Artists Tax Exemption


Artists Tax Exemption

Introduction

The Artists Tax Exemption Scheme was introduced in 1969. The scheme allows earnings made by artists from the sale of original and creative works to be exempt from income tax. It applies to visual artists, composers of music and writers. The scheme is unique to Ireland.

Full details, helpful FAQ’s and info on how to apply for the Artists Tax Exemption can be found on the Revenue website here

The info~pool section of this website hosts a helpful text entitled ‘Tax and Self-Employment prepared by Gaby Smyth and Co. Accountants. Here you will find info on Tax, PRSI, the Tax Exemption and Social Insurance benefits for self-employed artists.

______________________________________________________________________

Update – September 2009

DUBLIN, MONDAY, 07 SEPTEMBER 2009: In the Taxation Commission report published today we see another attack on the Artists Tax Exemption Scheme.  In the recommendation: 8.98 the Commission has called for a complete abolition of the tax exemption.  The fact that individual artists are one of the most economically deprived groups that punch above their own weight in their contribution to Irish society has been ignored.

In our recent survey The Social Economic and Fiscal Status of the Visual Artist in Ireland (published June 2009) we show that many of Ireland’s visual artists live below the poverty line.  We have outlined that 67% of visual artists earn less than €10,000 from their creative works.  A further 24% earn between €10,000 and €25,000.  They are therefore dependent on additional supports to make ends meet.  Our report shows that 33% of artists earn less than €10,000 in total earnings.  A further 34% earn between €10,000 and €25,000. These total earnings are comprised of income from creative work, and part time or casual labour earnings that are subject to the normal levels of taxation.  But, as with most sectors of the economy, opportunities for supplementing creative earnings are diminishing.  Therefore, with these current recommendations we will see more and more visual artists being made to take advantage of the social welfare system to allow them to make ends meet

Visual artists are also unique in that their primary purpose in creating artistic work is not so as to gain financial reward. The ethos that drives visual artists to make art is not economic. The act of creating is not motivated by profit and artists do not normally tailor their ‘product’ to an economic consumer. Visual artists also create on a continuous basis without any guarantee of financial success. Financially speaking this is a very high-risk strategy and the value of an artists work (economic or otherwise) may take many years to be recognised. The value therefore of what visual artists contribute is of immense worth. It is also worth noting that no consideration is made for the fact that visual artists are a part of the indigenous economy.  Visual artists do no repatriate funds outside of the country.  In fact, it is quite the opposite. By their very nature, visual artists who may utilise the tax exemption scheme contribute these savings directly back into the Irish economy. The Tax Exemption Scheme is one of a small number of incentives that artists have to continue to remain in Ireland and to make work.

It has been noted that the largest subsidy to the cultural life of Ireland comes not from governments, corporations or other patrons, but from the artists themselves, through their unpaid or underpaid labour. Artists need the every incentive to continue to create.  The withdrawal of the scheme would have an adverse effect not only on individual artists but on the arts sector as a whole and more especially on the public’s engagement with, and enjoyment of the arts in Ireland. In order to maintain a cultural climate we need to invest in our artists, we need to value and recognise what artists contribute and we need to create a sympathetic climate in which the arts can flourish. By abolishing Tax Exempt status for artists the government would remove one of the key incentives for artists to live, work and produce art in Ireland.

Ireland’s image abroad is consistently sold on its cultural heritage. The regeneration of our countries attractive for inward investment places great emphasis on the attractiveness of this cultural heritage. The Tax Exemption Scheme has created an image of Ireland abroad as a liberal, forward thinking country proud and confident of its own culture and one that values its creative practitioners. If the scheme were to be abolished not only would it be a blow to the artists who avail of the scheme but it would send out a signal internationally indicating a changing attitude of the Irish state to the value it places on the arts in Ireland.

In the short term the removal of the Tax Exemption scheme may seem an attractive proposition to Government. Visual Artists Ireland believes, however, that the benefit derived from the removal of the scheme would be far outweighed by the problems it would create in the long term. There is always pressure on artists to become more self sufficient and not to rely so heavily on direct public subsidy in the production of their work. The Tax Exemption scheme is an indirect way of encouraging and facilitating the production of new work by creative artists without the need for direct grant aid. The removal of the Tax Exemption scheme would lead to further reliance on direct public subsidy for funding of the arts and place greater pressure on an already overstretched Arts Council, as well as placing yet more people on to the live register.

