It is proposed to examine the question of tax relief on artistic activity. I welcome the representatives of the Sculptors' Society of Ireland and the Irish Playwrights' and Screenwriters' Guild. We do not currently have in attendance representatives of the Association of Irish Composers. If we had, I might have declared an interest in that at one point in my life I was travelling down the road of composing which was compulsory in pursuing my degree in music and my master's degree. I might have been——
Artists’ Tax Exemptions: Presentations.
What a——
With such a star performer among us, it is hard to compete at that level. In case anybody asks, it was brief and fleeting. I shall now hand over to our guests. The usual procedure is that following the presentations, there will be questions from members.
Mr. David Kavanagh
I thank the Chairman and members of the committee.
While members of the committee have absolute privilege, those appearing before the committee do not, but that should not be a cause of concern.
Mr. Kavanagh
We will try not to put ourselves in a position where we will run into difficulties. We are grateful to the committee for finding time to meet us to discuss this issue.
I have worked part-time with the Irish Playwrights' and Screenwriters' Guild which has approximately 180 members who write for the stage and screen in Ireland, the vast majority of whom are tax exempt. I am accompanied by Mr. Toby Dennett who works with the Sculptors' Society of Ireland. Despite its name, the society represents painters and sculptors who are nowadays generally called visual artists. The society has approximately 650 members, the vast majority of whom are also tax exempt. We apologise for Mr. John McLoughlan who left County Donegal yesterday and has vanished somewhere between there and here. He works part-time with the Association of Irish Composers which represents approximately 30 composers, the majority of whom are tax exempt. Between us, we represent in excess of 50% of those persons able to avail of the scheme.
In June the Minister for Finance, Deputy Cowen, initiated a review of high earners. Section 195 of the Taxes Consolidation Act 1997, under which certain artists are given certain tax exemptions, was listed as one of the 20 schemes the Minister wanted to have reviewed.It was at the bottom of the list. The tax theoretically forgone as a result of the tax exemption scheme represents less than 1% of the value of the tax exemption under the 20 schemes the Minister is reviewing. While it is a relatively small scheme in the order of things, it seems to have received an inordinate amount of press attention which, frankly, surprises us. In our view, individually and collectively, the scheme which is more than 25 years old has been a dramatic success and demonstrates something particularly unusual about Ireland and its approach to the arts. We were rather surprised that the scheme came under the spotlight in the way it did.
None of us is skilled in this area. We are not lobbying organisations. We do not know how to go about the business of speaking to Dáil committees and lobbying political parties and so on. We have to learn on our feet. I, therefore, apologise in advance if we make any errors of procedure as this is relatively new to us.
Those who pay attention to this issue will have noticed that in recent weeks two Irish novelists, Mr. John Banville and Mr. Sebastian Barry, have been placed on the short list for the ManBooker award; that the composer Gerald Barry has had his opera listed as the opening opera in the new season of the English National Opera in London; and that the new art gallery built on the campus of UCC and designed by Irish architects O'Donnell and Twomey has been listed for the Stirling Prize, one of the major international architectural awards. I guess we are all relieved not to see Bono's face staring at us from the economics or financial pages of the newspapers.
Irish artists are phenomenally successful. As a country, we punch way above our weight internationally. We all acknowledge that is the case but wonder to some degree why that is so. One of the reasons is the extraordinary fertile ground on which artists learn and hone their skills. As a nation, Ireland has an extraordinary commitment to the arts. The audiences are large for most arts events. We still have the highest rate of cinema attendance in western Europe. We have huge sales of books and music.
We have an arts castle which in recent years has developed a strong arts infrastructure. The number of galleries, museums, art centres and theatres, not only in the major cities but throughout the country, is large by comparison with that in countries of similar size. This infrastructure is peculiar and reflects a demand for participation in the arts in Ireland which is unusual by comparison with the position in other countries. It is not merely a matter of passive audiences. The committee may not be aware that more than 500,000 people watch every episode of "Fair City", four nights per week. A new drama produced by RTE, "Pure Mule", which some members may have watched last week, attracts more than 350,000 viewers for each episode. These are large numbers by comparison with those around the world.
We not only have a large audience for the arts but also an extraordinary level of participation in them by ordinary people. The number of small festivals, musical societies, amateur drama societies, painting clubs and so on, to be found in every small town, is extraordinary and much larger than anywhere else in Europe. Why should this be the case? None of us really knows the answer. It does seem that there is something that marks the Irish character as being different from those in other states. We appear to have a particularly huge interest in and commitment to the world of the imagination. We appear to have a special affinity for creativity and a special desire to work out who we are, how we live, how we manage ourselves as a society and how we are going to change in a rapidly changing world by using the arts as a vehicle to discuss all those complicated questions about our identity as a nation. Perhaps it is not something we should boast about or interfere with too much as it seems to work extraordinarily well. We are unusual as a society in having this extraordinary commitment to and involvement in the arts. It provides a fertile breeding ground which produces a stream of world respected artists from a country of 4 million.
