Man City, Premier League who could benefit from Luxury Tax

Premier League Wants to Abandon FFP Restrictions & Introduce ‘Luxury Tax’

The Premier League are considering abandoning the current FFP punishments, which includes point deductions, in favour of introducing a ‘luxury tax.’

As reported by the Daily Mail, a reformation of the current system has been discussed, and as many as 17 of the 20 clubs in England’s top division are reportedly looking for a change. For a rule change to be made, 14 clubs must agree and vote for the new rule.

Under the current rulings, clubs can lose £105 million in three seasons, and only money that is spent on stadiums, facilities, youth development, and community projects is included as part of this. However, the potential new rules could see just players and staff calculated, meaning that clubs could invest further in content, media, and marketing, allowing clubs to grow their global fan base.

What is a Luxury Tax?

The reported alternative to the current Financial Fair Play or Profit and Sustainability punishments is the ‘luxury tax’ a feature that already exists in Major League Baseball and the National Basketball Association. It relates to the amount spent on the salaries of the playing squad. This could work slightly differently if it were to be adapted for the Premier League; clubs that overspend their FFP allowance would face a financial punishment, which would increase if the club continued to overspend.

As part of this rule, the money collected from the fines would then be spread out to teams that had complied with the rules. This could see promoted teams stay in the league for longer if they comply with the rules, and therefore the gap between the top of the league and the bottom could close even more.

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Another system, known as ‘anchoring’, has also been discussed between clubs; this would be similar to a salary cap relating to the bottom of the Premier League. The rest of the league would be given a multiple of the bottom team’s annual wage and if they overspent this, they would again pay a fine.

The majority of clubs have deemed the punishments for Everton and Nottingham Forest to be archaic and too harsh. A rule change is likely but how significant this change will be is currently unknown. The Premier League wants to remain the best league in the world, but is this the best way to do it? Only time will tell.

However, in the long-run, this system could help those clubs in the bottom half struggling financially to maintain their top players, instead of being forced to sell.

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