Serie A clubs did not raise a glass of Franciacorta during the New Year’s Eve countdown. There was little reason to celebrate, as the league had lost its competitive advantage once the clock struck twelve.
Government leaders knew there were plans to phase out tax breaks that the government had used to gain an advantage in the transfer market. It was originally scheduled to be held at the end of February, so this is the last chance to take advantage of the winter window. However, the abolition was brought forward and took effect from January 1st.
Happy New Year, Serie A!
As explained in our long article on the subject, the introduction of the “Decreto Crescita” (Growth Decree) four years ago saw the return of Serie A. The flat tax allows clubs to attract foreigners and Italians working abroad (coaches, players, officials, etc.). Their contributions to the state have been roughly halved. The tax break was a relatively small but welcome aid in Italy, where the league’s television rights were rolled back, betting sponsorships were banned and the government did nothing to build new stadiums.
Serie A has had four different champions in four years. The team began to reach European finals again, culminating in June with Inter Milan in the Champions League final, Roma in the Europa League final, and Fiorentina in the Europa Conference League final. For the first time since 1990, Serie A played in his three UEFA finals simultaneously. Each club involved has benefited to varying degrees from the Growth Order.
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“Now that Italian football is moving up the European rankings, with three Italian teams taking part as finalists in Europe’s three most important competitions, two Italian clubs are scheduled to take part in the Club World Cup. At this moment, the removal of this tax deduction is an own goal for the world of football and for the economy of this country,” Inter CEO Giuseppe Marotta said.
That doesn’t prevent Marotta from signing Canadian international Tajon Buchanan from Club Brugge this week. Nevertheless, the reversal of tax breaks is a complicating factor. For comparison, Inter are paying a total of €44.7m (£38.6m, $49.9m) in wages, which would have cost €59.6m without the Growth Order. This undoubtedly gave them more financial power when negotiating with free agents such as former Borussia Mönchengladbach forward Markus Thuram, who has signed a contract for this season in Serie A.
The repeal of the Growth Ordinance is not retroactive. Players who currently benefit from it will continue to benefit from it under their current contracts. Clubs will be asked by the government whether they will be able to carry forward tax breaks for existing beneficiaries whose contracts are up for renewal, including Roma’s Jose Mourinho, AC Milan’s Mike Maignan and Italy-bound Romelu Lukaku. I’m nervously waiting for a clear explanation. Without that, it will be difficult to rent him next season or permanently transfer him.
“You are hurting the club,” said Lazio owner Claudio Lotito, who ended up hurting their rivals. “Without Mourinho and Lukaku, Roma is finished.”
Roma, like Milan, have relied on growth orders more than other teams. They are paying nearly 70 million euros in wages that would have cost 90 million euros without the tax cut. Tammy Abraham, Fikayo Tomori, Christian Pulisic, Ruben Loftus-Cheek and Olivier Giroud have moved to Italy, with both likely shopping at Chelsea.
The Premier League’s Profit and Sustainability Rules (PSR) are more important than ever. To make ends meet, English clubs need a market to sell to. Despite the growth mandate, Premier League wages are unreasonable for Serie A teams. It is now even more difficult to approximate them.
This is already having an impact on the January transfer window. Roma were looking for a centre-back, and instead of signing Chelsea’s Trevor Chalobah and Tottenham Hotspur’s Eric Dier, they loaned Dean Huyssen from Juventus, who was available on a more affordable deal before January 1st. I chose that. The suspensions of Paul Pogba and Nicolo Fagioli mean Juventus could be suspended. As for midfielders, the chances of signing Kalvin Phillips from Manchester City and Pierre-Emile Hojbjerg from Tottenham are bleak as they are both nominally expensive. Instead, Juventus are looking inward and promoting another player from the Next Generation team, Josef Nonge. The next generation team, which plays in the third tier and was set up to bridge the gap between the youth teams and the first team, should put Juventus in a good position to respond to change.
Now that English players are no longer classed as non-EU nationals in Italian football, Serie A clubs will continue to look to acquire English proficiency. The strategy here is to sell players with a raw premium back to the richest league in the world. But the cost of signing another Abraham or Tomori, to name a few, is now prohibitively expensive.
Player trading models will be affected. Consider the case of Selhou Guirassi. The Stuttgart striker has a low buyout clause of 17.5 million euros. A Serie A club like Milan could challenge Guirassi with the aim of moving him to the Premier League within 18 months. The tax cut will make the personal terms they can offer more competitive, perhaps giving them an advantage over their rivals in terms of his signature. Without it, there will be more costs and risks, and fewer profits.
“The tax cut was a tool to encourage the acquisition of players with high interest,” Marotta explained. “Today (removal) means a handicap. As a result, the quality of the product will be reduced, but not only that.” There will be no desire to sign a contract. Tax revenue from soccer could decline.
“One of the good things here in Italy over the last four or five years is that we have been able to attract foreign players thanks to the growth order,” said Roma general manager Tiago Pinto. The Athletic. “If you think about it for a second, Achraf Hakimi, Lukaku, Christian Eriksen, Tammy, Nemanja Matic, Georginio Wijnaldum, Pulisic, Loftus-Cheek…we wouldn’t have gotten even half of them if we didn’t have the Growth Order. is a very populist policy by the government. In the end, it will not end well.”
(Top photo: Pulisic’s deal with Milan will now be more difficult; by Alessandro Sabattini/Getty Images)