* RFEF to halt domestic matches from May 16
* Federation unhappy with new TV rights law
* Government says law 'historic achievement' (Adds details, CSD statement)
MADRID, May 6 (Reuters) - The Spanish soccer federation (RFEF) has decided to indefinitely suspend all domestic competition from May 16 over a spat with the government on issues including a new law on collective bargaining for television rights.
The law was approved in cabinet last week with the backing of the professional soccer league (LFP) and aims to create a more level playing field for clubs in Spain's top two divisions by sharing out TV cash more equitably.
However, both the RFEF, and its influential president Angel Maria Villar, and the players' union (AFE) have come out against the new rules and the two organisations have backed halting competition right across Spanish soccer.
The final two matchdays in La Liga would both be affected as well as the King's Cup final between Barcelona and Athletic Bilbao at the end of the month unless agreement can be reached to avert the action.
After a board meeting on Wednesday, the federation published a statement on its website (www.rfef.es) in which it accused the government of a "lack of respect" and complained it had not been consulted properly on the TV law.
The federation, which has been bitterly complaining in recent months of what it sees as government interference, believes the regulations will rob it of some powers and is also unhappy at what it says is the use of money from soccer for activities that have nothing to do with the sport.
A total of 17 regional federations would be affected by the suspension, including more than 600,000 players and 30,000 matches, the RFEF said.
"At the same time, and yet again, we reiterate the offer of dialogue to the Spanish government," the federation added.
Spain's government sports council (CSD) defended the TV rights law in a statement later on Wednesday responding to the RFEF's announcement.
The law would end the current system under which rights are sold by individual clubs and would potentially pave the way for a sharp price increase.
The current system favours big teams such as Real Madrid, the world's wealthiest club by income, and rivals Barcelona.
Poorer teams, especially those with big outstanding tax bills to pay, have called for rights to be pooled to help them make ends meet.
The CSD said the new law was an "historic achievement" and guaranteed "that Spanish soccer can reach levels of exploitation, profitability and sustainability that were unthinkable up to now".
The statement added that the CSD could not understand why the RFEF and the AFE were now opposing a law they had previously supported.
"The rest of the reasons put forward today by the RFEF are a series of excuses to justify continued conflict, which is based purely on the interest of the RFEF in not returning public money and not submitting itself to audits required by law," the statement said. (Reporting by Iain Rogers, editing by Pritha Sarkar)