A taxing issue for French football

Craig O'Callaghan finds out why AS Monaco face a fight to keep their privileged tax status
Commercial awareness

Two years ago, hardly an eyebrow was raised when Russian billionaire Dmitry Rybolovlev bought a controlling stake in the French football team AS Monaco. At the time AS Monaco were languishing in the French second division, far from the top table of French football. Now, after promotion last year, and with a squad containing some of the finest players in the world, they are top of Ligue 1 and one of the favourites to win the title.

Given the level of investment into the club, AS Monaco's rapid ascent is hardly out of the ordinary. British football fans will be able to list a handful of examples of mega-rich owners who have turned a club into champions. However, one peculiar detail in the case of AS Monaco has left the rest of French football furious: AS Monaco's foreign players aren't required to pay income tax.

An un-level playing field

Due to the terms of the Franco-Monégasque tax convention, Monaco levies no income tax on individuals, the only exception being that French nationals must pay French income tax. As a result of this, non-French players signed by AS Monaco get to avoid the 49 per cent rate of income tax they would pay at any other French club. Not only do players at AS Monaco get to earn more money than players at rival clubs, the club saves approximately €50m (£42.4m) a year.

Understandably, French clubs aren't happy, arguing that competition is being distorted by the tax laws. "As soon as Monaco enter the market for a player, they're at a distinct advantage" explains journalist Matt Dathan. "If that player has any ambition to earn a fortune from football, they're going to choose Monaco. The only hope for other clubs is that it encourages a culture of greed and unsettles the dressing room, with players coming to the club for the wrong reasons."

Adding fuel to the fire, President Hollande recently pledged to raise the income tax rate on mega-rich earners to 75 per cent. In worse news for the football clubs, the money would have to be paid by the employer rather than the employee. French clubs have appealed to be made exempt from this new law, although the French Minister of Finance Pierre Moscovici hinted such a move is unlikely to appeal to a nation of voters struggling financially.

Monaco on the move?

In an attempt to placate the situation, the French Football Federation have introduced a new rule stating that from the start of next season all clubs must have their head office based in France. AS Monaco would have until June 2014 to relocate their office, a move which would bring them into line with French tax rules and would cost the club close to €200 million. Unsurprisingly, AS Monaco have challenged the ruling, claiming it violates the principles of free movement and free competition as well as the Franco-Monégasque convention.

With a final decision still pending, all AS Monaco can do at the moment is do their talking on the pitch. In the meantime, Hollande has reconsidered his planned income tax hike and may potentially limit it to 2-3 per cent of a business's overall revenue, a change which would save the leading French clubs between €10 million and €30 million. AS Monaco are likely to hope this change as well as their pledge to invest in developing young French players will win them enough support to allow them to keep their privileged tax status.

Continue learning below