We have received much press coverage on this matter, but once again we find ourselves calling on our members to also individually support the campaign, as outlined in 2004.

______________________________________________________________________

In late 2004 Brian Cowen, Minister for Finance, announced a review of all tax relief schemes operating in Ireland. The Artists Tax Exemption scheme was one of many schemes put under review. There was, however, a disproportionate amount of negative publicity concerning the Artists Tax Exemption which resulted in calls from some quarters for it to be either abolished or for a cap to be placed on the level of income that can be exempted though the scheme.

Visual Artists Ireland believes the Artists Tax Exemption has been a real success for Ireland and that the scheme should remain in place and unchanged.

The Scheme
In 1969 Finance Minister Charles J. Haughey introduced a tax exemption scheme for artists. Regarded as one of the highlights of his political career, the policy was deemed progressive and admired across Europe. The scheme, which is still in place, allows for income earned by artists, writers, composers and sculptors, from the sale of their works, to be exempt from tax in certain circumstances.

Eligibility and How it Works:

The scheme is governed by Section 195 of the Taxes Consolidation Act, 1997. It allows the income of artists derived from the sales of work to be exempt from income tax. In order to qualify the Revenue Commissioners must make a determination that the works are – a) original; and b) generally recognised as having cultural or artistic merit.

The exemption granted applies only to income derived from the sale of these creative and original works. The Act specifically lists these works as: a book or other writing, a play, a musical composition, a painting or other like picture and a sculpture. Those categories might sound a little conservative or outdated but they do seem to have been interpreted in a broad enough manner to accommodate most of what comprises contemporary practice in the visual arts. For example there are artists working in video, performance and other emerging experiential modes of practice listed as recipients of tax exemption on the Revenue Commissioners website. The Revenue Commissioners are assisted in the interpretation of the act by guidelines drawn up by the Arts Council and the Arts Minister.

Writers, composers and visual artists who are seeking artists’ exemption, just need to submit a claim form to Revenue together with samples of their work and any supporting documentation. The form is available from the website. Claims should be accompanied by evidence that the work has been published, produced or sold. Artists who are considered to be producing original creative works of artistic merit are then issued with a certificate of tax exemption.

It should be noted, however, that the exemption is on income tax only – artists are still liable for VAT and PRSI. Artists are also liable for tax on income derived from other activities such as teaching for example. Artists must be resident in Ireland and not resident elsewhere. An artist resident in Ireland is allowed to leave the state for a period of time and still retain the tax-exempt status. This allows for the fact that many artists travel outside of Ireland in order to promote their work and widen their experience.  Interpretative artists such as dancers, actors and performers are not eligible for tax exemptions.

Results and Developments:

The Scheme has resulted in many artists, musicians and writers locating in Ireland to avail of its benefits. A small number of big acts and writers are said to benefit hugely from the scheme with their income from music publishing for example (not sales of CDs MP3s etc) being totally exempt from tax. But these are a high earning minority, the average income of most qualifying artists is relatively low. In 1994/95, the cost was recorded as £5.1 million. This rose steadily to 36.8 million in 2000/01 but dipped to 23.9 for 2002 (the latest year for which figures are available) – down 35 per cent. This may seem high, however, these figures need to be seen in context, Of all the tax forgone to the state in 2002 as a result of all the various tax relief schemes the artists exemption represented just 0.15%.

Based on the Tax Returns received for 2001 the Revenue Commissioners are able to calculate that 694 artists claimed the exemption against sales incomes of less than 10,000. A total of 456 artists claimed exemption on incomes between 10,000 and 50,000, while 114 artists claimed exemption on incomes of between 50,000 and 200,000.  Only 59 artists claimed exemption against income above 200,000.

The total income of this latter group of 59 artists (individuals earning over 200,000) which was exempted from tax was over 56 million. The total income exempted for tax by those 1,264 artists who earned under 200,000 was just over 23 million. The total income exempted from tax of those 694 artists who earned under 10,000 amounted to just 2.7 million.

Since the scheme was initiated over 8,400 applications for exemption have been received, of those over 6,300 have been granted. In 2004, 407 exemptions were issued of which 231 were for visual artists.

Statistics, Information and Official Documents

Artists Relief
A breakdown of the number of claimants by reference to ranges of the income which was tax exempted is set out in the table below. A married couple who has been elected or has been deemed to have elected for joint assessment is counted as one tax unit.

