'Deadweight' relief should be ended but retained for sports stars

ARTISTS AND WRITERS:THE TAX exemption for artists is unfair and should be scrapped, the commission has said.

However, it recommended the retention of tax relief for professional sports people on the grounds that it encouraged positive role models.

The report said the artists’ exemption had a “deadweight” effect as those who benefited from it would have been involved in artistic activity anyway.

The tax exemption on artists’ royalties was introduced in 1969 by the then minister for finance Charles Haughey and was originally introduced to help struggling artists.

It had been criticised as unfair, however, because performers such as U2 were paying no tax on millions of euro worth of royalties. It was retained in full until it was capped at €250,000 in the 2006 budget.

The commission said the exemption was not compatible with equity. “While the tax exemption may have created an environment in which the arts can flourish, considerations of equity and efficiency outweigh this factor and, accordingly, we recommend that the exemption be discontinued.”

Instead, it recommended that consideration be given to introducing averaging in the taxation of income from creative work given that artists’ earnings are often uneven and, while they could make a lot of money in one year, they may make very little the next.

The tax relief for professional sports people allows for such individuals to claim tax relief on their earnings derived solely from sport.

The commission concluded that there was a case for its retention as it encouraged positive role models for younger people.