French teams: development squads?

Monday, 28 November 2011

All for one, one for all

Philippe Gilbert used to ride for FDJ but these days there’s little chance he could go back. The French squad simply doesn’t have the budget to hire him. In an interesting piece on Eurosport.fr, Cofidis manager Eric Boyer says “We don’t have the means the to pay a rider one million a year. It’s an eighth of our budget” whilst Europcar’s manager Jean-René Bernaudeau says that hiring a staff would cost a fortune, “Gilbert, he’d cost our entire team budget“.

France is a nation of 60 million people, Europe’s second largest economy and home to the Tour de France and an extensive calendar of other races. How come the domestic teams have such modest budgets? What is their place in the sport?

Tax is a major factor. I’ve covered the topic before but it comes up again and again. To summarise, when an employer in France hires someone they pay taxes on their wages, adding to the cost of employing them. These taxes, known as “social charges” are a hot political topic but that debate belongs elsewhere. Let’s treat them as the fact they are.

Imagine a top rider with an agent who says “he will sign for a net salary of €1.8 million Euros”. Here’s what it would cost to hire this rider in several countries.

(€ millions) France UK
Italy
Spain
Net Salary 1.8 1.8 1.8 1.8
Player income taxes 1.8 1.2 1.5 1.6
Player social charges 0.35 >0.1 >0.1 >0.1
Gross Salary 4.0
3.0
3.4
3.4
Employer social charges 1.4 0.4 >0.1 >0.1
Total cost to team 5.4 3.3 3.4 3.5
Multiple of net salary 2.98x 1.86x 1.87x 1.91x
Source: French senate

Let’s walk through the table. We start with a rider and his agent saying “pay me €1.8 million a year“, a salary you might expect for, say, Tom Boonen, Fabian Cancellara or Denis Menchov. In lines 2 and 3, the rider or player has income and payroll taxes to settle themselves but already these are significantly greater in France, the gross salary for an athlete in France needs to receive is €4 million compared to €3-3.4 million for neighbouring countries.

But then come the payroll taxes, the social security charges. In France these are massively higher, see line 5. On the gross salary of €4m, another €1.4m in charges are added, meaning a French team needs to budget €5.4m just to ensure a rider gets his €1.8m, whereas a British-registered team only needs to spend €3.3m to give the same rider the same standard of living.

All in all it means a French cycling team needs a wage budget almost 50% bigger than a British team just to employ the same riders. As you can imagine, this is a real handicap. Put simply, French sports teams can’t compete on the same terms as rivals from other countries.

It’s not an abstract matter of data, tables and tax rates. The Eurosport piece points out that French squads have tried to hire Thor Hushovd, Janez Brajkovic, Denis Menchov, Tejay van Garderen, Andreas Klöden, Filippo Pozzato, Sylvain Chavanel and John Degenkolb, amongst others. But the riders were unaffordable.

Is this down to tax alone? Probably not but this is a reason why the French soccer league does not attract the best players and it is also a major factor in cycling. In addition, other countries allow teams to recruit riders on a “self-employed” basis whereby they contract out their labour to a pro team but legally they are not employed by the pro team. This outsourced status also saves a team money…and is also unavailable in France.

But if French teams have no big names, it is also because they don’t have the budget to start with. If they cannot rival Sky or BMC for wage expenditure and their all-star rosters, they could aim to recruit at least one or two big leaders and put a squad at their service.

Today we are condemned to develop riders. The wealthy pay [for talent], we develop it
-Eric Boyer, Cofidis

If a big name is out of reach this suggests French teams face a different role. When a rider on a French team becomes world class they will most probably leave for another team. This is already the case for French soccer where the “Ligue 1” frequently sees its best players bought by clubs in England, Italy and Spain although note the word “bought”. Soccer players can be transferred for millions, creating a new revenue stream for clubs that find new talent and develop it. In cycling French teams can find new talent but they cannot recover any costs via a transfer fee by selling, say, Gilbert to Lotto or Chavanel to Quick Step.

But I find a certain fatality in the comments of French team managers. They complain French citizens cannot move to Monaco to dodge taxes, which is true and gives Belgian or Italian riders even more income. But if a Frenchman wanted to maximise their take-home pay they could move to a low tax country like Switzerland. And several Italian teams are registered in Britain and Ireland. Indeed Continental team VC La Pomme, effectively a club from Marseilles, was registered in Latvia for 2010.

