French propose transfer tax

Arrival of the world’s most expensive player, Neymar, sparks plans for new levy on successful clubs
 

The growing volume of money in the football industry, and in particular the summer arrival of Brazilian Neymar for a record €222 million, are the main drivers behind a unique proposal recently submitted to the French parliament. UDI party MP Michel Zumkeller is calling for the introduction of a new tax on lucrative transfers. According to L’Équipe, starting next year, clubs would have to pay five percent of every such transfer. In Neymar’s case, the buying club – Paris Saint-Germain – would have paid the state €11.1 million. “It will be a precedent if it passes. Such a tax does not exist anywhere in the world and from a tax-system perspective, I don’t see it as a good idea,” sports analyst and football agent Jozef Tokos told the Economic Daily.

A country of experiments
This is not the first time France has experimented with novelties in its tax system. Four years ago, then-president François Hollande tried to introduce a 75 percent “millionaire tax” for residents earning more than €1 million annually. The plan was halted by France’s constitutional court, which deemed it unfair. “These considerations were part of the standard income tax. But a levy on transfer fees would be a completely new tax, and I don’t see the economic rationale for it,” said Tokos. The funds raised would go to the National Centre for the Development of Sport to support amateur clubs. Zumkeller said the proposal already has more than thirty MPs’ signatures and that he will seek further backing in the coming weeks. “The goal is to tax the most expensive transfers, not deals worth two or three million euros. When a club buys a player for €100 million, it can also contribute five million to amateur sport,” explained Zumkeller. The minimum transfer value subject to the tax is not specified; it would be defined annually by decree. “It’s clear the idea was inspired by Neymar’s transfer. But it feels rushed and reminds me of the idea of a financial transaction tax, which was much lower than in this case,” said Peter Varga, lawyer and partner at Carpathian Advisory Group.

A luxury tax
According to Tokos, it is typical for France that the state tries, through taxes or other laws, to regulate matters uncommon in other EU countries. “They even have a law on players’ agents, which governs their activity,” said Tokos. For now, it is uncertain whether the proposal will gain enough support to be enacted. “In a way, it’s a kind of luxury tax – incoherent, nonsensical, and needlessly complicating the tax system,” said Varga. The fact is that at the turn of the millennium, no one would have considered such a measure. But the rapid growth in turnover, especially among the wealthiest football clubs, may help it along. “Football’s power has multiplied, its popularity has soared, financial flows have increased, and it is more global than ever,” said Varga. So far, no football club has commented on the planned proposal from French lawmakers. “These clubs are already taxed on corporate income just like in every other country. Players also pay income tax. Tax systems are good when they are simple and have as few exceptions as possible. A transfer tax would only complicate it,” added Jozef Tokos.