Serie A clubs did not raise glasses of franciacorta during the countdown on New Year’s Eve. There was little reason to celebrate because as the clock struck 12, the league lost a competitive advantage.
Executives knew the government planned to phase out a tax break they had used as an edge in the transfer market. It was supposed to happen at the end of February, making the winter window the last chance to use it. However, its abolition was brought forward and became effective from January 1.
Happy New Year, Serie A!
As explained in our long read on this issue, the introduction of the ‘Decreto Crescita’ (Growth Decree) four years ago revived Serie A. Clubs could attract foreigners and Italians working abroad (coaches, players and executives alike) with a flat tax that roughly halved their contributions to the state. In Italy, the league’s TV rights were going backwards, betting sponsorship had been banned and the government was doing nothing to get new stadiums built, and the tax break was a relatively small but welcome bit of support.
Serie A has had four different champions in four years. Its teams have begun reaching 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 was represented in three UEFA finals simultaneously. Each of the clubs involved have benefited to varying degrees from the Growth Decree.
“At a time when Italian football is climbing up the European rankings, at a time when three Italian teams have participated as finalists in the three most important European competitions, at a time when two Italian clubs will be participating in the Club World Cup, the abolition of this tax break is an own goal for the world of football and for the country’s economy,” said Giuseppe Marotta, Inter’s chief executive.
It has not stopped Marotta from signing Canada international Tajon Buchanan from Club Bruges this week. Nevertheless, the reversal of the tax relief is a complicating factor. For context, Inter pay a total of €44.7million (£38.6m; $49.9m) in wages that would cost €59.6m without the Growth Decree. It gave them more financial power when negotiating with free agents, such as former Borussia Monchengladbach forward Marcus Thuram, who has arguably been the signing of the season in Serie A.
Buchanan is heading for Inter (Matteo Ciambelli/DeFodi Images via Getty Images)
The repeal of the Growth Decree is not retrospective. Players who benefit from it now will continue to do so for their current contracts. Clubs are nervously waiting for clarity from the government to see whether the tax break can be rolled over for existing beneficiaries whose contracts are up for renewal such as Jose Mourinho at Roma, Mike Maignan at AC Milan and Romelu Lukaku, whose prospects of returning to Italy on loan or permanently next season will be harder without it.
“You’re damaging clubs,” Lazio owner Claudio Lotito said, only to then needle his rivals. “Without Mourinho and Lukaku, Roma are dead.”
Roma have leaned on the Growth Decree more than most, as have Milan. They pay almost €70m in wages which would have cost €90m in the absence of the tax break. Both have tended to shop at Chelsea, with Tammy Abraham, Fikayo Tomori, Christian Pulisic, Ruben Loftus-Cheek and Olivier Giroud moving to Italy.
The Premier League’s profit and sustainability rules (PSR) are more relevant than ever. To balance their books, English clubs need markets to sell to. Premier League wages are a stretch for teams in Serie A, even with the Growth Decree. Now they are even tougher to approximate.
This is already having a bearing on the January transfer window. Roma were looking for a centre-back and chose to loan Dean Huijsen from Juventus rather than pursue Chelsea’s Trevoh Chalobah and Tottenham Hotspur’s Eric Dier, who would be less affordable than before January 1. The suspensions of Paul Pogba and Nicolo Fagioli mean Juventus could maybe use a midfielder, but the prospects of taking Kalvin Phillips from Manchester City or Pierre-Emile Hojbjerg from Tottenham have been dented now that both are nominally more expensive. Instead, Juventus are looking within, promoting another player from their Next Gen team, Joseph Nonge. The Next Gen side which plays in the third tier and was set up to bridge the gap between the youth team and the first team should put Juventus in a good place to cope with the change.
Serie A clubs will still try to buy English, especially now that English players are no longer classified as non-EU nationals in Italian football. The strategy here is to sell players with a homegrown premium back to the richest league in the world. But the cost of signing another Abraham or Tomori — to give a couple of examples — is now more prohibitive.
Player trading models will be affected. Take the case of Serhou Guirassy. The Stuttgart striker has a low buyout clause at €17.5m. A Serie A club like Milan could take a punt on Guirassy with a view to moving him to the Premier League in 18 months. The tax break would make the personal terms they could offer more competitive, perhaps giving them an edge over rivals for his signature. Without it, there is more cost, more risk and less upside.
Attainable targets, such as Guirassy, just got more expensive for Italian clubs (Harry Langer/DeFodi Images via Getty Images)
“The tax relief was a tool that facilitated the arrival of players that generated interest,” Marotta explained. “Today (its removal) represents a handicap. The quality of the product will be impoverished as a consequence and not only that.” If the game suffers, fans will be less inclined to go to stadiums, buy merchandise, take out TV subscriptions and all the rest. Tax revenues from football may fall.
“One of the good things here in Italy over the last four or five years was our capacity to attract these foreign players because of the Growth Decree,” Roma general manager Tiago Pinto tells The Athletic. “If you think a little bit, Achraf Hakimi, Lukaku, Christian Eriksen, Tammy, Nemanja Matic, Georginio Wijnaldum, Pulisic, Loftus-Cheek…without the Growth Decree, you wouldn’t get half of them. It’s a very populist measure from the government. In the end, the outcome won’t be good.”
(Top photo: Pulisic’s deal to Milan would be harder now; by Alessandro Sabattini/Getty Images)
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