The State has not been backward in recognising this position. We have had an arts castle since 1952, the structure of which was substantially reviewed last year. For 15 years we have had a Cabinet Minister with responsibility for the arts. During the past ten to 15 years local authorities have been becoming more actively involved. There is an authentic and genuine level of support from the State, which works positively. These structures are not unique. One will find them repeated in every developed western state. However, one scheme introduced by the Dáil in 1969 is unique and different from those introduced anywhere else in western Europe or elsewhere in the world in support of artists, that is, the artists' tax exemption scheme introduced by the then Fianna Fáil Government which has been supported by every Government since. It has been extraordinarily successful and is relatively straightforward in that money is transferred to artists without calling on the Exchequer directly — a clear and obvious benefit. Funding is given directly to working artists whose income can be defined in two ways. First, there is very little of it and, second, it comes in irregularly but it is improved by access to the tax exemption scheme.
The scheme does something else which is rather subtle and not much noted — it corrects one of the elements of the Irish relationship with the arts and artists for which we used to be notorious, that is, it used to be the case that any Irish artist who established a reputation in Ireland defined that reputation by leaving immediately and going somewhere else. That has not been the case for ten or 15 years. We are in a fortunate position in that those Irish artists who become world famous are world famous as Irish artists because they are resident here, they work here, they think and talk about Ireland and their recording studios, production companies and management offices are based in this country. They see themselves as Irish. They have to live here to benefit from the tax exemption scheme. It appears to us that they reflect extremely well on Ireland and are a very important asset to this country, nationally and internationally. Addressing a committee such as this I do not have to pitch this case. I assume members are serving on this committee because of an interest in and commitment to the arts. I will move on as quickly as I can to the details of the tax exemption scheme.
There are no statistics on the arts in Ireland. For some extraordinary reason we have decided not to research what happens in this vibrant part of our national life. The Central Statistics Office pays little or no attention and the Arts Council only appointed its first research officer last year. Very little research is done and the closest we can get to it is the information provided by the Revenue Commissioners in analysing the results of the tax exemption scheme. The last year for which detailed figures are available is 2001 when approximately 1,300 people benefited from the scheme. A total of 52% of those who benefited had average exempted income of €3,908. A further 34% had income between €10,000 and €50,000. That is not to say, however, that 34% consistently had income between those two amounts. A normal part of an artist's working life is to go through two or three years where one has no income and then have one year during which one is relatively successful. For example, someone can spend three years writing the script for a film. He or she sells it in the third year and earns €60,000 or €70,000 in that year, which has to pay for the previous two and two future years. To say certain artists are earning €50,000 does not mean they are earning €50,000 every year.
Of the 1,300 people mentioned, approximately 2% benefited hugely from the scheme. Between them they take about 58% of the tax theoretically forgone. Incidentally, the theoretical level of tax forgone by the scheme in 2001 was €37 million. In 2002, for which the Revenue Commissioners have produced partial figures, it dropped to €24 million but we would not suggest that indicates anything other than the instability of income to artists. It is not in any sense a trend. We would not conclude that the figure was higher or lower in 2003. We just do not know because artistic income is extraordinarily variable.
I hope that describes the current position with regard to the scheme, which we want to defend in two ways. We would be horrified if there was any question of its removal. Apparently, that is not on the agenda but it would be a disaster from our point of view and engender a crisis in the arts.
The Minister said publicly once or twice recently that he was a little disappointed that he was not getting much response from individual working artists to what was happening in respect of the scheme. I have on my desk copies of 65 letters from members of my own organisation. Perhaps there has been more success in artists suddenly realising this was real and that they were under threat because they have been writing. There is a surprising aspect to these letters. As I said, we do not know how to run these campaigns. Therefore, these are not formal letters but letters written by the artists themselves. They are full of errors and so on but an extraordinary aspect is the extent to which people indicate they will genuinely be unable to continue as artists if they lose the tax exemption. It is not a safety net for them in any sense of the word but an additional sum of money that makes it possible for them to continue in their chosen profession. They point out that if the exemption vanishes, they will have to significantly reduce what they do in the arts, drop out altogether or, alternatively, find that income elsewhere.
