Chelsea and Man United to be clobbered by luxury tax?

Top football clubs may soon have to pay a luxury tax on their star players, says Uefa.

Last Updated: 30 May 2013

The idea is being considered by Uefa as a solution to the growing disparity between Europe's richest and poorest clubs, and would involve the money raised through tax being redistributed among those smaller clubs that need it. And it could help put the game on a firmer financial footing too.

The likes of Sir Alex Ferguson and Chelsea's Gus Hiddink probably won't be getting their rattles out and chanting in support of the proposals, but it's hard to argue with the logic from a business point of view. Transfer fees have long attracted controversy for their relative silliness - at least since Jimmy Hill campaigned to have players' £20 a week salary cap removed back in 1957. But things have become particularly absurd with the recent influx of wealthy foreign investors. Take Manchester City: not only did the club pay £32.5m (€34.7m) for Brazilian star striker Robinho last year, it also forked out £14m for Craig Bellamy.

If that's how the club wants to spend its money, that is of course its own business, but it also serves to inflate the price of average players, meaning smaller clubs can no longer compete in the transfer market - at least not without severe financial risk. Bankruptcy is a problem facing hordes of clubs - just look at the fall of Leeds United, or Charlton, which was in the Premiership two seasons back, but now sits rooted to the bottom of the Championship having conducted a fire sale of all its key players. But at a time when the top 10 players in the Premier League earn more than £120,000 a week, what can these teams do?

Uefa's measures may have come at the right time. With the economy in such a parlous state, the rise of transfer fees and wages in the game seem increasingly out of kilter with what's happening in the rest of the world. If the Premier League's rich foreign investors are forced to pull out as a result of their own growing financial problems, it could ruin the game. By reining in excessive spending, Uefa's tax system could help put the sport on a more resilient, sounder fiscal footing.

Uefa has been doing its research, heading to the US to check out the system in Major League Baseball. Their sport may not make any sense, but its financial system does: baseball sets salary levels for teams and taxes them on the amounts they spend above that. The pool of taxed income is then redistributed to poorer teams. They also operate a limit on squad sizes, an idea that has also been considered by Uefa. This may hammer clubs like Chelsea, which has more expensive talent languishing in the outer reaches of its squad than most teams do in their first 11, but it would benefit others.

Of course, the issue of disparity between rich and poor may not be the only force at work. Uefa chief Michel Platini, and his Fifa counterpart Sep Blatter, are both seen to be critics of the English Premier League, and would probably welcome any way to stick the boot in a bit. Of course, it's not just an English problem - Lyon have won the French league every season for the past seven - but with all of the Premiership's big four making it through to the Champions League quarter-finals, it does seem like English teams - and their highly-paid foreign personnel and wealthy foreign owners -  have the magic touch.

Find this article useful?

Get more great articles like this in your inbox every lunchtime

Showing vulnerability can be a CEO’s greatest strength

Want your people to bring their whole selves to work? You first.

A mini case study in horizon scanning

Swissgrid has instituted smart risk management systems for spotting things that could go wrong before...

Interview ghosting: Stop treating job seekers like bad dates

Don’t underestimate the business impact of a simple rejection letter.

5 avoidable corporate disasters

And the lessons to learn from them.

Dressing to impress: One for the dustbin of history?

Opinion: Businesswomen are embracing comfort without sacrificing impact. Returning to the office shouldn't change that....

How to motivate people from a distance

Recognising success in a remote or hybrid environment requires a little creativity, says Insight SVP...