Following the tax fraud charges against Cristiano Ronaldo, Net released Part 1 of the Superstar Effect. Despite covering the background and examples of famous stars such as Messi, Ronaldo, Neymar and many others committing tax-related crimes, the essentials and fundamentals are only just beginning.
In the first part, Net discussed the main reason for why many high-profile footballers were committing tax fraud. They certainly have the money, and so the reason is that they intend to keep extra money for additional benefits for themselves. Plain and simple, Image Rights. Image rights, although not commonly known, play a massive role in the salary and earnings of star footballers.
Image rights in its most basic definition can be thought of as a players right to sell and give out licenses and rights to publicize and commercially use players physical features (Face, Body, & Voice) as well as any other marketable items (Signature & Nickname). Image rights can be a huge source of income for high-profile players who have branded a name for themselves not only on the pitch but off it too. For example, Messi and his Adidas partnership, or Ronaldo and his Nike partnership. As one may assume, the more famous the player, the more interested corporations are for accessibility to their image rights.
In fact, image rights play such a huge role in most players income that clubs normally create a separate image rights contract that permits the club to take over certain parts of a players image rights. For example, the club might pay the player in exchange for usage of his/her last name on jerseys, which can then be sold for commercial usage and profit. Keep in mind that after such a contract occurs, the player may or may not take in any percentage of the club image rights profits. Normally, a player gives a portion of their image rights to their club, but also keep a percentage for individual deals between other groups and companies and themselves.
The average superstar, such as Ronaldo and Messi, has an image rights contract that gains them money from sponsorships, television ads, social media posts, and fashion-wear. Ronaldo, in 2014, the year he was mainly accused of tax-fraud, earned €30 million from his base salary, in addition to another €10 million due to his winnings with Real Madrid including the Champions League. However, with Image rights licensing and Sponsors, he earned about €58 million which is why he was in total, the highest paid athlete in the world at the time.
However, no one is above the law. Superstars must pay taxes along with everyone else. Their tax is based on their total salary, which consists of their base contract (Not including bonuses), as well as image rights. This is known as the "Pay as you earn" system. In La Liga, salaries are exceptionally high, but so are player taxes. The tax rate is 52% which means that out of the €98 million Ronaldo earns, he keeps only €47.04 Million. A player's gross income is being cut by more than half!
Instead of making about €100 Million a year, Ronaldo is making half that. The case is the same for the other described players including Neymar and Messi, although their numerical figures are dwarfed by those of Ronaldo's. This leads back to the problem. The stars want this money, and therefore, sometimes do their best to avoid paying taxes for the image rights portion of their salary, and only pay for the club salary. This is considered defrauding the government, and eventually catches up to the player when authorities find the real numbers of the players total income, and hence, the "Superstar Effect" completes its cycle.
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