No Tax Perk for Sneijder as Turkey Tackles Soccer Splurge

It took lots of cash and a government tax perk to lure soccer stars such as Didier Drogba to Istanbul. Turkey’s clubs may soon be lacking both.

In an interview in Ankara last week, Finance Minister Mehmet Simsek said he’d eliminate the privileged 15 percent flat tax for soccer players, forcing them to pay the 35 percent rate applicable to others in their income group instead. The proposal is the latest blow to a league spending beyond its means while battling allegations of match fixing, budgetary impropriety and tax favoritism.

“If the government hikes this to 35 percent or so, the players won’t come because the clubs’ budgets are not fit to shoulder the increase,” Ceylan Caliskan, an agent for Drogba during his season and a half at Turkey’s Galatasaray before the Ivorian returned to London’s Chelsea F.C., said by phone two days ago. “Players want to have big money to come to a place like this from top leagues.”

While Turkish clubs have been offering such money -- Galatasaray gave Drogba a base salary of 4 million euros ($5 million) -- regulators suggest they’re not in a position financially to do so. In September, the Borsa Istanbul threatened to send listed teams to a so-called watchlist for “continuous surveillance” if they don’t clean up their finances. The head of the capital markets board warned them on Oct. 18 to balance their expenditures with income.

Financial Crimes

Short-term borrowing by Turkish teams has dwarfed that of even major European rivals, while their incomes and cash positions pale in comparison. Drogba’s former club Galatasaray has $112 million in debt coming due in the next 12 months, data compiled by Bloomberg show, more than four times as much as English Premier League team Manchester United reported in its most recent filing.

Galatasaray, which paid Inter Milan a 7.5 million euro transfer fee for midfielder Wesley Sneijder last year, reported $2.1 million in cash on hand in the third quarter. That compares with $114 million Manchester reported in its latest filing.

“Football is a big industry in Turkey, but unfortunately we’ve got a long way to go,” Simsek, the finance minister, said in the Oct. 16 interview in Ankara. Simsek said he’d instructed MASAK, the ministry’s financial crimes investigation unit, to investigate teams.

“There’s a lot of issues with transparency, and MASAK is going to look into all football clubs, superleague clubs, and look to see if there’s any money laundering or other issues,” he said.

‘Huge Amounts’

In June 2013, Istanbul teams Besiktas and Fenerbahce were banned from European competition following investigations into allegations of match fixing. Fenerbahce employs foreign players including Dutch winger Dirk Kuyt, Nigerian striker Emmanuel Emenike and Portuguese midfielder Raul Meireles. Besiktas boasts Senegal’s Demba Ba, hired from Chelsea for 2.5 million euros a year excluding appearance fees and bonuses.

“The clubs’ fiscal situation is already very bad and they’re still spending huge amounts on foreign players,” Erdil Arpaci, a former Besiktas director who now works as an agent, said by phone on Oct. 21. “If Turkish clubs are forced immediately to fix their fiscal flaws, none of them will be able to do it.”

Sneijder’s manager Guido Albers said Galatasaray had been late in paying the Dutch star, taking the risk of losing him, according to a report in Turkey’s Sabah newspaper on Oct. 21. Albers didn’t immediately respond to requests for comment made by e-mail and phone yesterday.

Fair Play

Turkish teams’ attempts at budgetary discipline are taking place against the backdrop of UEFA’s Financial Fair Play initiative, which threatens a range of sanctions if clubs spend more than they earn.

Simsek’s tax initiative follows a proposal that sparked threats of a league-wide strike in France last year. President Francois Hollande pressed ahead with his so-called millionaires tax, a 75 percent levy on anyone earning more than 1 million euros, amid warnings from the Ligue de Football Professionnel that it threatened the survival of the soccer league.

The situation for Turkish teams seeking to attract talent may be even more dire.

“Even under current conditions, Turkish clubs are on the verge of bankruptcy,” said Caliskan, the agent. “If the taxes are increased immediately, I think they will definitely go bust.”

‘Knife Edge’

Adnan Nas, a board member at Galatasaray, said the clubs were “already on a knife edge” financially. The proposals on taxes indicate that the government has “changed its mind” on past incentives that took into account the clubs’ impact on Turkey’s image abroad, he said.

Turkey’s last major international sporting triumph came 14 years ago, when Galatasaray beat London’s Arsenal on penalties at the 2000 UEFA Cup Final. Galatasaray’s Claudio Taffarel, the Brazilian national goalkeeper, was named man of the match. Taffarel, now 48, is currently the Istanbul side’s goalkeeping coach.

The two teams met again on Oct. 1 this year, in a match at Emirates Stadium in London that Arsenal won 4-1. Galatasaray received a 50,000 euros fine after its fans threw fireworks onto the pitch. Galatasaray last night lost 4-0 to German side Borussia Dortmund in their Champions League group stage game.

“Turkey will struggle to meet its global sporting ambitions if foreign players aren’t incentivized to join,” Galatasaray’s Nas said. “If you want this success and limit the transfer of foreign players with tax regulations at the same time, then sorry, there won’t be any success to mention.”

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