Report: Premier League consider luxury tax as part of PSR overhaul

White Premier League flag waving in the wind
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The Premier League is reportedly looking to remove points deductions in favour of a luxury tax penalty as part of potential changes to the Profit & Sustainability Rules (PSR). 

According to a report from the Daily Mail, league officials have been hit with criticism from across the league over the too stringent penalties of clubs that have broken PSR, which has resulted in points deductions to Everton (six) and Nottingham Forest (four) this season. 

This has also led to concerns that the current formation of PSR may strip the Premier League of its number one status, with drastically little amounts of money being spent by clubs in the previous January transfer window. 

This may lead to some big budget clubs being unable to attract the best players from across Europe, as many have been accustomed to over the years.  

With league officials expected to create an “entirely new system” of the PSR next June, this has led to discussions over the possible implementation of a luxury tax. 

This has been a financial regulation in many US sports leagues, such as the NFL and NBA. The luxury tax in those leagues enables teams to spend beyond the league-wide salary cap. 

However, entering into the luxury tax threshold brings about penalties of certain amounts depending on how much a team has spent. In the case of the NBA’s Golden State Warriors for example, the team is paying a $176m luxury tax penalty for being $40m over the salary cap. 

It is to be believed that a Premier League version of the luxury tax into PSR would presumably see it applied to the £105m clubs are allowed to make in losses over a three-year period, or £35m-per-year. 

The Daily Mail reveals that the under the Premier League’s luxury tax, the money collected from any teams who go over into the luxury tax, will be distributed to the rest of the clubs who remain under the £105m threshold, or even be distributed to the clubs in the English Football League (EFL) who are deemed to be in financial trouble. 

A luxury tax is one of many remedies to PSR being touted. Another highlight is an ‘anchoring’ system, which would introduce a form of salary cap which translates to the amount the club can spend related to the wage bill of the season that finished bottom (20th) in the league table. 

Reforms to the PSR have been heavily discussed by clubs, which are anticipating an overhaul to the rules in June. The report stated that 17 out of 20 clubs are expected to vote in favour of a system overhaul, with 14 needed to pass a vote. 

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