The paradox of the lack of fiscal harmonisation in Europe

During these hard times of economic crisis and constant reminders of economic recession, company closures, dismissals, and growth in unemployment rates in Europe etc., a few days ago we woke to the news of the transfer of two new “workers” to Spain: Cristiano Ronaldo and Kaká.

We could discuss the injustice of wasting almost 100 million euros on hiring a single person or list all the good things that could be done with so large a sum of money such as public works, or aid for third world countries, etc.

However, let us focus instead on the fact that such contracts are mainly possible because of a lack of European fiscal harmonisation.

Irrespective of questions of sport and heated discussions on justice and injustice, or morality and amorality, it is quite possible that these two “workers” will pay a lower tax rate than you in their next tax declaration. Have you considered that? Could you believe that they pay a lower percentage of tax than you?

Some years ago, the Spanish government established a law, known as the “Beckham Law”, which was originally intended to attract foreign talent, mainly researchers, by offering them a non-resident tax rate of 24%.

Spanish football clubs currently make the most of this law to offer football players better conditions than their German, Italian or French counterparts.

If a reader’s yearly income is over €60,000, then he or she will be taxed at a rate of 43% in the next tax declaration, whereas Mr Ronaldo and Mr Kaká will be taxed at a rate of 24% in their first years in Spain.

I therefore invite you to reflect with me.

While sitting on your sofa on a Sunday in May/ June 2010, completing your tax declaration, enjoy the magic of these two workers.

Julio Contreras
Branch Manager
ADMINEX Spain