The tax break that makes art possible

Artists' tax exemption is still in place - for now. Belinda McKeonlooks at a scheme that, in spite of anomolies, is envied worldwide

The Government's policy on the arts, envied by artists and organisations the world over? Incredible as it seems amid cuts and cancellations, it's true - at least where the fine art of beating the taxman is concerned. In a report published last year by the English arts council, which assessed taxes and benefits for artists in seven countries, Ireland shone out of the tables like a model benefactor, surpassing Denmark, Germany, the UK, the Netherlands and Australia and matched only by the Canadian province of Quebec. Even then, the Quebec example was modelled on the Irish one.

So where is this exemplary, arts- friendly Ireland? It goes back to 1969, when the then Minister for Finance passed an act that entitled all working artists resident in the State to apply for tax exemptions on the income from their creative work. The true breadth of Charles Haughey's financial creativity has since become apparent, but more than 30 years after its inception his scheme continues to recognise artists as one of society's lowest-paid groups and to afford them a concession that is crucial if they are to pursue their art as a career rather than as a sideline.

The writer Angela Bourke, who is exempt from tax on the earnings from her books By Salt Water and The Burning Of Bridget Cleary, is one of many grateful artists. "The royalties, even on successful books, would not be terribly high; on my first book, they were derisory," she says. "It's quite a struggle. But the exemption helps." Simon Doyle, a composer and librettist whose opera Thwaite will be produced at the Almeida Theatre in London this summer, agrees. "The fees for pieces are not great, considering the amount of time you put in," he says. "If you got taxed on them, it would hardly be worth it."

Artists are entitled to apply every year and for any number of eligible works. Since the beginning of the scheme, almost 6,000 applicants have been approved, some for individual works of art, others for a category of artwork. Nowhere else in the world, apart from in Quebec and in a 10-block arts-and-entertainment district in Providence, Rhode Island, do artists have the freedom to keep every cent - PRSI aside - they earn from the sale, publication or production of their work, untouched by the taxman's sting. Part of Haughey's legacy is the large population of immigrant artists the scheme has persuaded to become Irish residents.

Last November, however, that legacy looked as if it might be heading for a swift demise, as a pre-Budget submission by the Irish Congress of Trade Unions urged the current Minister for Finance to "re- examine" what it regarded as a tax break for the wealthy along the lines of investment in stud farms and multistorey car parks. Patently flawed as ICTU's reasoning may have been, it represented a considerable threat, especially when combined with the fact that the amount of tax forgone by the Exchequer as a result of the scheme is climbing steadily, from €6.3m in 1996 to €30m in 2000, the last year for which figures are available.

The Revenue Commissioners, who administer the scheme from Dublin Castle, account for the rise by pointing out that these were the boom years, when people had more money to spend on art, from paintings and sculpture to novels and CDs. But these were also the years when U2's album sales went stratospheric and Riverdance won the world over.

Contentiously, the scheme sets no limit to the amount on which an exemption can be claimed; the Revenue admits this detail may also explain the scheme's escalating cost. Exact figures, it insists, would be "impractical" to collate, but "a small number of people may well be making up a substantial amount of that €30m with huge exemptions. It's very lucrative for those who make it big."

Yet, strangely, it's those who don't make it big for whom the scheme makes the greatest difference. "When it was set up, in 1969, it had in mind the huge numbers who are trying to aspire to that status, who are struggling, scraping a living out of it," says a Revenue spokesman. "If they are paying tax out of a meagre income, it would be totally unviable for them."

To the enormous relief of artists at both ends of the spectrum, the budgetary shears bypassed the artists' exemption - this time. As the Revenue spokesman warns, however, "there is always another year".

Whether it be brief reprieve or new beginning, this year may well prove crucial for the artists' exemption scheme - the last chance, perhaps, to debate its merits, to argue for its survival for years to come. But far from engaging in debate, and farther still from suggesting that, as well as retaining the scheme, the Government might address limitations that hinder its effectiveness, artists are fearful even of drawing attention to its existence.

The attitudes of many of those who avail of the scheme are shaped by a curious guilt, a sense of having got away with something. Discussion of the exemption, it is widely felt, could swiftly bring about its cessation by rousing the protests of dutiful taxpayers, even though many of those qualifying for the exemption would otherwise pay little tax anyway.

So when the Sculptors' Society of Ireland wrote a pre-Budget letter to the Minister for Finance, setting out the advantages of the scheme, it was in a brave minority; the plans of other unions to lobby the Government were quickly abandoned as members worried that their actions might do more harm than good. As one artist says: "Start nit-picking and we'll lose the whole thing."

Which is an unfortunate stance, because, as those artists who fall outside the scheme's remit emphasise, and as might be expected of a scheme that has, save for some clarifications introduced by Michael D Higgins in 1994, operated in the same way for more than three decades, the current model is in many ways dated and could benefit from consultation between the Government and the arts community.

Under the scheme, artists resident in the State for the tax year in which they are applying for exemption send claim forms to the Revenue Commissioners, enclosing evidence of the sale, production or publication of their work. That work must fall into one of five categories: books, plays, musical compositions, paintings or like pictures, and sculptures. It must be original, creative and of cultural or artistic merit. The unlucky 71 of last year's 509 applicants to receive "negative determinations" either failed to meet three of the four criteria or produced work that could not be accommodated by the existing five categories.

In any case, they fell foul of a decision-making process that is far from transparent, shared as it is between the Revenue Commissioners, who make the decisions, and the Department of Arts, Sport and Tourism and the Arts Council, which provide the guidelines and the advice.

