Tax and national insurance cuts introduced by the UK Government will likely make the English Premier League an even more attractive proposition to overseas players.
Chancellor of the Exchequer, Kwasi Kwarteng, announced a 'mini budget' last week, the first of new Prime Minister Liz Truss' tenure, that included plans to cut the top 45 per cent rate of income tax as well as national insurance in a move that has been widely criticised as being weighted in favour of the wealthy.
The Bank of England today confirmed it will step in with measures to calm markets, after the Government's tax-cutting pledges sparked a fall in the pound and a "material risk to UK financial stability".
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High earners will pay a reduced rate of tax under the controversial new scheme, down from the current 45 per cent rate to 40 per cent - something that could mean millions more in the annual pay packets of Premier League football.
A report in the Times states that the average Premier League player earns £4m per year, around £75,000 per week, but does not have in place tax exemptions such are seen in Italy and France. Spain is to bring an end to their tax exemptions and the tax rate sits between 43 per cent and 47 per cent, while the other major European league, Germany, has a 45 per cent rate of tax for its highest earners.
For the likes of Everton and Liverpool, when heading to the transfer market in January or next summer, they may have some extra room for manoeuvre when it comes to the negotiating table, potentially having to pay slightly less in gross terms in wages that they would have been expecting to otherwise, with the tax cuts meaning that the average net income a Premier League player will receive would stand at around £240,000 per annum. For some of the Premier League's biggest earners such as Liverpool's Mohamed Salah, the extra net income will likely top £1m per year, with Manchester United's Cristiano Ronaldo set to bag an extra £1.3m.
"Agents will be looking at their position now ahead of the January and summer transfer windows," football finance expert and author of the Price of Football, Kieran Maguire, told the ECHO.
"The Premier League is the richest league in the world, with more than £2bn more able to be spread around clubs than the Bundesliga. They can already pay massive wages but this tax cut will mean that an already extremely attractive proposition is made even more so.
"For the likes of Liverpool and their reported interest in a move for Jude Bellingham, Bellingham will likely have a proportion of his salary paid to image rights companies, something that many elite players do, something that is well within the rules and has the blessing of HMRC."
The significance of image rights companies being paid directly is that players are paid through HMRC's PAYE, meaning that they are taxed at the time of payment at a rate that had been 45 per cent. If a proportion is paid to an image rights company then corporation tax is paid at 18 per cent.
Should Liverpool be looking to head to the transfer market in a significant way in January and June next year then they may find they have a slightly stronger negotiating position that some teams in Spain and Germany.
For Everton, a side that hasn't been able to break into the so-called 'big six' and take a slice of the enormous wealth that exists through sustained European qualification, the size of the Premier League's media deals and the revenue the competition drives means that they get a slice of around £3.4bn per year compared to £1.8bn in Spain's La Liga, £1.6bn in Italy's Serie A and £1.5bn in the Bundesliga. That already puts them at a significant advantage heading into a period where UEFA are promising to get tougher with clubs who breach financial fair play regulations and spend beyond their means.
Maguire added: "Everton will likely find themselves in a better negotiating position, as will many Premier League clubs. A side that finishes, say, 15th in the Premier League gets vastly more in revenue from the league than a side that finishes 15th in La Liga.
"Agents will be well onto this and it will make the Premier League even more financially attractive that it already was without the clubs necessarily having to keep spending more on wages to meet the demand of players when it comes to their net incomes."
Italy has for some time had a mechanism in place called the Growth Decree, something that Italian football has used as something of a sweetener to try and attract the best players to Serie A in a financial landscape where they may not be able to go toe to toe with the Premier League.
Former Liverpool striker Divock Origi's deal at Anfield was reported to have a salary of around £60,000 per week last season, with his current deal at AC Milan reported to be worth around £5,000 more than that. But more than the extra £5,000 will end up in the bank account of the Belgian.
The Growth Decree legislation was introduced to provide generous tax breaks for workers coming in from abroad and that quickly found itself applied to sport.
Hefty tax relief is given to players arriving from overseas over the age of 20 and earning more than €1m per year in salary. These tax discounts are applied for three years after the date of the move and based upon the player maintaining tax residence in Italy for at least two years.
For Origi, the £5,000-per-week pay rise will actually be far more valuable that it may appear at first, something which has been a tool for Italian clubs to try and entice players to Serie A from abroad, helping them to keep wage spend down due to the economic benefits the tax breaks deliver to the player arriving.
According to the Times, Premier League players paid out £1.4bn in direct tax in 2019-20, the cuts meaning that figure is set to drop by £70m.
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