Above all, I’m not seeing the rider development at the French teams. There’s something to be admired in Thomas Voeckler training without a powermeter and not even using a heart rate monitor but that is because it embraces an old-school romanticism. But it’s not the example to follow for teams wanting to get the best out of young riders. Take the example of Richie Porte, a neo-pro in his first few races with Saxo Bank and he didn’t stand out at first glance. But the team could spot his ability thanks his powermeter because Porte was putting out big numbers but just finding it hard to navigate his way in the dense bunch. This isn’t to say French teams don’t embrace sports science, they do. Cofidis employs a full-time coach and FDJ has well-structured training plans for younger riders. But there is still a legacy of old methods. And if teams want to bring on new riders when I look at the French squads they have not recruited many ne0-pros. FDJ has two whilst Agr2 La Mondiale, Cofidis and Saur-Sojasun have taken on one neo-pro each.

Similarly if smaller squads want to sign promising talent they need to look far and wide but the French teams tend to recruit local riders. Ag2r has recruited foreigners but this is for the points and not the talent, for what a rider has done in the past season rather than what he could do in the years to come.

Same story?
All countries are waking up to change. The Italians used to dominate the sport, plenty has changed since that time and no Italian won a classic this year or last. If France has challenges, so do many other countries. Forget tax, the maths has changed with the arrival of so many new riders from around the world. France, Belgium, Holland, Italy, Spain and Switzerland can no longer count on winning.

Conclusion
French teams can do more than bring on young riders. As a major country with large consumer brands and multinationals combined with a big calendar of excellent domestic races, you’d think France would be a heartland for cycling. But alas, FDJ has just rejoined the Pro Tour and Ag2r just qualified to stay in the top league.

Tax is a big issue for the French squads, a national issue that affects their ability to compete at home and abroad. But this is not insurmountable. We’ve seen some Italian teams registering abroad. If riders want millions, they can move to a low tax country. Obviously teams and riders chose not to move and perhaps we should salute this patriotic loyalty. But if a French squad does want to compete against others, maybe they need to adopt the same measures? As long as the rules allow it.

Finally, plenty can change. If Pierre Rolland or another Frenchman can come close to winning the Tour de France then sponsors, tax or not, will be queuing up

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{ 18 comments }

daniel November 28, 2011 at 7:39 pm

I think VC La Pomme were/are registered in Latvia.

That employer social charges tax is pretty shocking compared with those other countries. As a general French team supporter, this has got me down a bit.

Tomashuuns November 28, 2011 at 7:44 pm

An interesting fact:
In French teams you can notice that they all have 49 employees. Why you ask? Companies that have 50 or more employees have much bigger obligations:
http://www.bignonlebray.com/emails/68493cc89610e97da4529ee624d7ca56.html
that is why maybe they sack a few also valuable people. (I don’t really know what’s the situation in other countries, sorry.)

P.S. Yup! It was Latvia

simis November 28, 2011 at 7:49 pm

And I believe VC La Pomme were registered in Latvia not because of taxes but because the french federation wouldn’t give a team license

The Inner Ring November 28, 2011 at 7:56 pm

Latvia is fixed, thanks for that. And as Simis says it was not registered there for tax purposes but because the French Federation refused the team’s candidacy. My point was that if a French squad, one that is so identifiable with a French city, can be based abroad then Cofidis and others can do this.

But, and this is the key point… being French means near-automatic entry into the Tour de France. If Cofidis registered under a Belgian subsidiary… maybe they wouldn’t get an invite in July?

channel_zero November 28, 2011 at 8:52 pm

It’s not a tax issue.

#1 Taxes are high in France, yet, somehow the French are churning out good talent. Hopefully their recent success is due to less PED’s in the peloton. But, I think there’s a bias in your writing advocating a team structure where nationality is a factor.

#2 The UCI’s policies control the feeder system for talent used in ASO/RCS(? giro owner) events. There’s a bias towards keeping the entire Pro racing economy poor outside of ASO and possibly RCS events. A national federation can never become stronger than the UCI. So, even if the French were to forgive those taxes for bike racers, their budget would not change because of UCI policies.

Duncan November 28, 2011 at 10:12 pm

I can see the point with the tax issue. I work for a multinational and we don’t have a properly staffed office in Paris because it is too expensive to employ people. Instead the French move to London and if there is a meeting with a French client they take the Eurostar. It’s going to be the same for these teams: if they operate under French law they operate under French taxes.

