Artists Tax Exemption

We believe it is right that a tax exemption scheme that has been in existence for 36 years should in fact be periodically reviewed to assess whether it is useful and effective. We believe the broad scope of the current review will not look in sufficient detail at the wider context of the scheme and may therefore overlook its true value and benefit to the country. 

Our position is that we believe the Artists Tax Exemption should remain in place, that it should not be capped and that proper research should be undertaken into the social and economic value of the scheme.

To back up this position we draw on the following points -

Most Irish artists are still poor.

Of the 1,300 artists who benefited in 2001, more than a half earned under €10,000.
The average income for almost 87% of artists was below  €11,000 (less than the average industrial wage).

Artists earnings are erratic and unpredictable.

Artists tend to earn very unevenly throughout their career.

For every year in which an artist might generate significant sales there may be many more lean years before and after in which no income or very little income is generated.

This longer-term erratic cycle of earning is very common to artists and makes the system of annual tax assessment inappropriate for artists.

This erratic pattern of earning is evidenced in the Revenue Commissioners figures, which show the cost of the tax exemption to the state falling by one third between 2001 and 2002.

Only an artist's “creative” earnings are exempt.

Contrary to common perception artists do pay tax.

The tax exemption is confined strictly to earnings from creative work.

So a job an artist takes to make ends meet is fully taxed.

So too are the performance and merchandise earnings of musical artists – only their earnings from composing their works are exempt.

Artists also pay PRSI and VAT.

Artists are not unique in getting a tax break.

Artists are in no way unique in getting an exemption on one stream of their income.

There are numerous tax incentive/relief schemes in Ireland. Almost everyone in the country avails of some form of tax relief.

Of all the tax forgone to the state as a result of all these various schemes the Artists Tax Exemption accounted for just 0.38% of that total in 2001 and just 0.15% in 2002.

It is different to other forms of tax relief.

Unlike other tax schemes the Artists Exemption was not initiated to kick start an industry.

Other tax reliefs harness the profit motive to achieve a public good. The artists' exemption helps realise the ambition not to make profit but to make art.

What drives artists is their need to express ideas and to produce art.  This usually has very meagre financial rewards. Nobody becomes an artist out of greed.

It rewards artists that engage with their audiences.

Unlike more conventional forms of state subsidy for the arts, which are divided up behind closed doors the Artists Exemption is a very democratic scheme.

It rewards those artists that engage with their audiences, the greater the public's demand for an artist's work, the greater the benefit to the artist.

The scheme has been a great success.

In the 36 years of the scheme, the arts in Ireland have flourished. In most art forms, this country now punches far above its weight.

Irish artists are very successful internationally and the volume of arts activity in Ireland is comparatively very high.

All of the arts are very popular and attract audiences in Ireland larger than is usual in other countries. Irish people are very active participants in all areas of the arts.

It is not the drain on resources that some of the media have portrayed.

Despite the hype in the tabloid press the Artists Exemption does not represent a significant drain on the countries resources. Particularly in the context of the wider review of all the various tax relief/incentive schemes.

In 2002 the amount of tax theoretically forgone to the state because of the exemption was €24million. This represents just 0.15% of all the tax forgone to the state as a result of all the various tax incentive/relief schemes

We need wealthy Irish artists to live in Ireland.

High earning artists benefit the country in many ways -

• They are direct exemplars and role-models for other Irish artists.
• Their international success raises the reputation of Irish art in general and opens doors for less established artists.
• By being resident in Ireland they make clear that the day when Irish artists were not welcome in Ireland is past.
• They pay considerable amounts of tax in Ireland. Typically on two thirds of their total income.
• They generate substantial business in Ireland – production companies; recording studios; management offices; etc.
• These businesses work with other Irish artists and give them access to production expertise in Ireland, which they could not otherwise get.
• These businesses also attract non-Irish technicians to work in Ireland who pass on their expertise to Irish technicians.
• They generate considerable employment in Ireland.
• The businesses they create and the people they employ pay considerable taxes in Ireland.
• They contribute hugely to the international reputation of Ireland as a society which values and respects creativity.
• They have a very important impact on the attraction of Ireland as a tourist venue.
• Many of them are privately generous sponsors of the arts in Ireland providing time and money.
• They are great Irish artists.

High earning artists need an incentive to stay in this country.

For a high earning artist with an international audience, Ireland is not the most natural of places to be resident. Such artists are certainly not here for the weather.

The main industries and hubs associated with music, with publishing, with film are located in centres such as Los Angeles, New York and London. These would be the natural places for such major international artists to graduate towards and to spend much of their time.

While our high profile high earning artists might not pack up and go tomorrow if the exemption is lost or capped, it would certainly remove the incentive to remain consistently based and resident in this country for the required 184 days per year. It would also remove the incentive to maintain their production companies and associated industries in Ireland.

The incentive to move to where the hubs of these industries are located applies most especially to those younger and emerging artists, who might not yet have established a high profile. Once they have moved and settled elsewhere they would be less likely to return.

The few rich ones still pay a lot of tax.

High earning artists resident in Ireland pay a lot of tax in Ireland.

They pay full tax on their “non-creative” earnings derived form associated areas such merchandising or performances.

As detailed in the PWC research commissioned by the Arts Council, typically these earnings come to at least twice the amount they get tax-free.

If these high earners stay in this country, it means they pay tax on that income and they pay that tax in Ireland and not elsewhere.

Scrapping or capping the scheme would loose the state money?

For the many lower-paid artists, the State would inevitably come under pressure to increase direct supports (for example through the Arts Council) to compensate them for the tax they would have to pay. This would be essential to keep the existing artistic fabric of the country from collapsing.

For the few higher-paid artists, some would leave Ireland if the scheme ended. The country would lose not only the tax foregone, but also the much larger amount of tax these artists do pay now. On top of that, Ireland would lose the many support industries that depend on these artists being here  (and all of which pay tax now).

Ending or diluting the scheme would very likely end up costing the State more money.

It has also been estimated by PWC that even if the 2% of high earning artists remained in this country they could quite easily and legitimately reduce their tax obligations collectively by at least one third. This would bring the 2002 figure of  €24million forgone to the state down to just €16million. Not insubstantial but a relatively minor amount in the wider context.

A cap would inevitably mean closer monitoring and scrutiny in relation to the administration of the scheme. This would be another cost that would eat in to any potential gain.

A cap would be difficult to administrate.

To date the scheme has been very easy to administrate. It is a simple scheme and it works.

Placing a cap on the scheme would bring all sorts of complications and costs to its administration.

It would require much closer monitoring and would open it up to misuse.

Scrapping or capping would affect Ireland's standing internationally.

For more than a generation, an important part of Ireland's international reputation has been the value it places on its culture and its artists.

This highlights our national capacity for creativity and imagination – a key factor in attracting vital foreign investment as well as an important source of a sense of identity and community in Ireland.

Abolishing the scheme would be seen around the world as a philistine act. It would be a step backwards that would destroy one of thefew things that set Ireland apart in a highly competitive world.