The Arts Council, in its statement to the Minister, Deputy O'Donoghue, in the first instance, who then passed it to the Minister for Finance, pointed to its concern that if the tax exemption was removed, it would be placed in a position where it would have to appeal for additional direct Exchequer funding to replace the money lost from the tax exemption scheme. Its argument is that it has invested significant amounts of taxpayers' euro in developing an infrastructure in the arts, including theatres, art galleries, concert halls and art centres. These institutions depend on artists to provide them with the raw material they need to keep the doors open and entertain the audiences that want to attend. The removal of a large group from the existing body of artists or a reduction of the amount they can commit to the arts because they have to earn their income elsewhere would mean a reduction in the number of artists available for this infrastructure. The Arts Council has argued that, as a logical extension, it would have to try to replace money currently earned by artists not directly from the Exchequer and instead give it in direct funding. The result would be that the State would not earn additional tax revenue by removing the scheme from these artists but would end up paying more money by having to provide direct subsidies for artists in substitution for the funding lost in tax exemption. We hope — this has been our impression from the meetings we have had on this topic up to now — there is not a serious appetite to abolish the scheme. There appears to be a wide acknowledgement that it is essential for lower earning artists and that they deserve it.
Much of the focus of the criticism of the tax exemption scheme has been on the 2% of artists who generate the maximum take from it. I do not know who they are but we assume the majority are people involved in what is called popular music. They are the people whom we know have very large earnings and, generally speaking, avail of the scheme. It is not true to say, however, that they do not pay tax. PricewaterhouseCoopers has calculated that 35% of their income is earned from creative work and, therefore, can be applied under the scheme but the other 65% of their income is taxable. Not only is it taxable but it is taxable in Ireland because the people concerned need to be tax resident here take advantage of the scheme for their creative earnings. Therefore, they are paying considerable amounts in tax. They are also generating considerable economic activity. These wealthy individuals are not wealthy because of money they earn in Ireland. They are wealthy because of money they earn outside it. It is because of their international success and fame. Consequently, they come under considerable pressure to relocate to their market. They are constantly under pressure to live and work in Los Angeles, London or New York. However, they remain living in Ireland because of the pull of the tax exemption. In Ireland they generate considerable amounts of tax revenue and economic activity. We do not know the statistics. As far as we know, they are not published but we calculate that approximately 250 to 300 people are directly employed by these 30 or more artists, presumably all of whom are PAYE taxpayers.
Regarding the famous individuals whom we cannot name, although we all know who we are talking about, we are not saying they will leave the country in a huff if we tell them the tax exemption will no longer be available to them. They have deep roots in Ireland. They have families here, children attending school and so on. We are saying an incentive to keep them here would be removed and the pressure on them to leave would increase radically. Furthermore, the future internationally famous artist, currently poverty stricken somewhere in Ireland but who will break through in the next year or so, would have no incentive to stay here. The idea that we generate internationally successful artists would slip away. They would become successful American or British artists, not what we believe they should be — successful Irish artists.
There are many other points I wanted to make but perhaps they will come up during questions. The arts in Ireland are extraordinarily and unusually successful. The artists' tax exemption scheme plays a pivotal role in establishing and encouraging this success. The amendment of the scheme would not increase the tax take and Ireland's enviable reputation in the arts would suffer as a result. Our function here and our slightly clumsy and unlearned appeal to the committee is for it to support the artists of Ireland and agree with the Minister for Arts, Sports and Tourism and the Arts Council that the scheme works, is successful, of serious benefit to Ireland, economically and culturally, and should be left as is. I thank the committee for listening.
I thank Mr. Kavanagh for his presentation. I welcome Mr. John McLoughlan who has come from County Donegal. I gather I made it here quicker than he did. There was a rumour he had left County Donegal yesterday but I left there this morning.
Mr. John McLoughlan
I left yesterday.
Coming from an arts background, I can empathise with the idea that once an artist makes it in Ireland, there is great support for him or her. Artists are in the weakest position during their early education in the arts and in gaining access to support at that time. In that sense this is one scheme in which an artist can aspire to participate, if he or she can struggle through the mire of becoming a composer, sculptor or playwright. In other words, there is light at the end of the tunnel. Any of us who has been abroad knows that Ireland is renowned for the arts more than anything else. Sometimes sport comes into play but the arts are number one on the list. Irrespective of what country one visits, they will always come up in conversation.
The scheme only accounts for 1% of the tax forgone in the 20 to be reviewed. It seems to be a small amount of money. Ultimately, the argument to be made to the Department of Finance is that account must be taken of the cost of administering and reviewing a scheme such as this as compared to the cost of replacing the amount in tax forgone.
I was at college with Mr. Ian Wilson and Mr. Stephen Gardner who have moved here. They would probably say they located here because of this incentive as much as for any other reason. Where are artists likely to locate if they do not gravitate towards Ireland? Is there another country competing with it in the arts? In other words, which country would gain from the loss of our artists?