Numbers of persons claiming the artists exemption and the income subject to the exemption in the short tax year 2001

Range of income – € No. of Claimants Income subject to Exemption – €
5000 or less 446 916,555
5001 – 10,000 248 1,796,686
10,001 – 50,000 456 9,867,796
50,001 – 100,000 75 5,411,767
100,001 – 200,000 39 5,298,712
200,001 – 500,000 31 10,092,434
500, 001 – 10,000,000 28 46,631,246
Total 1,323 80,015,197

Cost to the Exchequer

Cost to the Exchequer for 1994/95 IR£ 5.1m
Cost to the Exchequer for 1995/96 IR£ 8.1m
Cost to the Exchequer for 1996/97 IR£ 10.4m
Cost to the Exchequer for 1997/98 IR£ 15.5m
Cost to the Exchequer for 1998/99 IR£ 19.3m
Cost to the Exchequer for 1999/2000 IR£ 23.71m (€30.1m Euro)
Cost to the Exchequer for 2000/01 € 36.8m
Cost to the Exchequer 6/4/01 -31/12/01 (short year) € 23.5m
Cost to the Exchequer for 2002 € 23.9

www.irishstatutebook.ie/ZZA39Y1997S195.html
Taxes Consolidation Act 1997 Section 195

www.revenue.ie
This site provides further information on the Artists Exemption scheme, the Artists Exemption brochure, as well as the application procedures and forms.

The Review

In late 2004 Brian Cowen, Minister for Finance, announced a review of all tax relief schemes operating in Ireland. The Artists Tax Exemption scheme was one of many schemes put under review. There was, however, a disproportionate amount of negative publicity concerning the Artists Tax Exemption which resulted in calls from some quarters for it to be either abolished or for a cap to be placed on the level of income that can be exempted though the scheme.

Visual Artists Ireland believes the Artists Tax Exemption has been a real success for Ireland and that the scheme should remain in place and unchanged.

Visual Artists Ireland has initiated a campaign in partnership with others, in particular the Irish Playwrights and Screenwriters Guild to try and ensure that the scheme is maintained in full.

Minister for Finance Brian Cowen announced in his Budget 2005 Statement on 1st of December, 2004 that the Department of Finance and the Office of Revenue Commissioners would review certain tax incentive schemes and tax exemptions.

Although no specific reference was made to the artists’ exemption scheme, the minister said that he intends to eliminate the concept of unlimited or unrestricted relief, claiming such reliefs are no longer viable or ‘acceptable’ to the general tax-paying public.

See below for supporting documents which the Minister released to give some context to the review process.

finance.gov.ie/viewdoc.asp?fn=/documents/PressReleases/2005/Bckgrddoctaxrelief.pdf
(Background Document on 2005 Review of Tax Reliefs)

finance.gov.ie/viewdoc.asp?fn=/documents/PressReleases/2005/tsg_22_04.pdf
(Supporting documentation)

finance.gov.ie/viewdoc.asp?fn=/documents/tsg/2003/tsg0228.rtf
(Tax incentives/Expenditures)

Our Position

In adopting a position on the issue of the Artists Tax Exemption, Visual Artists Ireland has collaborated with the Irish Playwrights and Screenwriters Guild and the Association of Irish Composers.

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 the few things that set Ireland apart in a highly competitive world.

The Campaign

In an effort to retain the Artists Tax Exemption in full Visual Artists Ireland has run a co-ordinated campaign in partnership with those organisations that represent both writers and composers. These organisations are the Irish Playwrights and Screenwriters Guild and the Association of Irish Composers. Activities to date are as follows.

  • We have undertaken research and constructed strategic arguments as to why the exemption should stay in full.
  • We have made written submissions to the Department of Finance in line with the formal review procedure. Our Submission. Click here to view all submissions made as part of the review.
  • We have addressed the Joint Dail Committee on Arts, Sport, Tourism, Community, Rural and Gaeltacht Affairs. See:  http://debates.oireachtas.ie/DDebate.aspx
  • We have met with representatives of the Social Partners including Jimmy Deenihan TD – Fine Gael; Fiona O’Malley TD – Progressive Democrats; Jack Wall TD – Labour; Paul Gogarty TD – Green Party; The Chambers of Commerce of Ireland and others.
  • We have produced an information leaflet for artists to inform them of the facts figures and issues surrounding the exemption in order to encourage them to speak up with more confidence about why the exemption should be retained. See brochure
  • We have encouraged a select number of critically acclaimed and high earning/selling artists to make personal appeals to the Minister for Arts Sport and Tourism.
  • We have worked closely and productively with the Arts Council to share information and ideas and to co-ordinate our campaigns.
  • We have liaised with the press to try and encourage a more informed and considered approach to coverage of the issue.