A shame though. Sometimes it feels like people in France don’t understand business but you think of the country as the home of road cycling.

cthulhu November 29, 2011 at 12:26 am

I actually believe not the French taxes are too high but the British too low. And the nearly total missing of social charges in Italy and Spain worrisome. But that is an political problem within the EU and still a sign of too much competition within the union and not enough unification. But I doubt that does belong here.

Despite the fact that it brings them a guaranteed Tour invitation it still is admirable that the French teams keep their local identity to the fullest with all it’s duties to the society although that is pretty costly.

TotheBillyoh November 29, 2011 at 2:01 am

cthulhu says it all for me. Taxes are what pays for the teachers, police and even the roads we race on. Many countries in the world outside of France are gripped with a mania to privatise profits and socialise costs to the benefit of whom? The 1%. And ‘low’ taxes are a part of this.

In a reverse view I wonder what amount of taxation dollars are being fed directly and indirectly to teams? GreedEdge is a benefactor from Australian Institute of Sport dollars (a body set up to “buy” us gold medals at the Olympic Games because we get sad and toss out governments if we don’t). Astana et al are another case in point.

A level playing field, beloved of the World Bank, WTO and other USA quangos? I think not.

That said, an excellent post again, thanks. I will regard French teams with renewed respect in future, knowing what they are dealing with.

The Inner Ring November 29, 2011 at 8:41 am

With the French presidential election in 2012, “social charges” are a political topic but not for sports teams but whether these taxes prohibit employment in France as a whole. In cycling it’s just one example how teams race globally but work on the basis of local rules. Teams have to contend with many other factors, for example the $/€ exchange matters for the US teams and rules on employment law affect the recruitment of “soigneurs” in France.

Nico November 29, 2011 at 11:32 am

Excellent article, as always.

Having recently moved from France to work in Belgium, I was shocked to realise that Belgian taxation and social security charges are even higher (in most cases) than in France.

High taxation does not prevent fairly large teams (Quickstep springs to mind) to do well in the Pro Tour and attract riders on high salary.

As an earlier poster rightly mentions, surely one of the reasons why French teams stay ‘small’ is because there is very little in the way of ‘business culture’ in France, which would (partially) explain why French teams fail to attract bigger sponsors – or more money from existing ones?

In response to your last comment Inner Ring, unfortunately I cannot really see ‘social charges’ being lowered after 2012 – not because it is likely that the socialists will get in, but whether we like it or not the priority will be to reduce government debt…

Yorkie November 29, 2011 at 11:47 am

If taxes are so high for high-earning French sportsmen, then how come the French rugby teams are able to attract the world’s greatest players to compete in their leagues?

The Inner Ring November 29, 2011 at 11:57 am

Yorkie: someone was asking that on Twitter. I’ve read about this in France and there was a piece in L’Equipe a while back, maybe a year ago? In a simple summary, you have a salary cap in European club rugby and the big clubs are only France and England, at least in terms of budgets. The best players were going to the English clubs but then came the banking crisis and the Pound fell a lot against the Euro and income tax was raised in Britain. This changed the balance, being paid in Pounds was less attractive and the salary after tax was reduced if you play in Britain. But it’s comparing England and France, soccer is better because we see more European nations in comparison.

DP November 29, 2011 at 5:23 pm

The Salary cap in Rugby is only applicable to English clubs not French, this is why there is a current influx of UK rugby players to French Rugby teams.

Maddave November 29, 2011 at 8:49 pm

This is a cycling blog I know, but the “worlds greatest rugby players” play in France.

Did I miss something?

The Inner Ring November 29, 2011 at 8:54 pm

DP: thanks

Maddave: going off territory has its risks. I did mean the best players playing in Europe of course and of those, the ones who are mobile and hopping from club to club etc.

DM Gorton November 29, 2011 at 10:51 pm

Quality article. Why I read this blog. Not to learn about tarmac.

Martin W November 30, 2011 at 12:52 am

A UK-based cyclist on a net salary of €1.8 million is only paying 20% income tax? They should be paying 50% on anything over £150,000, shouldn’t they?

Having said that, I wouldn’t be surprised if most millionaires in the UK paid an effective tax rate of below 20%, since they can afford advice on how to drive a truck through the loopholes in tax law and enforcement. Sigh. As you were.

Martin W November 30, 2011 at 12:53 am

Whoah, sorry. Misread the table, it’s an additional 1.2m not a multiple. It’s late here.

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