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Nov 6, 2009

Spanish league decides not to strike over tax hike

Spain's professional soccer league (LFP) has decided not to strike over a planned tax hike for top-earning foreigners and has instead set up a commission and called for dialogue with the government.

After a meeting of officials from the 42 clubs in Spain's top two divisions in Madrid, the LFP said it had agreed not to take any action for the time being and to create a commission including Real Madrid president Florentino Perez, the LFP president and three other club bosses.

It said another meeting would be held on Nov. 19 to discuss any progress made in talks it hoped to have with the Socialist government.

The new measure, which needs parliamentary approval and will take effect at the beginning of next year, will raise taxes for foreigners who earn above 600,000 euros ($892,600) a year to 43 percent from 24 percent.

The move, which modifies the so-called "Beckham Law" named after the England midfielder and former Real player, has split Spanish soccer.

Some clubs, coaches, players and the LFP argue they will discourage foreign players from coming to La Liga or make it impossible for clubs to afford them and others say everyone should be treated equally by the tax authorities.

The "Beckham Law" was approved in 2002 to make hiring foreign high-earners easier and Spain more attractive to the highly qualified or skilled.

Angel Barajas, a professor at the University of Vigo and an expert on soccer finances, said the change in the tax system was an opportunity for clubs to change the way they negotiate contracts with players.

If clubs continued to agree contracts based on net wages then personnel costs would rise considerably under the new rules and they should therefore switch to negotiating based on gross wages, he told Reuters. "If they don't then the financial situation of the clubs can only get worse. Nevertheless, this tax change would affect the bigger clubs more as their contracts are obviously worth more."

Real director general Jorge Valdano told Spanish radio on Friday the change in the tax treatment of foreigners would hurt the clubs and not the players coming to Spain.

"It's clear that this would weaken our league compared to the English Premier League and we can't resign ourselves to coming second," the Argentine said. "And you also can't take action of this sort without consulting anyone in the soccer world," he added. "It's an understandable political measure but it seems very hasty."

The new rules are not retroactive and will not affect players who have already signed contracts with Spanish clubs such as Real's Cristiano Ronaldo and Kaka or Barcelona's Zlatan Ibrahimovic and Lionel Messi.

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