Fuelling demand for the commissioners to explain their decisions is the fact that far more work fails to qualify for exemption now than in 1969 - indeed, than in 1994, too. The figures may show that the overwhelming majority of applications to the scheme have succeeded, but they mask the untold numbers of artists who take for granted their ineligibility even to apply. Works and forms that are indisputably artistic but cannot be accommodated by the Revenue's narrow categories have emerged, developed or simply grown in confidence in the Irish arts scene. Meanwhile, the definitions that frame the exemption scheme - of the artist, of the artwork, of originality and creativity - are no longer relevant to many of the artists who make up that scene.

That the scheme is no longer reaching its full potential is readily acknowledged by the Arts Council and by the Revenue Commissioners. "When it was initiated," says Paul Johnson of the Arts Council, "literature, visual arts and music were the strongest art forms. But as the cultural climate has developed, everyonerealises that the exemptions are limited and limiting."

So the old rule of thumb that originality belongs to the copyright owner is discredited by the immediate and unquantifiable nature of performance art, improvisational music, theatre that blurs the line between writer and performer, dance and choreography, digital and multimedia genres, as well as the production, presentation and sharing of works of art on the Internet. The strength of these genres also challenges the scheme's distinction between creative and interpretive artists, long a moot point for critics of the criteria for membership of Aosdána, the artists' organisation set up by the Arts Council in 1983.

The election to Aosdána last month of Ronan Guilfoyle, the jazz musician, might suggest that the rigid criteria that exclude so-called interpretive artists both from Aosdána and from eligibility for tax exemptions are relaxing, but Guilfoyle knows he was admitted as a composer rather than as an improvisational musician. Yet, he says, the ethos of jazz is improvisational. "Ninety-eight per cent of what we perform is made up by ourselves."

Improvisational music is a growing field, according to the Contemporary Music Centre, and with 10 per cent of all composers working in the electro- acoustic and multimedia fields, and with third-level courses nurturing many more, the issues of copyright, creativity and originality are not going to go away.

Nor, as performer-led and improvisation-based forms of theatre gain stronger footholds through the work of companies such as Corn Exchange and Operating Theatre, are these issues restricted to music. The question is whether the one-off, lived moment of the improvised performance should be recognised as a work of art and whether income from that moment should, accordingly, be tax free.

Moves are already under way in the film industry to request the exemption for film directors; if they are successful, theatre directors may well follow their lead, although the fear of somehow being penalised for raising the issue is strong in both camps. But dancers and choreographers, also anxious to be recognised as artists, at least have cause for optimism, with the Arts Council placing dance, alongside architecture, at the top of its agenda in its latest arts plan.

According to Johnson, whose background is in dance, it is only a matter of time until a choreographer is elected to Aosdána, which means eligibility for the tax exemption scheme may not be far behind. Johnson also says that the Arts Council has encouraged the Department of Finance to "engage in more meaningful dialogue" about the scheme and that the Department of Arts, Sport and Tourism is clarifying the guidelines.

Other so-called interpretive artists can draw sustenance from this news, but they would hardly be advised to hold their breath. "It has taken us such a long time to get to this place," says Johnson. "It could be another 10 years before the interpretive question is addressed. It's not simple . . . You could open a floodgate."

Those who call for a revision of the distinction between creative and interpretive artists are also aware of the challenges involved in deciding where the line should be redrawn. "It's a semantic minefield," as Guilfoyle puts it. In a work of theatre in which not only the actors and directors but also the designers contribute to the creation and realisation of a character, for example, how is the credit for originality and creativity to be distributed?

Alan Shortt, whose comedy scripts rather than his performances qualify for exemption, foresees war if the distinction is altered. "How would you quantify it? You'd have people saying three minutes of that was ad-libbed, so I'll have so much, per word, tax free, please. Like any tax shelter, it would be open to abuse."

Some wonder, however, if the Irish model is not already open to abuse by the big earners who benefit enormously from the fact that there is no limit to the amount against which tax-free status can be claimed. "While everyone can see the tangible benefits brought to Ireland by U2 and others - the benefits for tourism, the increased awareness of Ireland, the increase in national pride - still these benefits don't naturally filter down to the emerging artists," says Johnson.

And it is the emerging artists, and the low-earning artists, who will suffer if the exemptions granted to multimillionaire artists marks the scheme out in the future as a reasonable target for budgetary cuts.

That the Government has, thus far, seen the merits of the artists' exemption is encouraging, and that the Department of Arts, Sport and Tourism is working to clarify the scheme's guidelines is heartening. To allow it to continue to make a very real difference to the lives of artists, who are among society's worst-paid members, and to allow it to adapt to a scene in which artistic merit is no longer instantly measurable in terms of sales or tangible form would be a fitting rebuttal.

But in facilitating this endurance and this adaptation, the administrators of the Irish model might do well to look to Quebec, where, since 1995, artists have enjoyed tax-free income on copyright work on a sliding scale. The exemption reduces once they earn 15,000 Canadian dollars a year, or about €9,500, and is cancelled outright should they earn more than 60,000 Canadian dollars, or about €38,000.

Combined with the income-averaging system that has benefited artists elsewhere, by assessing earnings over several years rather than just 12 months, to reflect the erratic nature of their employment, it could combine equity with encouragement and stand as a fitting rebuttal of accusations that the Government merely pays lip service to the arts.

"The tax exemption is a fantastic piece of civilised legislation," says Guilfoyle. "When I say it to American or UK colleagues, they are always stunned. It's a really rare thing in these times that we legislate in a way that is not purely based on the bottom line of the dollar but that is looking at the greater good."