Far from supporting celebrities at the expense of the taxpayer, the artists' exemption scheme offers many benefits at minimal cost, writes Mary Cloake.
Art is in the news. Even if I wouldn't have written some of the headlines myself, I am delighted that there is debate and controversy about one of the most important aspects of our national life.
In particular, it is the artists' exemption scheme that has attracted much media interest in recent days, arising from the release by the Revenue Commissioners of the names of beneficiaries, and a forthcoming review by the Department of Finance.
Established in 1969, the artists' exemption scheme allows for income to be tax-free if it is derived from the proceeds of creative and original works of artistic and cultural merit. These are defined in a number of categories: books and writing; plays; musical compositions; paintings or other pictures; and sculptures.
Much of the comment acknowledges the considerable value of the exemption to the taxpayer. Even when Ireland was a poor country the scheme ensured that it was possible for artists (both from Ireland and abroad) to live and work here. A vibrant arts community has emerged of artists who otherwise may have been forced to emigrate.
These artists have added enormously to the artistic and cultural life of Ireland. They have contributed immeasurably to the international reputation of Ireland abroad to the benefit of trade, tourism and international relations.
The artists' exemption scheme can be seen also as part of a wider policy which acknowledges the value of innovation and creativity in our community.
The issues exercising those critical of the exemption relate largely to the estimated cost to the Exchequer of the scheme.
There is an implication, by highlighting a small number of high-profile, high-earning individuals, that it benefits the wealthy and famous. This is far from the case.
More than half of the beneficiaries of the relief in 2001 earned artistic income of less than €10,000. In fact, the average arts earnings of half of the scheme's beneficiaries in 2001 was only €5,213. These artists are therefore well outside the tax net, and indeed below the minimum wage. Some 87 per cent of those who benefited in 2001 earned less than €50,000 in that year, and even this figure does not represent the true financial status of these artists.
An artist's income is subject to considerable year-on-year variation. It can take between three and five years to write a book or prepare a body of work for an exhibition. The proceeds of such a book or exhibition may well be the only artistic income an artist has for these years.
Even in the case of the small number of high earners, particularly artists who are commercially successful globally, an analysis of cost to the taxpayer needs to take into account three related facts. First, high-earning artists are highly internationally mobile. Their work can, in theory, be carried on anywhere.
If the tax exemption did not exist in Ireland, many high earners would move abroad (at least for tax purposes). Their income would also move, and the Exchequer would not benefit, as some comment has suggested, by an estimated €37 million a year. Much of this tax would simply pass on to another country.
Second, if artists do move, the Exchequer will also lose the tax they do pay at present. Very few internationally successful artists derive their income solely from artistic (and, therefore, exempt) sources. In fact, because the scheme relates only to creative and not performing artists, for many high-earners, (and for many of the celebrity-status individuals cited in recent comment who have performing careers), creative artistic income constitutes a relatively small share of their total earnings.
Most are liable for Irish tax on the rest of their incomes. For example, a commercially successful artist in the music business earns income from publishing, recording and touring. The only part of this income that is tax-free is the income arising from music publishing.
Earnings from recording and touring are taxable. If artists relocate to another country, their taxable income also relocates, and the Exchequer loses the benefits of all the tax on this other income.
Third, by living in Ireland, internationally successful artists generate considerable ancillary economic activity. They have invested quite significantly in their art-forms, especially in film, music and publishing. And, apart from the purely economic argument, high achievers exert influence on the climate for the arts in Ireland. They can be inspirational to up-and-coming artists. They remain important figures as sources of advice and knowledge in their fields. Their presence here attracts interest from their peers and from investors internationally.
The secondary issue exciting criticism of the artists' tax exemption has been the assertion that an overly liberal definition of "original, creative and of artistic or cultural merit" has been applied in the operation of the scheme.
It is to Ireland's credit that a piece of legislation that might be seen as difficult to implement, exactly because it depends on an open definition, has been successfully applied for 35 years. This openness means that the State can support a wide variety of very different artistic perspectives. The cost of this openness may be that there are cases that are contentious in terms of their artistic and cultural value.
This is part of the benefits of an open scheme, and it would be a travesty if a few such examples were to lead to a discrediting of a relatively simple instrument which is acknowledged internationally as a beacon of enlightened legislation, and which highlights the value our society places on artists.
A much wider, more informed, debate on the issue is needed.
Mary Cloake is director of the Arts Council