Spanish football clubs' tax debt awakes storm.

van Rompuy, Ben

Spanish Secretary of State for Sport Miguel Cardenal sparked outrage in Europe when he suggested waiving the unpaid tax bills of the Spanish football clubs. The clubs in Spain's top two divisions collectively owe some 750 million euro to the tax authorities and another 600 million euro to the social security system. Among the clubs with the highest tax debt is Atletico Madrid (155 million euro), which bought top striker Falcao for a club record deal of 40 million in August 2011. At a time when Spain's debt problems continue to escalate, more than five million Spaniards are unemployed and suffering from the cutbacks, it would be unacceptable if football clubs were treated more favorably than normal taxpayers. Moreover, giving tax amnesty would constitute State aid, capable of significantly distorting competition, and go against UEFA's Financial Fair Play rules.

Faced with public outcry, Cardenal wisely dropped the consideration of forgiving the tax debt. The Spanish government started up discussions with the Spanish football league (LFP) to cut a deal. On April 25, 2012 both parties announced a plan for clubs to repay their tax debts. The most important measure is that, beginning in the 2014-2015 season, clubs will be obliged to set aside 35 percent of their revenues from the sale of audiovisual rights as a guarantee against tax obligations. The government will exercise administrative control over the LFP. It was stressed that economic control and sanctions will be strict. If clubs transgress the new rules, they can be barred from competition. Most controversially, if a club increases its tax liabilities, potential buyers could submit offers for the acquisition of federative rights of players that will be evaluated by a joint commission consisting of government, LFP, and club officials. If the LFP fails to enforce the rules, directors could be removed and income from the National Lotteries withheld. While the Spanish government is keen to emphasize that no special treatment is given, pointing to debt restructuring agreements signed in other economic sectors. Yet the roadmap does not seem to be that stringent. First, Spanish clubs are given until 2020 to settle their tax debts without the usual requirement to present a long-term viability plan. Second, the Liga only generates a third from its revenues from broadcasting rights. Individual negotiation of such rights has favored polarization of revenues within the league. There is a wide gap between the two top clubs, Barcelona and Real Madrid, representing more than 50 percent of total broadcast revenues, and the other clubs.

According to a recent study conducted at the University of Barcelona, the top 20 Spanish clubs accumulated a combined total of 3.53 billion euros debt at the end of the 2010-2011 season, up from 3.48 billion euros in comparison to the previous season. For the moment, it remains unclear how and when the financial situation of Spanish football will mirror its success on the pitch.

Dr. Ben Van Rompuy, Senior researcher Asser International Sports Law Centre