AS Monaco’s taxing promotion to Ligue 1

As published on ‘The Roar’ – 23/05/2013

After two years in the wilderness of France’s second tier competition, AS Monaco Football Club are primed to return to their former Ligue 1 status as one of the leagues powerhouses.

Led by Russian billionaire Dmitry Rybolovlev, whose investment group owns two thirds of the club, Monaco currently sit atop the Ligue 2 standings, having already guaranteed promotion.

With former Chelsea, Juventus and Inter Milan coach Claudio Ranieri at the helm and an enviable chequebook ready to be utilised, there is a great deal of excitement among Ligue 1 supporters as to the potential for a second European heavyweight to rival that of Paris Saint-Germain.

However, both the French Football Federation (FFF) and the French Professional League (LFP) seem determined to set back Monaco’s rise unless they are well renumerated, given the club’s financial advantages of operating in the tax-haven Principality of Monaco.

This is by no means a new source of confrontation for the club and is indeed an issue that has seemingly arisen during periods of great success for Monaco.

It was during the club’s successful UEFA Champions League run in 2003/04, where Monaco eliminated both Deportivo La Coruna and Real Madrid, when the FFF released reports as to the financial benefits the club enjoyed as a result of its favourable tax exemptions.

The FFF claimed that Monaco saved approximately €8 million per year due to the near tax-exempt status.

In the last few years, the issue has seemingly taken a backseat while Monaco struggled financially as well as on the field, culminating in the 2011 relegation to Ligue 2.

However, after winning promotion back to Ligue 1 the issue has once again raised its head in a rather ugly manner.

In March, the LFP voted to alter the league’s statutes which would in essence force Monaco to move their administrative offices to France before 2014 or risk expulsion from the French Federation.

In a meeting only two weeks ago with the club, the FFF’s president Noel Le Grat spectacularly demanded (allegedly) €200 million for the privilege to play in France’s premier competition without the club having to relocate.

Needless to say, the Principality outfit were outraged, issuing a statement on the club’s website which outlined the details of the meeting and announced they would be proceeding with legal action.

The essence of the confrontation is based on a perceived view that Monaco is not operating on a level playing field to the French based Ligue 1 clubs.

There are no questions as to the benefits of the Principality’s near tax-exempt status however one should not jump at the assumption that this equates to distinct advantages as an operating football club.

The club does not boast a typical income structure in that gate receipts provide little to boost the Principality side’s income stream.

Operating in a sovereign state with a total population of only 36,000 obviously has its limitations.

Needless to say, Monaco has never set the stands alight with its highest average season attendance over the last 15 years registering at just over 11,000.

In its last five years in Ligue 1, Monaco was ranked either 19th or last in average crowd attendance.

Even in Ligue 2, granted their attendance has dropped even further, however they only ranked 13th in their current promotion winning season with an average of just above 5,000.

Clearly their match-day income would not even come near the likes of PSG or Lille who average over 40,000 spectators.

When you then look at the revenues clubs are generating from match-day sales, you may start to wonder how relevant the FFF’s reported €8million ‘advantage’ that Monaco carries actually is.

A Deloitte publication form January 2013 titled, ‘Captains of industry – Football Money League’, profiles some of Europe’s highest-earning clubs (quite an interesting read for those interested in club operation and revenues).

Two of the French clubs that feature are Olympique Marseille and Olympique Lyonnais. The Ligue 1 clubs’ proportion of match-day to total revenue are not as high as many of the Spanish, English and German clubs (closer to or above 25 percent of total revenue).

Even so, Marseille and Lyon account 13 percent and 14 percent of total revenues respectively to match-day revenue. In real terms, this equates to €18.1 and €17.7 million respectively.

Given that Monaco’s attendances were approximately 25 percent of the likes of Marseille and Lyon at the best of times (closer to 15 percent in recent years), the FFF’s €8 million advantage looks less and less beneficial to the club.

From a completely objective view, some would argue that this is simply a bad business model.

However, since its introduction into the French Federation in 1924 the club has continually proven its ability to successfully operate a football club despite demographic limitations as well as contribute towards French football through its player development, broadcast appeal and favourable European results for the LFP.

Now that they have the backing of Dmitry Rybolovlev behind them, Monaco is predicted to once again become a leading force in Ligue 1.

The potential for AS Monaco to develop over the next few years to a level that could rival Paris Saint-Germain as another of Europe’s heavyweights would surely whet the appetite of any French and indeed European football enthusiasts.

Any newly found interest is sure to contribute towards favourable broadcasting deals and improved European rankings for Ligue 1 over the years.

So why are the FFF and LFP seeking to complicate such progress?

The club’s history is not only entrenched within the French Football Federation but has played a large part in the Federation’s history.

Boasting seven Ligue 1 titles and five Coupe de France cups, Monaco’s youth system has produced some famous French internationals including the likes of Lilian Thuram and Thierry Henry.

Founded in 1924, it was in fact the FFF who first invited the club to turn professional in 1933.

As the Principality of Monaco is not a member of UEFA, the club has never had any realistic alternatives of existence beyond the French Federation.

The club’s existence in Monaco was never built around potential tax-benefits, despite the current financial advantages that are enjoyed.

Thus after 90 years of contributions to the essence of the FFF and LFP, the recent demand for €200 million as ‘compensation’ for Monaco not moving their administrative operations seems harsh at best.

In a recent article in France’s Le Monde, Antoine David, a University of Nice professor and lawyer specialising in sports law insisted that AS Monaco’s legal standing was solid.

“The Court of Justice of the European Community and the Treaty of Rome stipulates that companies have the right to settle in any country in Europe, and even if it is for tax reasons,” he said.

A claim supported by Olympique Lyonnis’ President, Jean-Michael Aulas, who fears, “We may be legally attacked by Monaco, which could cost us dearly.”

Legalities aside, I question whether it is worth the effort, resources and negative press surrounding the FFF and LFP. Particularly given the potential that a second French powerhouse could provide for the league.

One just needs to look at the Bundesliga of recent seasons and the strides it has taken in strongly establishing itself among the top three European leagues.

Even more so this year as the world’s footballing community awaits an all-German Champions League final.

Given the substantial possibilities that Monaco’s investors provide, it is unsurprising that many in the footballing community outside of France are questioning the merit of the Federation’s stance.

Unfortunately for French football, it seems there is still much to be said in this ongoing dispute with a peaceful solution not in sight.

…C’est la vie.

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