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Taxing times for the Premier League

  • Story Highlights
  • Top rate of UK tax set to be 50 percent, the fourth highest in the developed world
  • The average Premier League footballer's annual salary is $1.8m (£1.2m)
  • Tax expert believes rate rise plus weakened pound will hurt Premier League
By Neale Graham
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LONDON, England (CNN) -- The dominance of England's Premier League has been built on its clubs' ability to lure the world's best players with high wages.

The English Premier League's success has been built on buying and keeping the world's best players.

Arsenal manager Arsene Wenger believes the UK's tax rate rise will hurt the Premier League's competitiveness.

But that could all be about to change after last month's decision by the British government to raise the level of top-rate income tax from 60 cents in every $1.50 to 75 cents.

The rate rise, which takes effect from April of 2010, will mean that some well-off people -- including Premier League footballers -- will pay half of any income over $226,000 in tax.

And given the average basic salary for a Premier League player is $1.8m, it will make a difference to a lot of players, not just the foreign superstars like Brazil's Robinho and Portuguese striker Cristiano Ronaldo.

English premiership managers such as Arsenal's Arsene Wenger believes the tax hike will hurt the Premier League's ability to attract the best players while potentially driving out those players unhappy at paying out more in tax.

Wenger was asked if the success of English sides was overly reliant on having the best foreign players.

"That time will soon be over because with the new taxation system, with the collapse of sterling, the domination of the Premier League on that front will go, that is for sure," he told the UK's Sunday Times newspaper in a recent interview.

Pete Hackleton, who works for accountancy firm Deloitte's sports business group, believes Wenger could be proved right.

"An increase in the tax rate and the decline of the pound against the Euro over the last year to 18 months does put the Premier League at a disadvantage," he told CNN.

"I'd say it will have a sizable impact upon the Premier League's competitiveness against other countries. Clubs are going to have to think about how they react to it."

The Premier League's ability to remain the most marketable league in the world has been built on the ability to attract the best talent.

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But if that talent is unhappy at seeing half or less of their salaries, other leagues in countries with more generous tax bands may become more enticing.

Spain's top division, La Liga, is one of the Premier League's biggest rivals in terms of the quality of its product, and it is likely to be best placed to capitalize should England drop the ball.

The reason -- aside from the weather -- is the so-called "Beckham Law." The country's government introduced legislation four years ago which effectively caps non-Spanish nationals' tax at 24 percent. David Beckham was among the first foreigners to take advantage of it while he was playing for Real Madrid.

English clubs desperate to keep hold of their best players without breaking the bank undoubtedly have a challenge on their hands going into the off-season. But there is a little room for maneuver.

One area is in a player's image rights, which can be hugely lucrative. If a player is aligned to an image rights company, payments into those companies are income of the image rights company, and the player is not taxed on them. Additionally, the club does not need to make UK social security contributions on those payments.

So will the tax rise, married to a falling pound, prompt an exodus of players from England?

"I suspect some of the top players will want to continue to be paid what they're paid at the moment and it's up to clubs to decide if they can afford to pay that," continued Hackleton.

"And it's a call for the players to make if they believe they can receive more money elsewhere."

Highest-paid players and top rates of tax per country

Italy 43 per cent

Zlatan Ibrahimovic (Internazionale), Ricardo Kaka (AC Milan) $12m each

Spain 43 percent (24 percent for non-nationals)

Lionel Messi (Barcelona) $11.2m

England 50 percent

John Terry, Frank Lampard (both Chelsea) $10.1m each

USA 35 percent

David Beckham (Los Angeles Galaxy) $6.5m

Argentina 35 per cent

Juan Roman Riquelme (Boca Juniors) $4.5m

Russia 13 percent

Anatoliy Tymoshchuk (Zenit St Petersburg) $4m

Japan 50 percent

Naohiro Takahara (Urawa Red Diamonds) $1.74m

Sources: Total Football Magazine, MLS Players Union, Futebol Finance

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