against a coalition of parties even further to their left.)
And the purveyors of goo-goo pan-Europeanism have been affronted, too. Michel Platini, president of the Union of European Football Associations, claimed that there was something "abnormal" about the influx of talent to the Spanish league. "These transfers are a serious challenge to the idea of fair play and the concept of financial balance in our competitions," Platini told reporters. "UEFA is working hard with clubs to set up a new set of rules as soon as is possible to clean up the system." He called reforming "the system" UEFA's "top priority."
It seems unlikely that UEFA will have enough authority to regulate the tax policies of semi-sovereign states. Who could hash out such existential questions about fairness, soccer, and the nature of taxation? Well, that sounds like the European Union's entire job description.
It wouldn't be the first time the EU has meddled with sports. In 1995 Jean-Marc Bosman, an undistinguished player in the Jupiler League in Belgium, went to the European Court of Justice asking them to void his contract so as to allow him to sign with a French team. At the time, Bosman's case seemed hopeless--allowing him out of his contract would have up-ended the entire legal and economic underpinnings of European soccer. It was the equivalent of moving from baseball's old contract system to the current free-agent regime. But the court ruled in Bosman's favor and the face of soccer was changed.
Perhaps the EU will intercede again on behalf of the Premier League. Fairness--or rather, European-ness--practically demands it.
Jonathan V. Last is a staff writer at THE WEEKLY STANDARD.