The Government isn't scrapping tax exemption for Irish artists, but some high-earners may still decide not to stay, writes Shane Hegarty
There may have been widespread relief among artists at this week's announcement that tax exemption for artists would be capped, not scrapped, but the Arts Council is still concerned. Although half of the total exempted income is earned by just 2 per cent of the artists, and the €250,000 cap announced by the Minister for Finance, Brian Cowen, will only affect a handful, the Arts Council is worried that these high- earners may take their business elsewhere.
The council's director, Mary Cloake, says that the decision "suggests an incomplete understanding of the inconsistent nature of artists' earnings . . . €250,000 earned in a very successful year may be the only income an artist has for five, eight or 10 years". However, one music business accountant believes the changes will be more complex than initially reported. Alan McEvoy, of LiveWire Business Management, whose clients have included Ronan Keating, Westlife and Samantha Mumba, says that the €250,000 cap applies only up to €500,000 in earnings, after which 50 per cent of all earnings will be exempt. If an artist earns €600,000, for instance, €300,000 will be tax-free. Furthermore, artists will be able to balance taxable income against exempt income. An example on the Department of Finance website shows that if a singer/songwriter was to earn €400,000 in taxable income (from touring, for example) and €1 million in exempt income (from publishing), then only €700,000 would be taxable.
McEvoy says the tax exemption will still be enough to satisfy the lower earners in the music industry, and that established high-earning acts are unlikely to leave.
"I would be afraid that down the line it mightn't be enough to keep the middle-to- upper-tier acts, the next big things of the future," he adds.
Musicians are exempt only on songs they write themselves and, presuming that they make a self-penned album, a band would need to sell about 600,000 copies before they'd reach the cap; but they also earn from radio royalties. For a popular touring band, though, it's likely that much of their income is already taxable.
McEvoy wonders if the pull towards London might become greater for some acts, given that it is the hub of the European music scene and that Irish artists are always under pressure to base themselves on the doorsteps of their record companies.
"If the scheme is diluted further, then it is one less excuse to keep them here," McEvoy says.
SEVERAL OF THE artists now likely to face a tax bill were either unavailable for comment or could not be contacted by The Irish Times, although at least one high-profile writer believes that the cap is justified. It is likely that these artists will want to talk to their accountants first.
Previously, a PricewaterhouseCoopers survey, conducted on behalf of the Arts Council, said that two of Ireland's 12 highest-earning artists would consider leaving the country if the scheme was scrapped. A further three said that they would stay, but that they would have to cut down on non-commercial activities, such as donating to charity and encouraging new artists.
Marita Conlon McKenna, chairwoman of the writers' group, Irish Pen, says that without knowing the detail of the legislation as yet, high-earning writers are likely to wait and see, but points out that if they leave Ireland, they'll only have to pay tax somewhere else. She believes it was a "great day" for Irish publishing.
"If it had gone, a lot of Irish publishing houses would have been under threat, because they don't pay big advances as they do in the UK or US. Loyalty would have had to go out the window for some writers."
Most writers receive staged payments, covering the writing, submission and printing of the book. They may have one book in three years, but that money will be spread over time, which should allow writers to spread their tax liability.
There is more concern for sculptors and painters, who may spend a few years working towards a single exhibition and payday. It's something already taken into account by the artists' group Aosdána, which bases its grants on earnings over five years.
ACCORDING TO JOSEPHINE Kelleher, director of Dublin's Rubicon Gallery, the initial emotion on Budget day was one of relief among visual artists that the exemption will stay for most, but they wonder if it will force high-earning artists to change their working methods.
It might take 10 or 20 years for an artist to reach a level of income high enough to be taxable, says Kelleher, which means few would be affected. Nevertheless, when they do begin to earn large amounts, they often buy the works of emerging artists or employ them as studio assistants when preparing for exhibitions, so this practice could yet be curtailed. There is also the worry that the new development could be the beginning of an accelerating process.
"To date there have been no major waves of panic," Kelleher adds. "It's a question of what happens next."