The French government on Friday performed a u-turn and exempted Monaco from paying the 75 percent tax on earnings over 1 million euros ($1.37m) that will be introduced in 2014.
On Thursday night, deputies in the National Assembly had agreed that Monaco, who are subject to vastly different tax laws in the principality, would also be subject to the controversial new tax imposed on all other professional clubs in the French league set-up.
However, Budget Minister Bernard Cazeneuve confirmed on Friday afternoon that the decision had been reversed because of the “risk” that the tax law could be considered unconstitutional if applied to a company not registered in France.
As a result, a narrow majority (12 to eight) of deputies went back on their vote of the previous night.
However, Cazeneuve added that the aim was still to “treat all clubs equally”.
A first version of the 75 percent tax was already ruled unconstitutional at the end of 2012.
The amendment agreed by MPs on Thursday ahead of the 2014 budget sought to force all foreign-based sports clubs affiliated to a French federation and playing in a French competition to pay the tax.
That wording directly targeted Monaco.
“Our wish is that all clubs playing in French competitions should be liable for the same taxes” and “not just for two years”, said Cazeneuve, referring to the length of time that the new rate will be applicable as an emergency measure.
“But we do not wish to take any legal risk, especially a constitutional risk, on the 75 percent tax,” he added.
“There are other ways for us to reach the same outcome.”
Discussions have already been ongoing for several months between the French league body (LFP) and AS Monaco in a bid to force the principality club to set themselves up as a French company for tax purposes.
Left-wing radicals complained that the government’s decision means they will miss out on a significant sum of money that could be reinvested in French sport at a grassroots level.
The clubs themselves will be liable for the 75 percent tax on high earners, which will only be applied to earnings this year and in 2014.
The rate of tax is in fact 50 percent, but social charges mean it will cost companies closer to the symbolic level of 75 percent that socialist president Francois Hollande had pledged to implement during his 2012 campaign for election.
French professional clubs had threatened to strike on the weekend of November 30-December 1 if they were not exempted from the tax, but later withdrew that threat.