Question

[Related to the Economics in Practice on p. 102] In. 2014, the Spanish government passed a law to change a regulation,known as the "Beckham law," on foreign athletes. This new law will require foreign professional athletes to pay thestandard Spanish tax rate of 52 percent on earnings of more than 300,000 euros, up from the 24 percent rate they hadbeen paying since 2005. For top-quality players, the elasticity of migration under the Beckham law was estimated to be1-87 based on the average annual tax rate. Using this estimate of elasticity, what impact will this increased tax rate have onthe migration of top-quality players in Spain?

Answer 1

Answer:

It will increase emigration in the short run, but in the long turn the tax effect will be translated to the club and companies as the players has leverage.

Explanation:

It is a complex question, we have to consider that elite players agents has leverage on the negotiation as the football club wants to keep them in the team. What end up happening is that players negociate a net ammount thus, they are indifferent to the tax-rate for their contract.

We should also consider there is income from advertizing and social media which has increased over the years. Here, the players will also negociate a net amount and company's will take the hit not the players.

I:E the player will want 10 millon net thus, the parties will sing a contract value that after all taxes leaves them with that amount.

Also this make the effort to elude taxes more viable as it happened with Messi and Cristiano Rolando among others.