The representatives said an amendment of the scheme would not increase the tax take. Are they of the view that there is a move towards amending it, or is it proposed to scrap it? Given that they referred to its amendment, I gather they assume the 2% category will be targeted and that a threshold will be applied to the scheme. Have they been given any indication to this effect? They have explained the argument for not amending the scheme. Have they been given any indication of the direction in which it is proposed to move?
Mr. Kavanagh
No, we have not. We heard on the grapevine that what is being considered is the applying of a cap to the scheme but nobody has suggested the level of earnings at which a cap would be applied or, administratively, how it could be made to work. We are not tax experts and have not been able to employ such an expert to advise us. We are simply speculating. It is extraordinarily difficult to imagine how a cap could be applied to the scheme effectively. If a cap of €100,000 per year on earnings was applied, it would not take a very clever tax lawyer to advise a client to make sure he or she earned €99,999 for the first three years and in the fourth to live in the Virgin Islands or the Bahamas and earn a couple of million euro. I assume wealthy people in the 2% bracket can afford clever tax lawyers and that if I can think of adopting such a strategy, they would also think of it and adopt it in a much more sophisticated way. I assume it would be technically difficult to apply a cap to the scheme.
It would be as difficult to sell the idea to the man or woman on the street who pays tax and questions why artists do not that artists should be allowed to earn €100,000 without paying tax as it would that they be allowed to earn €1 million. We are keen to address this issue as plainly as possible. It seems there would be a number of technical difficulties in applying a cap to the scheme. Our response to the man or woman on the street would be that artists pay tax. They pay a substantial amount but the question is: do we want them to pay tax in Ireland or elsewhere? We would prefer them to do so in Ireland. We would prefer them to be treated as Irish artists, not international artists, because that would give us a serious economic and cultural advantage.
In response to the question as to which country such artists would move, Mr. McLouglan wants to comment. When the scheme was introduced, it was supposed to attract non-Irish artists to live in Ireland but it has had limited success in that respect. It has been successful in attracting a relatively small number. There are five or six non-Irish artists in the top earning 2% category who are resident here for tax purposes. Presumably, they would leave the day the tax exemption was removed. I am not sure of what major disadvantage that would be to anybody. For some reason it seems more composers have moved here than any other group of artists.
Mr. McLoughlan
I would like to comment on this issue because the Chairman mentioned Mr. Stephen Gardner and Mr. Ian Wilson. I also thought of Mr. Kevin O'Connell. My thoughts started to roll on the subject because there are many Northern Irish composers, painters and other artists living in the Twenty-six Counties. The Chairman asked to which place they might all move. I would say in reply that they would move back to the North or to Britain. I can also think of individuals from South Africa and elsewhere. We really cannot say to where they would move. Mr. Kavanagh has already answered the question. In his presentation he said we did not believe anyone would flee here but we are talking about the next generation. We do not know their names but they may be of Irish origin and very much tempted to leave. Artistic pastures are greener in Scandinavia. In that context, I could name a few countries but that would be a waste of time.
Mr. Kavanagh
High earners are under pressure to move from those who manage their careers in Los Angeles, New York and London where most of their business is done. As PricewaterhouseCoopers stated in its report, these artists will be pulled to those markets. They are already under considerable pressure to do so.
While I am uncomfortable in quoting names, I would like to give an example, which may be a little unfair. Mr. Jim Sheridan is editing a film he shot in Toronto. The company which invested a considerable amount money in having it shot in Toronto would much prefer to have it edited in the United States close to it but he has insisted on returning to Dublin and is editing it with a team of editors in an editing suite. He is paying a considerable amount of money for the privilege. That is indicative of the benefits that flow from having Irish artists tied to their own land.
I thank the representatives for coming. I will have to leave once they have answered the questions I will put to them. I apologise for not being able to stay for the rest of the meeting.
I was pleased to hear their contribution in which they referred to an important piece of arts supporting infrastructure. When I lived in London and was involved in the arts, this scheme was hailed as an example of a great incentive provided by the Government. However, as indicated by the Minister for Finance in last year's budget, many of our tax exemptions are subject to review.
I will play devil's advocate in regard to this scheme. I heard the representatives' views on the imposition of a cap. I believe its imposition is the only workable option. While I am not sure what the view of the representatives is, I know of many people who are uncomfortable that millionaires living here are not paying taxes. A variety of schemes across the board will be reviewed to ensure such persons will pay them. I include artists in this category. When this exemption was established, like other established exemptions, it was done for the purpose of kick-starting the industry but at this point it needs to be reviewed.
