‘Real-time’ rulings and punishments for clubs under luxury tax plans
The proposed replacement for Uefa financial fair play (FFP) would have the power to make Champions League clubs change their squads immediately, under plans that it will operate in real time rather than try to dish out punishments retrospectively as with the current system.
The new “luxury tax” proposals, which will be discussed by Uefa, clubs and leagues in Nyon next month, would take into consideration “squad costs” – not just transfer fees and player salaries but also agents’ fees – when calculating whether limits had been breached. Clubs would have to submit to Uefa each player’s squad costs along with their proposed 25 names for the upcoming season, which would be scrutinised as to whether they passed controls.
Any breaches would potentially mean clubs being forced to drop players from their squads for the three Uefa competitions, to bring them into line with spending limits.
While the details will be decided over the next few months, some form of the luxury tax proposal – which would mean clubs paying a premium when spending breaches a certain level – is certain to replace the current 10-year FFP system.
It is likely that the luxury tax control would be two-pronged. There would be a top limit of the percentage of a club’s revenue that could be spent on squad costs, and potentially in addition to that a “hard cap” on the total of capital that could be invested each year by an owner.
Uefa does not believe any system can hope to close the competitive gap between wealthier and poorer clubs, but by redistributing the income from a luxury tax to clubs lower down the hierarchy, it believes it is following a principle of fairness that should lead to greater financial stability. Repeated breaches of the luxury tax would result in disciplinary measures, potentially leading to sporting sanctions.
The governing body has faced huge challenges in applying FFP rules to wealthy clubs, including Paris St-germain and Manchester City – both of whom have won
significant victories over Uefa in the Court of Arbitration for Sport. The relaxing of the rules over the pandemic, to allow owners to inject funds into the clubs, have made FFP even more difficult to enforce. Currently clubs are not permitted to make losses of more than €30million (£26million) over a three-year assessment period.
It is the proposed real-time monitoring of squad costs that those familiar with the proposals believe would be one among the most effective safeguards against overspending and financial instability.
For example, under FFP, the wages of Lionel Messi will only be included in PSG’S financial results for the 12 months ending next July. Those results will most likely be submitted to Uefa in October next year, leaving a gap between spending and enforcement. The real-time nature of the system would mean Uefa regulators working off unaudited club accounts, making verdicts much more difficult to challenge. There is no suggestion that PSG have broken FFP rules.
Uefa’s priority is to see financial stability across leagues and clubs hit hard by the pandemic. The Premier League and English Football League, which will be represented in Nyon next month, are also expected to change FFP laws to harmonise with Uefa. Currently Premier League clubs are permitted to lose £105million over a three-year period.