Uefa will set out proposals next month to replace its Financial Fair Play rules with a salary cap and luxury tax by next year.
Under the planned system, clubs in European competition would be limited to spending a fixed percentage of their revenue — possibly 70 per cent — on salaries. Any clubs breaching the cap would have to pay a luxury tax, under which the equivalent or more of any overspend would go into a pot to be redistributed.
This would
replace the FFP rules brought in 11 years ago, which state that clubs must break even over a three-year period.
The proposals will be unveiled at a convention on the future of European football that Uefa is hosting in Switzerland next month, involving national associations, leagues, clubs, players and agents, sources with knowledge of the plan have told
The Times. That meeting will also discuss how to fend off the threat of any future breakaway European Super League (ESL).
The plan is viewed as fairer and more transparent than the existing FFP system and would allow some scope for wealthy owners to spend beyond their club’s income, but only if they are willing to pay the luxury tax. For example, if Paris Saint-Germain’s signing of Lionel Messi and other players this summer pushed the club over the salary-cap threshold, they could remain in European competition but would have to pay a substantial amount extra for the privilege.
Redistributing the money from salary-cap breaches to other clubs would also promote competitiveness, Uefa is expected to argue.
The draft proposals envisage adopting a similar system to those used in the United States in Major League Baseball and basketball’s NBA.
One example would be that for every Euro a club exceeds the salary cap, it would then have to pay a Euro into a fund distributed to the other teams in that competition. If the cap is breached the next year, the repeat offenders would pay €1.5 or €2 for every €1 they have gone over, depending on the scale of the breach.
Repeat offenders would also face possible sporting sanctions, up to the ultimate punishment of disqualification from European competition, as Uefa believes there still needs to be a strong deterrent to stop clubs overspending.
The proposed luxury tax would also be used on a sliding scale — for example, exceeding the cap by up to 20 per cent could mean clubs paying the equivalent amount of the overspend, but for anything over 20 per cent it could be 1.5 or two times that amount.
The review of FFP has been taking place internally in Uefa for the past year and officials believe that the salary cap/luxury tax system would be based only on recent spending by clubs and allow them to plan more easily for the future.
Under the existing system, clubs’ losses from as far back as four years ago can be used as part of the FFP calculation, something that has become almost unworkable after the financial impact of the pandemic on European football.
It is understood that the European Commission (EC) would be happy that a salary cap based on percentage of revenue would comply with European law.
The European Commission is believed to have no objections to the idea of a salary threshold
EPA
There is also an idea of having one fixed salary cap at a very high level, for example €600 million (about £509 million), alongside the percentage of revenue to stop the elite clubs inflating their income to ridiculous levels via related-party sponsorship deals. That, however, would be less easy in terms of securing agreement from the EC.
A constant criticism of FFP has been that it maintains the elite clubs’ position because owners of smaller clubs who are trying to reach the same level are not allowed to put in money to cover losses.
The salary cap as a percentage of revenue would potentially have a similar effect as those clubs with the bigger revenues can spend more on wages, but it would be more flexible and would at least allow owners to breach the cap if they were prepared to pay for it.
The actual level fixed for the salary cap will be a key decision for Uefa. France’s Ligue 1 is implementing a 70 per cent of turnover restriction from 2023-24, so Uefa may follow a similar path.
Intriguingly, the plans for the ESL, which collapsed in April, also included a salary cap, but the member clubs would have been limited to spending only 55 per cent of turnover on salaries and transfers combined.
The ESL’s founder members, including the “big six” English clubs, would have earned up to £310 million in joining fees and about £220 million a year — twice as much as they get from the Champions League.
The ESL’s plans collapsed when nine of the 12 founder clubs, including the six English ones, pulled out only 48 hours after it was launched, though the remaining trio of Real Madrid, Barcelona and Juventus are still involved in court proceedings against Uefa.
Q&A
Why is Uefa ditching its FFP rules?
There is an acceptance at Uefa that the FFP rules introduced in 2010 have had their day and something more relevant is necessary.
What is the thinking behind the cap being a percentage of revenue rather than a fixed cap?
It is much easier to get the European Commission to ratify a percentage of revenue. Setting a fixed number could lead to legal challenges based on competition legislation.
Why is it called a “luxury tax”?
Clubs who breach the cap will have to pay for the luxury of doing so — for every euro spent above the limit they will have to contribute the same or more to a central fund to be distributed to rivals.
Which clubs would this system help most?
It will make it easier for the state or oligarch-owned clubs to inject more money into their teams to achieve success, so it may be a levelling up with the established giants of European football. For most clubs, it should be simpler to plan to stay within the cap rather than the complicated FFP calculations.
How will the new system be more transparent?
Clubs will know what the penalties will be for breaching the cap, so it won’t be a complex sanctioning system. Sporting sanctions would be imposed only on repeat offenders.
What is the likelihood of stakeholders giving this the thumbs-up?
It appears likely — most people in football agree that FFP needs a total overhaul and this system works well in basketball and baseball in the USA. There is no obvious alternative.