    Through our membership of international artists representative organisations we have facilitated letters to be sent on behalf of those organisations to key representatives in the Irish Government.

    We have initiated an email campaign to encourage artists to register their concerns with their TDs. You can download a draft letter see. See also a list of TD’s here.

We believe our efforts have had some success. The Minister has recently made very strong public statements in favour of retaining the scheme in full and press coverage of late has been much more positive and much more balanced and informed.

A statement is expected in the budget in early December which will decide the future of the scheme.

Update: January 2006

Cap on the Artists Exemption is Wrongly Reported
– Response to the Budget Announcement

Visual Artists Ireland welcomes the retention of the Artists Tax Exemption scheme. It also welcomes the fact that no cap was placed on the scheme. The widely reported cap of 250,000 on the Artists Tax Exemption Scheme is in fact untrue.

The figure of €250,000 is in fact being used to define a ‘high earner’. High earners whether they be artists or anyone else will have to pay some tax, this is not the same as a cap being placed on the artists exemption scheme. High earning artists can in theory continue to claim an unlimited amount of tax relief on their creative earnings.

Throughout its campaign to retain the artists tax exemption Visual Artists Ireland and its partners argued not that high earning artists should not pay any tax but that high earners already do pay tax, typically on two thirds of their total income and that the exemption on creative earnings should thus remain in place.

In his budget statement Brian Cowan announced that – “It is necessary not only to eliminate some incentive relief’s but also to regulate the use that can be made of those that remain. We cannot stand over a situation in which some high-earning tax residents, through the use of incentive relief’s, can reduce their taxable income to nil. This is simply not a fair situation.”

The new measures, which will come in to play from January 2007 place an annual overall cap on the extent to which various specified tax relief’s can be availed of. This cap will operate by reducing by half the amount of income that can be relieved from tax through any of the various tax relief schemes. The measure will apply to those with income over €250,000 per year.

The scheme therefore does not represent a cap of €250,000 on the artists exemption scheme but rather a cap on the percentage of total income that can be exempted from tax which applies to those who earn over €250,000. High earning artists whose total income is comprised of up to 50% of creative earnings and 50% of non creative earnings (from performing or merchandising for example) will not be effected by the new proposals no matter how much they earn. This is a significant difference to the implementation of a straight cap that was initially reported.

Research carried out earlier this year by PWC on behalf of the Arts Council revealed that most high earning artists only availed of the artists tax relief on 35% of their total income. The new measures will therefore mean no change for the majority of high earning artists as they already pay tax on a significant portion of their income.

Visual Artists Ireland sees this as very important as the scheme will therefore continue to operate as an incentive to successful Irish artists to stay in Ireland. We believe it is important for successful high earning artists to remain resident in Ireland because 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; 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; they generate considerable employment in Ireland and they contribute hugely to the international reputation of Ireland as a society which values and respects creativity.

Overall we see the campaign that we ran in conjunction with the Irish Playwrights and Screenwriters Guild and the Association of Irish Composers as being a great success. It was our fear that in a pre election budget the Government may have been tempted to score easy points with the tabloid press by announcing a scrapping or capping of the artists exemption while ignoring the real issue of implementing a fair and equitable tax system. This has not been the case. The Artists Tax Exemption scheme is still operating and there is no cap attached to it. The new measures that have been introduced apply across the board and not just to artists. They are aimed at introducing what must be seen as a fair system in which no one who is a high earner gets away with paying no tax at all.

Visual Artists Ireland would like to express its thanks to all those that supported its campaign by writing letters or emails to TDs and Ministers. We would also like to thank Minister John O’Donoghue for his strong and outspoken support for retaining the scheme during the review process. The strong role played by the Arts Council in advocating the retention of an uncapped scheme was also crucial.

Further details of precisely how the new measures will work will be revealed in the Finance Bill in early 2006. You can download the Financial Statement and the Summary of Measures to see more details of what Brian Cowan actually announced in his budget 2006 statement. See also the Departments’ Revenue Examples document which illustrates how the relief will be calculated.