I note the statistics given by the representatives. We have received similar statistics previously. They indicate that the vast majority of artists earn very little and should continue to be supported by the scheme. A cap should be applied because that would be one way of prolonging the scheme as opposed to its remaining in place as currently framed, which is not an option.
I am interested in the delegation's view on the stallion tax scheme.
I know the answer already. The delegation is here to sell, not to buy.
Mr. Kavanagh
I have a good get-out clause because the only thing I know about stallions is that they have a leg at each end and a head at the opposite end to the tail. I know absolutely nothing about the stallion tax exemption scheme, how it works or who benefits from it. As I do not have any knowledge of or interest in the matter, I cannot help the Deputy.
As regards the idea that the artists' tax exemption scheme was introduced to kick-start the industry, like some of the other tax exemption schemes, that was not the case. It was intended from the beginning that the scheme should not be done away with but that it should be reviewed. Every scheme in a democracy should be reviewed to see if it works and is effective. It was not a scheme to kick-start the industry, to bring it to a certain level and then to allow it to sustain itself. Unfortunately, that is not practical in the arts. Artists will not be able to sustain themselves now or in the future. That is a lesson we must accept about the arts. Although it is a pity, we must accept that the Government must contribute to them. Their survival and particularly their success will always depend on Government support. The scheme has some uses and subtleties in that it is not a direct subsidy where an Arts Council——
Mr. Kavanagh has already made that point and I agree with him. However, as representatives of the public who have been charged with protecting the public purse, we must look at the bigger picture. My point about millionaires paying taxes still stands. What is good for the goose is good for the gander. People are crying out for a stallion tax.
I accept Mr. Kavanagh's point about kick-starting the industry. I did not mean to imply that was the purpose of the scheme; it is more of an enhancement of the important role of artists in society. The stallion tax scheme allowed us to develop an internationally renowned thoroughbred industry, which is important. However, that scheme is subject to review. Does it need the same type of support? We must deal with horses as well as artists when protecting the public purse. We cannot do something for one group and not the other. That is why I asked the question.
Mr. Kavanagh
It is not true that millionaire artists do not pay tax.
I am not saying they do not pay any tax.
Mr. Kavanagh
They do not pay tax on their creative income.
We are talking about a tax exemption. I am aware of the subtleties. However, I would like Mr. Kavanagh to address the fact that some people — I know it is a minority — generate millions of euros. If the scheme is to be retained for those who earn less money, those who generate income from their creative activities should be subject to tax.
An easier comparison might be the film relief scheme. Film producers might be in the same position.
Mr. Kavanagh
From its inception, section 481 was clearly intended to develop a viable industry and when that happened the tax benefit would be removed. Whether that will happen is a matter for discussion in a different place. Taxing millionaires on their creative income would reduce, not increase, the State's tax take. That is why it is an error to say that because a person is a millionaire he or she must pay tax. The reason we think that will happen is that the people concerned are already under severe pressure to leave this country, to conduct their business where it is happening such as Los Angeles, New York or London, and to take their earnings with them and pay tax on them in those places. It is better economically and culturally to accept that these millionaires do not pay as much tax as we would like them to pay to ensure they continue their economic activity in this country in order that they pay whatever tax they can and generate economic activity here rather than elsewhere which will generate further taxes. That would benefit the country culturally and economically by improving our reputation internationally and the way we can promote the country to potential tourists. There is an old joke about no one being able to name five famous Belgians. If we asked anyone outside Ireland to name five Irish people, he or she would start with Joyce and Beckett and finish with Bono. That is priceless from a tourism point of view. If the people concerned lived in New York or Los Angeles, we would lose that extraordinary economic advantage. Our argument is that in an ideal world we would like all millionaires to pay tax, but we must be realistic. Many millionaires, not only millionaire artists, do not pay as much tax as we would like them to pay. The State will earn more income tax by retaining rather than abolishing this scheme.
Joyce and Beckett felt they had been driven out of the country.
Mr. Kavanagh
If the tax exemption scheme had then been in place, it is possible they would have stayed, as have many Irish artists since.
Mr. Toby Dennett
For the majority who avail of the scheme, a cap would make little difference. However, for the 2% who earn 58% of the entire amount in tax given to the State, a cap would be the same as scrapping the scheme. It is too simplistic to ask why millionaires do not pay tax. Those who pay tax pay approximately two thirds of their total income in tax. The economic argument is clear. It is about keeping the people concerned in the country in order that they pay whatever they pay in tax in Ireland.
Mr. McLoughlan
Deputy O'Malley played devil's advocate. If the scheme is capped rather than scrapped, which the Deputy said she favoured, will it be at a certain figure such as €50,000 or €100,000? That figure would be below the average industrial wage in 20 years' time with inflation and earnings, but it would be on the Statute Book and start to affect the people the Deputy did not want it to affect when the cap was introduced.
