Football and Politics: The Monaco Puzzle
The close season transfer window is less than two weeks old, and Monaco are rolling in rubles and resemble an excited teenager playing fantasy football. James Rodriguez and Joao Moutinho have arrived, with Ricardo Carvalho and Radamel Falcao seemingly on their way. All for a paltry £110m, give or take a few million. And we haven’t even started talking about salaries yet.
It remains to be seen whether Radamel Falcao will lift a trophy with new club AS Monaco. (Photo by Denis Doyle/Getty Images)
Football, due to its global, all-encompassing and all-consuming nature, has never been far away from politics. And let us not insult the word “politics” by imagining some petty [in this context] Sepp Blatter incident involving money flowing under the table and other movements of cash to ensure that the power-brokers continue to do as they wish. What we are talking of here is politics which goes beyond club directors and officials of the governing body. We are talking of governments and the people they serve.
AS Monaco were Champions League finalists as recently as 2004, when they were defeated by Jose Mourinho’s FC Porto [it’s almost surreal that Monaco are going after current and former Porto players, as some sort of delayed retribution]. But considering that the only constant in football is change, it’s not too difficult to imagine Monaco languishing in the bottom half of Ligue 2 at the end of 2011, only to be rescued by Russian billionaire Dmitry Rybolovlev. Since then, the club’s rise has been relentless and has culminated in their promotion to French football’s top division. And one would have thought that the return of one of the erstwhile superpowers of French football would be met with greater fanfare. But the problem lies in Monaco – not the club, but the principality. Or at least that’s what the French clubs would have us believe.
The principality of Monaco is a tax haven, meaning that resident individuals don’t pay personal income taxes. With the principality not being a member of UEFA, the club has been participating in the French league since 1933. But the recent decision of the Ligue Professionnel de Football [LFP] to restrict admission to Ligue 1 to “clubs whose effective place of management is in France” changes the dynamics of the situation rather dramatically. With footballers registered with clubs operating from France having to pay a tax rate of 75% [for those earning beyond €1m annually] the zero-tax status of Monaco – though playing in the French league, AS Monaco operates out of the principality – means the following: a foreign player with a net annual salary of €1m will cost AS Monaco €1.05m, compared with the €3.19m other French clubs have to pay for a player with the same net annual salary. The ruling of the LFP, thus, puts pressure on AS Monaco [hereafter ASM] to register as a “French” club and pay the taxes which other clubs are subject to if they wish to play in Ligue 1.
If the ruling wasn’t enough, the step taken by the French Football Federation to broach a compromise – ASM would pay €200m [£170m] over six or seven years to make the field more equal – has forced ASM to reach out to the French Supreme Court with the claim that the LFP’s ruling earlier this year in March “violates several fundamental principles of French and European law, notably the principle of free movement, free competition, free access to sporting competitions, and also the Franco-Monégasque tax convention signed on the 18th of February 1963″.
While the case is sub judice [a ruling is expected by the end of this month], all negotiations between ASM and the LFP have stopped, with ASM not coming to the table if the LFP continue to hold the sword of exclusion over ASM’s neck.
But one has to wonder why the ruling has taken place now, even though Monaco has been a tax haven since 1869 [with the tax exemption restricted to non-French nationals in 1963] and has always attracted players like Glenn Hoddle, George Weah and Jurgen Klinsmann because of their tax-free status. The answer lies in the recent increase in tax rates to 75% in France for the rich. Surely, there should be a level playing field for everyone?
But the impact of such a regulation has consequences which affect more than just ASM’s existence. If ASM doesn’t comply with the regulation, Ligue 1 would become a walk in the park for PSG. A two-horse race is no fun, but it’s better than a horse competing with a bunch of slugs.
French domestic football has always been considered inferior to the other major European leagues, and that has a lot to do with the financial standing of French clubs. With the advent of ASM and PSG, other French clubs could benefit by selling their players at the inflated prices which usually accompany clubs backed by billionaires, and at the same time, the league would rise in quality due to the attraction for players – albeit, monetary – of playing for the rising giants of European football. And nothing helps more than global appeal, which is what players like David Beckham bring with them.
With the Supreme Court’s decision pending, ASM have taken things to a different level by going on a spending spree rarely seen before, but with a slight difference – none of the players bought have been from French clubs. While this means that these foreigners don’t have to pay the 75% tax, it also means that the French clubs don’t benefit from any transfer fees received. At the same time, the arrival of Falcao and co. makes ASM highly attractive to sponsors and fans alike, which reduces the probability of the LFP excluding ASM from Ligue 1 as the whole league stands to benefit from ASM’s participation.
Whatever decision the Supreme Court makes, it’s clear that French football will never be the same. Where does the blame lie? Dmitry Rybolovlev is free to do as he pleases with his money, and the LFP is only trying to protect its own interests. The differences arose with the increase in tax rates, which is controlled by the French government. But Mr. Hollande couldn’t be expected to sit back while the public deficit continued to rise. So, where exactly does the buck stop?