La Liga’s taxing time for clubs

While La Liga’s sides and the Spanish national team have found success on the pitch in recent seasons, the story off it has been very different, with the Spanish League’s (LFP) main concern being how to reduce the raging debt run up by many of its clubs.

In fact, the situation has become so serious that from now on the LFP will directly intervene in certain cases, where it will attempt to control spending on wages and force clubs to put aside around 15 per cent of revenue to pay debts to the tax office.

UEFA’s Financial Fair Play regulations, first agreed in principle in September 2009 by European football’s governing body, have now been brought in to prevent professional clubs spending more than they earn in the pursuit of success, and thus getting into financial difficulties that could threaten their long term survival. They are measures the LFP are anxious to adopt and now clubs will be prohibited to have overdue debts at the end of each year, either to players, other clubs or the government, with investment in the first team squad not exceeding 70 per cent of income in any one season.

In addition, the net debt should be below 100 per cent of total income and an infringement of the rules may range from a loss of points or, as in Malaga’s recent case, to a ban from European competition.

The main aim is that by 2017 all Spanish clubs will have a debt of less than €30m, although the LFP will face a mountain of contradictions in their objectives. For example, according to figures, money owed in social security payments by clubs from La Primera, Segunda A and Segunda B that are Sociedades Anonimas Deportivas, public limited sports, companies rose from €10m in February 2012 to €16.6m at the end of May this year, an increase of 66 per cent. Those clubs that did not convert into SAD companies – a new legal status introduced back in 1990 – accumulated a debt of more than €3.5m, although this did not correspond to La Primera where Real Madrid, Barcelona, Athletic Bilbao and Osasuna did not owe anything.

To this needs to be added money due to the tax authorities, unquestionably the most worrying aspect for the vast majority. Here the official figures have not been updated since January 1, 2012, when the government set the total outstanding at €752m, with Atletico Madrid the main offenders at €120m followed by Deportivo de La Coruna’s €90m, Real Betis on €35m and Real Zaragoza’s €32m. At the same time, the Inland Revenue are understood to place the real total debt at some €673m, although it has not been officially confirmed.

Atletico, meanwhile, continue to top the liability table yet, according to the club, their arrears are now down to €99m, an amount that allows them to play in next season’s Champions League. However, University of Barcelona economics and finance professor Jose Maria Guy de Liebana, in his sixth annual report on Spanish football finance, maintains Los Colchoneros owe €179m to various administrations, more than tripling second-placed Espanyol’s €52m.

What is clear is that the current state of affairs is obviously unaffordable, with even the big two of Madrid and Barca heading the debt list as each owes almost €500m, although in these cases income generated is significantly higher and makes both financially viable. More disturbing are the circumstances at teams like Atletico, with a total debt of around €400m, and Valencia, who owe €300m, while Espanyol, Real Zaragoza and Sevilla, according to Futbol Finanzas, are all nearing the €100m mark.

Apart from Madrid and Barca, who will also have to face the new UEFA regulations sooner or later, there will undoubtedly be tough times ahead for the rest, as Guy de Liebana pointed out: “In the end, everyone is concentrating on Real Madrid and Barca, who are the kings of the banquet while the rest live a real uncertain future.”