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Thursday, 11 June 2009

Sports news: UK tax flight starts

A few weeks ago, Andrei Arshavin commented in the national press on his pay packet. Since joining Arsenal in the January transfer window the Russian midfield wizard has dazzled the fans of the North London team with his fancy footwork and creativity, but it seems that Mr Arshavin now considers that his move to the Premier League may have been one of his less astute manoeuvres.

Arshavin agreed a deal worth £80,000 a week, more than the €106,000 wages he earned at Zenit St Petersburg, but as is often the case, he was surprised upon receiving his first payslip to find that his bank account had been topped up by a much lower amount. Arshavin had been used to a relatively low income tax rate of 13 per cent in Russia. Now he has learnt that next year he will have to pay the new 50 per cent tax rate on his annual earnings over £150,000, which in his case means £77,000 of his £80,000 weekly pay.

The 27-year-old said with customary delicacy: "I have a problem with my contract. Certain nuances emerged linked to taxation and some other things. As a result, I’m getting less money than I expected. My advice to other Russian players who may move to England in the summer is to take contract matters more seriously. It’s important to understand clearly and in detail what money you are going to get and what taxes to pay, so that there are no unpleasant surprises of the kind I am facing now. Nothing should be done in a rush."

English football clubs should take note. Their revenues from TV rights and match day tickets may be higher than their continental rivals, but despite paying lower wages (often 70 to 75 per cent of a club’s revenues) continental clubs could look a more attractive option with lower tax rates in Spain (25%), France (40%), Italy (43%) and Germany (45%), particularly to players who instinctively go for the net.

Indeed, this morning's news that Manchester United have agreed to sell Christian Ronaldo to real Madrid will be no surprise. The player may have wanted to move for some time, but not only will the player take home the same at £100,000 a week in Madrid as he would have banked at £150,000 in Manchester, but he will pay hald the amount of tax on the earnings from his not considerable wealth.

The loss to the UK exchequer is clear and the extra stamp duty from a house sale won't come close to filling the gap.

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