Tax is a big topic in France right now. With a promise to cut its budget deficit, the French government has been looking for ways to raise extra revenue. Meanwhile unemployment is high and many agonize over the long-standing high payroll taxes that make hiring expensive.
But it’s just the newspaper front pages or the business section, the saga of football club AS Monaco’s promotion to the top league of French football has put the spotlight on zero-tax Monaco vs high-tax France. It’s also a big issue in cycling. If it’s not a talking topic, high payroll taxes in France are fundamental to understanding why French teams face an uphill task compared to their rivals.
Let’s start with the basics. A payroll tax is a tax paid by the employer based on the employee’s wages. You might think of workers in a factory here but it applies to a pro team which pays the same tax on a percentage of a rider’s salary.
Oh la la
France which has some of the highest payroll taxes in the world and by some measures the highest. The rates vary with sliding scales, deductions and other variables that help keep accountants and payroll software vendors in clover. But the number is about 42%, knock yourself out with the OECD report. It means to pay a rider the UCI minimum wage in the World Tour of €36,300 a French team pays €51,500: €36k in salary plus about 40% or €15k in tax. Once the rider receives the money they they’re liable for income tax and social security contributions.
The upshot is that a French team has to pay more in tax to hire a rider than a Spanish, Australian or Dutch team. Substantially so. It’s a subject that’s interested the French senate who looked into the matter with regards to football. Here’s some data on the effect of taxes when a soccer club looks at hiring a top player:
To explain the table, we start with an athlete and his agent saying “pay me €1.8 million a year”, a salary you might expect for a top rider capable of winning a grand tour. The athlete can pick from a range of teams in different countries but wants to be paid this amount. In lines 2 and 3, the rider or footballer 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. Our exemplar rider might move to Monaco, where no income tax is liable. The move will save them well over a million Euros a year.
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 meet the rider’s demands. This isn’t an abstract matter, take the case of Sylvain Chavanel who had been of interest to several French teams but he went to Swiss team IAM which might have a smaller budget but it can stretch it further.
Golden generation, golden pay?
Look to the future and the current crop of riders is very promising. But if they deliver then they’ll want to be paid accordingly and if a non-French team offers a high salary then it’s possible the French squad cannot match it and the rider would leave abroad. Should they stay then it would take an exceptional commitment from the sponsor.
Teams can move. At the stroke of a pen it’s possible to reclassify a team and. “Italian” teams Vini Fantini and Bardiani-CSF have their headquarters in London and Dublin respectively. Kazakh outfit Astana are run through Luxembourg. French teams could move their tax domicile to another country. But they cannot:
- FDJ is state-owned and this would not be allowed
- Ag2r is a health-insurance company that trades on values of solidarité that exclude moving a cycling team to Ireland
- Europcar is a big French company and the team has deep roots in the Vendée region whose regional government has kept the team afloat over the years
- Smaller team Bretagne-Séché are also sponsored by a region, they cannot move abroad
- Cofidis could consider the move but if it wants a wildcard invitation to the Tour de France then being seen to be French is the best way to get invited
In fact paying high taxes in France is a way to buy yourself a start in the Tour de France. It is expensive but you can be sure of the golden ticket for July. Teams like Cofidis and Sojasun have been able to ride the Tour de France when, if they were Turkish or Brazilian, would have slim chances of being selected. For all the penalty of being French, being French is very valuable for some teams.
There are other advantages too. There’s talk of a “golden generation” right now in French cycling but it’s not thanks to luck. French cycling has deep roots with a large network of clubs and teams to act as talent scouts. Those high taxes fund coaches and a strong U-23 programme, so much that the UCI has removed the international status of some French U-23 because the French simply had too many events.
Mercifully cycling is a sport and there are greater factors to success that the tax rate applied to a team. But whether it’s hiring a neo-pro or signing a superstar, it costs more in France to pay riders and this is a contributing factor to the relative weakness of French squads. People used to talk about a two-speed cycling in relation to doping, relatively clean French squads up against some foreign squads with a less ethical stance. But given the tax differences we also have un cyclisme à taux variable and as the current crop of French riders progress it’ll be interesting to see if they remain in France.
- I’d covered the topic once before but readership has grown by a factor of beaucoup so it’s time to revisit, update and reflect again on the subject. Also if you have an iPad or iPhone, subscribe to 2r Magazine for a recent article on Italian teams who are secretly registered in low-tax locations like London and Dublin.