Football: tax the expensive players to get more suspense

7 January 2015 by in Business and finance, Current events, Football Business

(Translation of an article that appeared in the Dutch newspaper De Volkskrant.)

Introduce a levy on players and football is fun again.

Football is getting less exciting. In many leagues and tournaments competitive balance is decreasing. For instance, only few clubs still have a chance to win the Champions League, and Ajax is no longer among them. In addition, the status and therefore the attractiveness of the leagues of small countries is waning in the long run because of the outflow of talent, and this also holds for the Dutch Eredivisie.  Of course, a boy from Amsterdam can support of Barcelona so that he can see the club of his dreams win the important Spanish title, or the Champions League. But he sacrifices his chance to see his club win in a football stadium. Barcelona is far away, and CampNou has only 99,000 seats. The boy will cheer before the television, possibly alone because his friend next door is an Arsenal fan.

In the meantime tickets are getting more expensive, and viewers now pay to watch matches that used to be free. In the Netherlands, things are not like this yet. However, the cheapest season ticket for Arsenal is a staggering €1250. Football is getting less accessible for the average fan.

How do our politicians react to this? They let it go. If the Dutch government takes a measure which  significantly harms big firms – such as a high old-fashioned tax on profits  – many firms will move abroad.

But football is different. The biggest clubs are all located within the European Union. And it will remain that way. Arsenal cannot move to New York, because it will lose almost all its fan. And therefore the European Union  has, in principle, power over the clubs.

It should use that power now. I propose a progressive social levy. This means that a club like Arsenal should spend one euro on special projects for every euro it spends on players’ salaries. For example, projects to reduce the rate of school dropouts, or to support non-professional clubs.  The downside to this is that the levy will force Arsenal to spend less on players, which will weaken its squad.

Feyenoord Rotterdam adopts this sort of business model: for every euro the club pays out on player salaries, it has to spend 20 cents on social projects.  For a small Dutch club like Cambuur the figure is five cents, so that Cambuur can pay its players almost the same salaries as before.  So, Cambuur stands a better chance against Feyenoord, and Feyenoord can score more goals against Arsenal. This is also an advantage because Feyenoord’s monumental stadium, De Kuip, has a much better atmosphere than Arsenal’s expensive Emirates Stadium, making victory for the fans even sweeter.

But can the football sector really afford to divert large sums of money to social projects? The answer is simply, yes, it can. The average club in the English Premier League, for instance, now earns 53 times as much as the average club in the English top division of 1960 (after adjusting profits for inflation). Elsewhere in Europe, football has also seen remarkable growth. The exploding revenues have mainly been used to pay players higher salaries. Now, because the levy is directly based on the players’ payroll, the players will earn less so that no club needs to go bankrupt. Because the levy is highest for the largest clubs, it is the top players like Steven Gerrard and Wayne Rooney that will feel the effect of this business model most harshly. But they can still become millionaires.

What we need is to restore balance to the competition and not restrict victories to whichever club has the most money to spend on players. At the same time, more money will be available for social projects. Too idealistic? From an economic view certainly not.

But is the proposal politically feasible? We are talking about a policy that harms vested interests and that can only be successful after a hard political battle which can take many years. So the question is whether there are politicians who want to fight for the fans. Or will politicians rather prefer to let the football fans walk alone? One thing is certain: the extent to which football remains attractive will depend on politicians.

Tsjalle van der Burg is economist and author of the book Football Business: how markets are breaking the beautiful game