It would be subject to review. That is not a reason to leave it in place.
Mr. McLoughlan
I thought the Deputy might say that. I agree it could be subject to review. However, it has not been reviewed since 1969. When will the next review take place?
That was because it was not capped. Mr. McLoughlan made a good point. That is the trouble about including a certain figure in legislation.
Mr. McLoughlan
The Association of Irish Composers made a submission on the scheme in which it stated that before removing or changing, including capping, the artists' tax exemption scheme, the Government must assess if the scheme was a success, if it continued to be a success and whether conditions had changed in order that its work could be considered to have been completed. The Deputy touched on this when she made the comparison with the exemptions granted for stallions and the film industry. The conclusion is that the general conditions regarding artists have not improved sufficiently to warrant its removal or adjustment. As long as artists continue to concentrate primarily on the artistic quality rather than the financial potential of their work, their income will remain uneven and, in the main, poor. If they concentrated exclusively on the financial potential of their work, they would cease to be artists and might also remain poor. They are not stallions; they are different.
The artists' tax exemption scheme was the only one introduced for the sake of its effect on the individuals covered, not on society as a whole. There is an interesting paradoxical satisfying symmetry to this. In other words, most of the other schemes were introduced to help people find houses or to stoke up sectors of the economy such as the racing industry and were, therefore, based on economic decisions. This scheme was not the result of an economic decision. Therefore, it should not be scrapped on that basis. I could be asked why not but it must be recognised the scheme is different. The reasons for its introduction were also different. By considering it with the others, there is a fatal fallacy in the logic that went into it in the first place. Although it was the only tax exemption scheme not introduced for the sake of its effect on society as a whole, it was probably the only one that had a positive effect on society in non-fiscal terms by enhancing the country's reputation and generating artistic activity, which is extremely healthy. We must be careful about making adjustments because it is a low cost scheme, which is not about fiscal values. With regard to society, it was not about fiscal values or reliefs applied only to individuals. To scrap it on the basis of cost or revenue generation would change the basis of our value system altogether.
Cuirim fáilte roimh an toscaireacht a tháinig isteach chugainn inniu, agus gabhaim buíochas léi as ucht na faisnéise a chuir sí ar fáil dúinn. Bhí sé an-chabhrach, agus is maith an rud é go bhfuil eolas mar sin ag teacht ón phointe ceart chugainn. I welcome the delegations and thank the contributors for their presentation.
While I support the retention of the current tax exemption scheme in the main, I am totally opposed to the provision of a tax exemption for millionaires under any heading. The representatives do no credit to their case — I acknowledge how difficult it is to argue in favour of an exemption for such individuals — but it is totally wrong. PAYE workers rear their families and try to do their best for the community and, in so doing, make a strong patriotic contribution to the State. However, it is most unpatriotic to suggest millionaires will leave the country if they have to pay their dues the same as everybody else because they cannot avail of this exemption. In most cases, they have benefited from our education system, possibly at no cost; have been helped to cultivate their talents in the community and availed of favourable publicity and audiences generated during the years.
Many artists need help. Most of them do not receive sufficient help. It would make more sense if tax paid by millionaires who might leave the country — I do not believe they would — was ring-fenced for artists who need it but there is no way the ordinary PAYE worker could be convinced of this. Mr. McLoughlan is only adding to the perception of elitism in regard to the arts if he tries to argue that concept with such workers. He referred to the man and woman on the street and, therefore, must be aware of that perception. He will find it difficult to convince people that they should pay full tax while a millionaire should be exempt because he or she is involved in the artistic world and there is a perceived threat that he or she might leave the country.
Mr. McLoughlan and his colleagues made a good case and I intend my comments to be helpful but harm is being done by trying to make a case for the impossible. I support the assistance of artists who need it in the same way I support other groups which need help but I do not support the provision of an open-ended scheme. Many schemes are means-tested and there is no reason a scheme applying to the arts world should be different. It would be wrong if somebody were to deduce from this that I am anti-artist. I am most supportive of artists who are not being properly helped. Art and artists are among our most valuable assets. I have experienced on every continent that we are more noted for our sport and art than for our economic progress or political structures. That is why they are an asset in their own right.
It detracts from the case made by the representatives that an argument can be made on behalf of millionaires who are doing well, given that not all of their wealth is related to performing. Names are running through my mind and, by and large, they have done exceptionally well. I would say the same about other areas of economic activity. I do not intend to be partisan but one always finds that where the big person scores, the small person suffers. Somebody always needs help and if the big person takes a larger slice of the cake because he or she has greater appeal among the media or he or she can lobby Government, as public representatives, we should strike a balance and be the voice of the small person who cannot succeed in the same way.
