Monaco football club resists efforts to end its tax-free status

Monaco FC went to court this week looking to quash a ruling from French football authorities that its privileged tax-free status must come to an end and it must start to pay income tax like any other club.

The French Professional League (LFP) is insisting Monaco move its headquarters to French soil by June 2014, in a case that is polarising opinion in French football. Some believe millions being spent on the club by its Russian owner are injecting much-needed competition into the game. Others say the tax burden faced by other clubs leaves them at a competitive disadvantage.

There is also no little resentment from Monaco’s rivals, who ask why a club from one of the wealthiest and most privileged corners of the world should have had tax-free benefits for so long.

Monaco has been a registered French club since 1919. After the French-Monaco tax convention of 1963, which established the principality’s tax-free status for foreign and Monégasque nationals, the club began recruiting foreign players.

As the club’s fortunes ebbed and flowed, rivals largely left Monaco to its own devices. That changed when fertiliser billionaire Dmitry Rybolovlev bought a majority stake in 2011 and began to buy top-quality foreign players to compete with Paris Saint-Germain, the dominant Ligue 1 team, owned by Qatar Investment Authority.

Monaco’s promotion back to Ligue 1 at the end of last season accelerated its transfer deals. This summer, it completed the transfer of four coveted Colombian and Portuguese internationals in deals worth a combined £110m.

Rival clubs, particularly those challenging for lucrative Champions League places, say Monaco’s tax-free status is unfair. Monaco has no more than a dozen French players in its squad of 35.

Economist and author Bastien Drut said Monaco’s rivals had one eye on President François Hollande’s promised 75 per cent tax on incomes of €1m and above, which would include the wealthier football stars in Ligue 1.

“It [the tax] won’t be a problem for PSG – they really don’t care – but it will be a very big problem for clubs such as Lyon, Marseille and St Etienne,” he said. “It will create a two-speed Ligue 1.”

A piqued Monaco is taking the dispute to the Conseil d’Etat, the top court for administrative justice, to get the LFP ruling annulled, though that may take months. On Thursday, the Conseil d’Etat heard Monaco’s case for the ruling’s suspension. A decision is expected in the next few days.

Its technical argument is that the ruling is a violation of French and European law on free movement and competition and free access to sporting competition.

More widely, it argues its squad investment will attract more spectators and is good for the development of French football. It says it has “always considered itself part of the family of French football”, developing players for the national team such as Thierry Henry and David Trezeguet.

“To have this decision imposed on us by the French football authorities without any consultation, at a time when we are making investments that will have a positive influence on all of French football, is very disappointing,” says Monaco. “It threatens the very future of Monaco football club and that is why we will continue to contest it vigorously.”

The LFP is in a difficult position, said Mr Drut. A stronger Monaco that can compete with PSG gives French football a better competition and the chance to drive up the price of its TV rights.

“It has to be very pragmatic and find an agreement. This is what will happen at the end,” said Mr Drut.

At a meeting last month between Mr Rybolovlev and Noël Le Graët, FFF president, a sum of €200m was raised as a one-off settlement to avoid Monaco relocating. The judgment from the Conseil d’Etat will influence if and when they meet again.

Copyright The Financial Times Limited 2017. All rights reserved. You may share using our article tools. Please don't cut articles from and redistribute by email or post to the web.