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French soccer trying to deal with the coming AS Monaco problem

May 18, 2013, 2:01 PM EDT

1198px-Monaco_in_Europe_(-rivers_-mini_map)

The influence of Dmitry Rybolovlev’s billions could stretch well beyond AS Monaco’s audacious attempt to lure Radamel Falcao to Ligue 1. The club has also been linked with Porto’s Joao Moutinho and Jackson Martínez, Barcelona goalkeeper Victor Valdes, Manchester City attacker Carlos Tévez and Málaga creator Isco. Along with the talent already in tow (Ibrahima Touré, Valare Germain, and Lucas Ocampos), the high-profile additions could make Monaco immediate contenders to take one of France’s three Champions League spots. There may be another bully on PSG’s block.

That’s if AS Monaco even get a chance to compete. The club is currently at the center of a debate in France, with the French federation and league trying to balance what amounts to an uneven playing field.

Because of Monaco’s (the state) status as a principality, the club is not subject to the same, significant taxes as their other league competition. In that past – before Rybolovlev and tax hikes in the France – that status was not an insurmountable advantage (though Monaco has won seven league titles). Now, the combination of billionaire investment, extreme taxation, and the hyperactive transfer market means the club’s return to Ligue 1 could be an unsettling one.

How much is this upsetting the league’s existing clubs? They want Monaco to pay a fee to offset that advantage, an amount speculated to be around $260 million dollars. Rybolovlev seems willing to pay some fee over time (which would be distributed among the league’s other clubs), but as of now, he’s balking at the lump sum.

There are other, more extreme solutions. The idea of denying Monaco entrance into Ligue 1 has been floated, though FFF president Noel Le Graet doubts this will happen. Forcing Monaco to operate within France seems the most likely, if still disputed solution, as it would expose the club to French taxation. Then there’s the most extreme idea: Clubs boycotting their games at Monaco, taking 3-0 losses in forfeit, and refusing to play until the situation is resolved.

Talks between the club and federation officials will continue next week. It’s unclear when there’ll be a resolution, though it seems unfathomable that Monaco, a traditional power in French soccer, would be denied access to the top flight merely because they’ve had the fortune to attract a new owner.

For a league that features Paris Saint-Germain, Monaco could be seen a way to offset Parisian power, even if that ultimately makes life more difficult for the likes of Lille, Lyon, and Marseille. In the long run, however, as teams like PSG and Monaco raise Ligue 1′s profile, increase the value of its television and marketing rights, improve the league’s results in Europe and, far down the road, maybe even win access to Champions League for a fourth French team, the Monacos of the world could be a net good.

That doesn’t mean there won’t be some road bumps along the way. Right now, though, France seems as willing to erect new obstacles as to find a balance.

  1. jsmith80 - May 18, 2013 at 2:53 PM

    Richard – How do taxes affect MLS with there being teams in both the US and Canada? Are different currencies and tax rates problematic? Or does the single entity, salary cap reduce that?

    • Richard Farley - May 18, 2013 at 3:07 PM

      Others may be able to answer parts of this better than I, but …

      It used to be, US vs. Canada was a bigger deal, but the relative weakness of the US (or, strength of the Canadian) dollar has helped. Canada’s tax rates for the income brackets of MLS players are higher, but given how little MLSers make compared to, say, baseball players, it’s not that much of a net difference.

      In Europe, the scales are so much bigger, changes in tax rates can really matter. A lot. Spain recently got rid of its Beckham tax break, so foreign earners couldn’t avoid full taxes. In France, earners over €1m are going to be subject to a 75 percent tax (hope those numbers are right, off the top of my head).

      How that really affects this Monaco situation: Most of the time, players negotiate deals wherein their clubs cover income tax. Their net rate is competitive in soccer’s global market, but their gross rate takes into account the income tax clubs are essentially covering.

      So Monaco, being a Principality, doesn’t have to cover for that. Wherein PSG is paying huge taxes to get Zlatan Ibrahimovic to come to Paris, Monaco wouldn’t have to do the same with the players they’re luring.

      If anybody has anything to add (or correct) … that’d be great.

      • jsmith80 - May 18, 2013 at 3:42 PM

        Thanks for the reply!

  2. mvktr2 - May 19, 2013 at 12:55 AM

    “though it seems unfathomable that Monaco, a traditional power in French soccer, would be denied access to the top flight merely because they’ve had the fortune to attract a new owner.”

    Richard your definition or understanding of the problem is quite different from mine. Seems the taxes/tax rates are the problem, not the new owner. The wealthy owner is a bonus, not a problem. An imbalance of tax rates between french companies and companies in principalities associated with France is the problem, big difference.

    • Richard Farley - May 19, 2013 at 1:42 PM

      I don’t think the clip you selected sums up my view of the circumstances. Please see paragraph three. What you pasted was derived from that preceding summation.

  3. dally83 - May 19, 2013 at 7:02 AM

    Interesting overview that makes some good points. The French football authorities have handled this in such a staggeringly incompetent way that they are alienating even those that started off with some sympathy for their point of view. The key point is that the new owner at Monaco seems a pretty shrewd guy so he is not just going to pay out for something that is not clear but he does appear to have an ambition and intention to invest into a great project that will have all sorts of positive effects on French football overall. So, it is true that there is real potential – if this can be sorted out – for French football to continue to improve and reach a different level

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