I welcome the delegations and pay tribute to their work in the arts community. I declare an interest in that my brother and many other friends work in the arts field. Therefore, I have a deep understanding of issues in the arts, including the tax exemption scheme. A state that does not nurture its artists, musicians, sculptors or painters does not have a soul or a spirit and has lost its sense of balance. I am concerned that we are at a crossroads following the recent significant economic development and that we will lose this sense of balance and spirit. That is why I strongly support the artists' tax exemption scheme, although I take on board the views of Senator Ó Murchú regarding the weaker sections of society and the perception of injustice. However, this exemption has not only been of great benefit to artists but has also benefited Ireland in general in terms of its reputation internationally as well as tourism and trade.
The profile of artists makes it difficult for them to conform to tax and social security legislation. They experience significant fluctuations in income and go through long periods without income. They may not be jobless but they do not have an income at times. Approximately 86% earn less than €50,000 per annum, while 50% earn under €10,000. For example, it could take many years for a playwright to produce a play, while a visual artist may hold one exhibition every four years. There are approximately 45 professional choreographers in Ireland, some of whom earn between €1,000 and €25,000. Fewer than 20 earn more than €10,000. That is the real world for artists, of whom I am strongly supportive.
From an economic point of view and speaking as a Deputy elected to represent the disadvantaged in society, the removal of the scheme would cost the State more than it would save. It is important to note this point. I agree, as stated in the submission, that the arts are immensely successful but we must look at how they can become more successful and relevant to broader sections of society. There is a certain elitism in the arts. As such, we need to broaden their base.
My next question relates to the arts for working people and disadvantaged communities. Having worked in the inner city for 20 years, I am aware of the pool of talent not being tapped in terms of music, painting, sculpting, drama and so on. The State is not doing enough to develop the talents of thousands of young children in primary schools in poor disadvantaged areas. It is an important issue which those involved in the arts world and Ministers must tackle. There is much that is positive also. For example, individuals such as Robert Ballagh have made a contribution to the development of skills in poor parts of the city and turned the corner in developing self-esteem and strategies which keep children away from poverty, crime and anti-social behaviour. Perhaps the delegates will tell the joint committee if they see a further role for the arts in this area. I speak about the development of arts therapy in primary schools for children at risk. These are important issues.
I support the artists' tax exemption scheme as it plays a major role in establishing a more humane society. I do not believe its amendment would result in an increase in the tax take. If I thought for one second that there was a golden egg from which we could recoup resources, I would support such an amendment. Overall, I support artists and their efforts.
Ba mhaith liom fáiltiú roimh ár gcuairteoirí freisin agus rá gur chuir siad cás láidir os ár gcomhair inniu. I came to this meeting with an open mind on the issue before us, although I, too, have misgivings about high earners remaining outside the tax net in terms of their earnings from creative endeavours. Mr. McLoughlan made the interesting point that the scheme was the only tax concession which did not have an economic base. It has occurred to me, having listened to the delegation, that what the arts contribute to society is, in many ways, intangible. However, their contribution to society has never been more important than now, given the spiritual deficit. Such a deficit is best addressed by the arts.
It is mentioned in the submission that 52% of low earners have an average exempted income of €3,909. This figure is quite low. There is merit in examining what can be done, not through the tax system but in other ways, to assist the group represented. In considering tax concessions in an economic context we must look at the net outcome. For example, will the exemption from tax of high earners based on their creative activities result in extra jobs being created in the community? The argument that we may not lose people at the higher end if the concession was removed and that we may not be able to hold onto others in the future is not without merit. It is one to which I am open.
Reference has also been made to those writing a play or book who experience lean years during the writing period and only earn an income later and the resultant problems if a cap was introduced at that stage. There are many intricacies involved and the issue is not one easily addressed. I find it difficult to move away from the principle that everyone on a high income should be taxed. However, I remain open to the argument in terms of the assessment of the net position. We must try to quantify what the arts contribute to society, difficult as that may be.
The Labour Party spokesperson on the arts is unable to attend today's meeting. While I support the concept being discussed, I will bring the issue concerning the top 2% of earners to his attention. Having listened to the arguments presented, I now have a somewhat different perspective on the matter. I wish the delegation well in its endeavours. While I do not wish to tell the groups represented how to conduct their business, there is a need to focus on the bottom 52% of earners. The argument was advanced that removal of the exemption would result in greater pressure on Arts Council funding with it, in turn, seeking direct Exchequer funding. That is an important argument. However, this issue has arisen before in regard to the entitlement of artists during down-time to social welfare benefits. The matter was raised by the Irish Actors' Equity Group on previous occasions.
