💶 Tax Plays a Massive Part in an Athletes' Total Earnings

Over 100 of you subscribed to the newsletter this week.

Those of you who are receiving this for the first time, welcome to The Long Play. I am currently writing this on the rooftop of my hotel in Chennai having just been to my first and second in-person IPL game

What an incredible experience in an incredible city.

Interestingly, whilst I was here I learnt that international cricketers playing in the IPL are taxed at a flat rate of 20% on all accrued income when applying their trade in India.

Tax plays a massive part in the computation of total earnings for an athlete. Today I will give you an indication as to how it varies by country and which players are benefitting the most.

To start, lets stick with the IPL. Several English players will make more than $1m playing in this years tournament:

These are favourable sums of money considering they will only incur a 20% income tax bill for their efforts.

It's not just the wages that matter in an athletes earnings, the marginal income tax rate can make or break the success of a signing.

Some leagues (or countries) are extremely favourable for athletes, whereas others are stifling in their appeal.

Take Italy, for example. In 2019, the Italian government introduced a scheme called "Decreto Crescita" (the Growth Decree). It wasn’t built sepcifically for footballers, it was designed to attract all skilled workers to Italy in any field, but footballers just happened to become some of its biggest winners.

It works like this. A player must:

• Become a tax resident in Italy

• Have lived outside Italy for at least two of the past three years

• Commit to staying in Italy for at least two years

In doing this, foreign players can enjoy tax rates as low as 25%. A big drop compared to 45% in the UK or 43% for Italian-born players playing in Italy.

Remember when Aaron Ramsey left Arsenal and landed a massive contract at Juventus?

It wasn't just the wage hike. He doubled his salary and almost halved his tax burden.

Cristiano Ronaldo cashed in on it too when he moved to Juventus. That man will get paid wherever he goes but it was one of the reasons the deal made so much financial sense for him at the time.

He now plays in the Middle East where, as you know there is usually no income tax at all. Infact, this is the same in most Emirati regions.

The 45% that all English players pay in the UK goes straight into their pockets. In many cases, like Ivan Toney, its usually a material increase in wage coupled with a lowering of the tax burden.

There’s a catch though.

UK tax laws state that players cannot just hop on a plane and start cashing in. They need to be out of the UK for a full tax year to benefit. In the United Kingdom the UK tax year runs April to April, so the timing of the transfer matters quite a lot.

Most football transfers happen in the summer, which means a player must stay outside of the UK for almost two full seasons to avoid a nasty tax bill when they come back.

Jordan Henderson is a case study.

He left Liverpool in the summer of 2023 to join Al-Ettifaq on a huge contract. Things didn’t go to plan there, he unfortunately lasted just six months at the Saudi club. To protect his earnings (even for a short 6-month stint in Saudi), Henderson needs to stay away from the UK until after April 2025.

So, in early 2024, he signed for Ajax. This move kept him out of the UK long enough to safeguard the tax break. And also allowed him to benefit from favourable tax rates in Holland too (~37%)!

Spare a thought for those playing in France.

At the moment there is not much top talent playing in France for various reasons. Some of you may recall my video breaking down the several issues facing French football currently. A big one reason not discussed in that video however, is tax.

In France, the top income tax rate is 45% (for income above €177,106/year). On top of that, there are social contributions (CSG/CRDS) which add another ~9.7%. So the effective top marginal tax rate for a high-earning footballer in France is ~54%.

France is currently one of the most heavily taxed places for top footballers in Europe which, does not bode well for a league devoid of thriving talent.

If Ligue 1 wanted to make their league a more attractive place to play lowering taxes would be quite a strong move and quite a signal of intent. But that in itself would go against the very fabric of French culture so I do not imagine this happening for a while, if at all

It’s a sad state of affairs over there.

Switching gears somewhat, I will leave you this week with some fascinating golfing statistics.

Whilst the above was meant to be a Justin Thomas glaze-post it ended up proving once again how dominant Tiger Woods was in his prime!

The crazy thing here though is how close Rory and Tiger are in earnings after 250 starts despite Tiger’s sheer dominance on the tour.

That speaks to how incredible a time it is right now to be a golfer.

To see a complete breakdown of how wealthy Rory really is, watch below:

I’ll see you next week.