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SBD Global/November 4, 2013/International Football

French Football Clubs To Strike After Hollande Rejects Tax Exemption Plea

French football clubs have said that "they will go ahead with plans to go out on strike" over a new 75% tax, according to REUTERS. This "comes after their plea for an exemption fell on deaf ears at the Elysee Palace." Representatives of the football clubs in France's Ligue 1 and Ligue 2, the country's two top leagues, announced that "they would not play any of their scheduled games on the last weekend of November." The strike "is meant as a protest against" a new 75% tax on salaries above €1M ($1.4M) annually. The announcement came after the heads of the clubs met with French President Francois Hollande, "where they had hoped to convince him to grant them an exemption to the tax, which they say will make it impossible for them to attract top stars." French Football League President Frederic Thiriez said, "The president listened attentively but absolutely did not hear us. No solution was found tonight, so the mobilization is going ahead." A recent opinion poll indicates that "the idea of putting the squeeze on professional football clubs has a lot of support among the French public." A survey conducted by the polling company Opinion Way in October found that 85% of voters did not think football clubs "should be granted an exemption" (REUTERS, 11/1).

FEARS OF LONGTERM DAMAGE: CNN's John Sinnott wrote the tax law is worrying French clubs "to death." They fear that one of Europe's top leagues, "newly resurgent following significant investment from mega wealthy Qataris and Russians, could be irreparably damaged by the tax." And they feel so strongly over the matter that "they plan to go on strike." So if you are a French football fan, do not "expect to be watching" the likes of Paris St. Germain striker Zlatan Ibrahimovic or Monaco forward Radamel Falcao in action between Nov. 29 and Dec. 2. Ibrahimovic is one of more than 10 players at Qatari-owned PSG -- "France's richest club" -- whose yearly pay exceeds $1.35M.  Just for Ibrahimovic's hefty pay packet alone, "PSG's costs would increase" by nearly $12M under the Hollande plan. Former Monaco CEO Tor-Kristian Karlsen said, "French teams will be at a disadvantage with regard to English clubs who only pay 40 percent tax. That will affect the standard of the league. It might also affect money coming into French football from foreign investment -- potential owners might be tempted to get more value for money elsewhere." Earlier this week, French professional clubs union (UCPF) President Jean-Pierre Louvel "unveiled a study outlining the economic benefits French football brings France," given it has an annual turnover of $5.8B and there are potentially 25,000 jobs at stake. Louvel, who is also the president of second division club Le Havre, said, "The return on investment for the state is $500M. In addition, each euro generated by clubs creates additional €2.5 ($3.38) in the country's economy" (CNN, 11/1).

MAKES CLUBS LOOK "GREEDY": CNBC's Ross Wesgate wrote Hollande "has told the country's football clubs he won't bend on a 75 percent tax rate for salaries" above €1M and the "union representing the clubs says a strike planned for the end of November will now go ahead," according to CNBC's Ross Westgate. Hollande has the "lowest approval rating of any French president ever" and if the strike goes ahead as planned, "what happens to their fan base or their approval rating?" CNBC's Stephane Pedrazzi reiterated Hollande having the "lowest approval rating ever," but in this case, a "large majority of French people believe that the clubs should pay" this 75% tax, according to a recent survey, while 85% "believe that the tax is justified." Pedrazzi said the "clubs claim that because of the nature of their business, because they have a lot of salaries" higher than €1M and that's a lot compared to the relatively small size of the clubs, they ... shouldn't pay this exceptional tax which is here" only for a few years. Pedrazzi: "They argue it could destabilize the economy and that ultimately they wouldn't be able to keep in France the star players … and that's the reason why they were asking for a special status. They are going ahead with the strike on November 13th. There won't be any football games in France."

SI's Peter Berlin noted the tax will be paid by the football clubs, not the players, and the strike is by the clubs "against the government." The players "don’t care, they want more money" but in France salaries are stagnating. Berlin said the pending strike in France is "slightly different" from labor disputes in the U.S. because they "tend to be a lockout, a battle between the owners and the players. But essentially, there's a similar point here which is that French clubs lost" more than €100M "collectively last year." Berlin added, "Salary caps, luxury taxes in American sport help control expenditure. They're just not available to European clubs because capping salary would be against European law so they have to find other ways. They're desperate, they need to control costs, they don't want costs to go up. They're losing money, they're in trouble." Berlin said a strike would not harm their "popular support" among their fans but "they might have to repay some TV money, that wouldn't be nice. It's difficult to see how this strike will have an effect on Hollande will get what it wants." The clubs "just look greedy and stupid, I have to say" ("Worldwide Exchange," CNBC, 11/1).
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