In what must be classed as an unsuccessful year in football for La Liga (yet in almost every other league would be seen as a resounding success) with neither of Spain’s two most dominant clubs reaching the final of the Champion’s League, Spanish football is facing up to a stark reality both on and off the pitch. 

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The dual hegemony of Barça and Real Madrid has been one of the few constants during Spain’s tumultuous recent history, but while they have survived and prospered through two socialist revolutions, a dictatorship and finally modern democracy, they may be facing their biggest challenge yet in the shape of the financial crisis.



Spain obviously values its football league highly, as both a world class commodity with enormous export value, and as a showcase of Spanish talent to the world.  Just as any other country would in its situation, Spain has shown itself to be keen to do what it can to preserve its domination in the most truly global sport there is.  However, the Spanish government’s laissez-faire attitude to the collective debt of Spanish football clubs is finally starting to provoke debate about how far a country should go to maintain its presence as a world beater.



It is an unfortunate truth that in the past any government that upset the shared power balance between Catalunya and Madrid would have seen serious repercussions at the polling station.  Football has been carrying out its business inside of a bubble impervious to the dangers of the real world, but now the voices demanding that the rich pay their way are growing louder than the singing at the terraces and consecutive governments have begun to chip away at the hitherto untouchables’ almost unlimited liberty when balancing the books.



Until recently, the clubs and players benefited from three different forms of tax relief.



The first and probably most contentious was tax exemptions for foreigners. This began with David Beckham’s arrival at Real Madrid from Manchester United in 2003, which cost the club £24.5m.  Two years later a law was passed to allow expatriates playing in Spain the chance to avoid normal levels of 45% of tax for high earners and instead pay a flat rate of 24% - the same rate as the lowest earners in the country.



The original intention of the law was to attract big businesses from abroad to Spain, leading to more investment in the country, but it didn’t take long for footballers to realise that there was a potential goldmine waiting for them on Spanish shores.  The law was backdated to two years prior to it being passed with David Beckham the first player to benefit, and from that day the act was known in the Spanish press as the Beckham Law.

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As footballers’ agents generally deal in figures received after tax, the Beckham Law meant that teams were able to pay players better wages than their English or Italian counterparts.  In January 2010 the socialist government amended this incentive to only apply to those with salaries below €600,000, thus shutting out most of the Spanish league’s biggest names.



Secondly, the rate of tax for high earning nationals (Spaniards who could not benefit from the Beckham Law) was set at 43%, which made it a more attractive proposition than the 50% rate Premier League players must pay.  Yet once again, in the face of financial oblivion the Popular Party were forced to increase the rate of tax by 7% for taxpayers earning over €300,000.  The Popular Party were the ones who set this original rate of tax in the first place, and it seems impossible to imagine this kind of activity if it weren’t for the pressure building due to Spain precarious financial position.



Finally, clubs rather than players continue to benefit from the Spanish taxman’s overly relaxed attitude towards them.  Nearly all English clubs have some level of debt, but income tax debt is less expensive as it amounts to little more than a interest free loan from the state, whereas normal debt will amass interest for as long as it not paid off - making it much more attractive for clubs to avoid paying their national debt for as long as possible.  German newspaper Bild expressed its anger at the possibility of Europe having to effectively pay the wages of players such as Cristiano Ronaldo should Spain require a bailout, as top Spanish clubs were paying such high wages instead of prioritising their debts to the state.



In total, Spanish clubs owe €780m to the government, with Atlético Madrid the club most indebted to the nation’s coffers, making up €155m of that total.



At a time when new rules are being introduced to force teams to balance spending in relation to self-generated income (Financial Fair Play), questions have been asked by the European Commission over whether relaxation over debt payments constitutes state aid for the teams in question.



Some commentators have gone as far as to label this practice ‘financial doping’ - clubs getting unfair help to balance their books from the state while other countries’ teams have to find their own means to be successful.

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It is not difficult to imagine that these unjust instances of aid to some of the biggest institutions in the world would have kept going indefinitely were it not for the government’s hand being forced by the financial crisis.  Hopefully once Europe sees the back of these dire financial times they will not be tempted to revert back to their old ways. 

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Until then these powerful institutions will have to learn anew how they once played their beautiful game on a even playing surface.