I wish the delegation well and support the exemption. It should not be abolished; rather it could be adjusted, given that the matter has not been reviewed since 1969. The scheme is a positive one and should be reviewed at this stage.
I agree the correct approach would not be to consider the issue in economic terms; it is much larger than this. It is a hugely important aspect of society. We have reached the stage where the community has been weakened for many reasons, into which I will not go now. We need the arts fraternity, through its various mediums, to hold up a mirror to show us where we are going wrong and point us in the right direction. The scheme accounts for only 1% of the total amount of tax forgone, a small price to pay for what we receive.
When in St. Petersburg recently, I was asked to visit Nabokov's house which had been taken over by a community group trying to sell the only remaining Russian items belonging to Nabokov who had been exiled and never returned to Russia or again owned a house of his own. The group had been able to gain access to the ground floor of his family home and I was asked to meet the equivalent of the county manager of St. Petersburg because a commercial rent was being demanded for the premises. I used the example of how James Joyce's stories about Dublin and Ireland were a massive tourist attraction. I pointed out that having a place where Nabokov grew up would be a significant tourist attraction and that charging a commercial rent would be like cutting off one's nose to spite one's face or killing the golden goose. The manager seemed to be hearing this view for the first time. I do not underestimate the spin-off from artistic endeavour. There may not be much money involved, but the spin-off can be significant.
Senator Ó Murchú said that if he knew the tax take would be ring-fenced and directed towards young musicians, he would support and encourage it. However, that is not the way it happens. The usual procedure is not to ring-fence funds that would be worth spending on another aspect in the same area. There may be merit in the suggestion that those people on higher earnings should be encouraged to mentor or contribute directly to artistic endeavours as a form of benefit-in-kind through which they would invest in younger playwrights or community artists.
Mr. Kavanagh
There is much to which to respond. Senator Ó Murchú suggested that his remarks might be interpreted as being anti-Irish. Nobody who knows of his lifetime commitment to Irish culture could suggest that this could be true in any circumstance. This thought would not occur to me.
I am not an artist, although I was an art student in the early 1970s, when the college was located beside Leinster House. I discovered I had no talent and decided not to become an artist. However, I am a taxpayer trying to raise a small family who argues that millionaires should not pay tax on their creative income. There is, therefore, at least one taxpayer in the country prepared to defend such a position.
It would be great if the Arts Council, this committee or the Dáil and Seanad were able to organise themselves to address the questions asked by Deputy McGrath such as how we can make more organised use of the extraordinary artistic energy of the country and focus it more precisely on ensuring artists have stable incomes and how society can get the maximum benefit from what artists can contribute. There are significant ways we could address these questions more comprehensively and carefully than we have.
A major weakness is that there has been no research whatsoever on the arts in Ireland since the inception of the Arts Council in 1952. We make generalised assertions to the committee which, frankly, are based on our instinct for an industry in which we work, rather than on any serious research. We do not know the social, cultural or economic value of the arts. The CSO should invest time, money and effort in trying to establish some of this information in order that it might be brought to the attention of this committee and there might be a serious review of the benefits of the tax exemption scheme.
We are concerned that there has been no review. Instead of a review of this complex, subtle and quite successful tax exemption — we realise it is a gift or benefit to artists given by the State — its benefit has not been analysed or carefully examined. The benefits or lack thereof are entirely based on a rough assessment of whether the exemption is a good idea. I apologise for making this comment when Deputy O'Malley is not present but, unfortunately, it reduces the argument to an over-simplistic view of saying a person is a millionaire and that it is, therefore, wrong that he or she does not pay income tax on some element of his or her income. It may or may not be wrong. The scheme has not been analysed carefully enough by any of the bodies responsible for making the decision. We are very worried that a cap will be imposed because it seems politically useful to do so or because there has been negative publicity in the newspapers, rather than being based on a careful analysis or assessment of what artists could or should earn, how their earnings might best be managed and how their contribution to society might best be organised.
Deputy McGrath spoke about the education system. While there is dramatic investment in the arts in education, it is inchoate. It is disordered and disorganised. The education institutions do not talk to each other across primary, secondary and tertiary level. Nobody seems to try to work out whether it is appropriate to train certain numbers of painters, sculptors or musicians. We do not think about the life the people we have brought through the education system to be artists will have or how they should contribute to society. That is a pity.
We cannot escape the obvious logic of saying millionaires should pay tax. We understand the authority of such a simple statement. However, it is a pity that a knee-jerk decision will be made about the tax exemption scheme, a scheme we know in our hearts and souls to be hugely successful and which has contributed significantly to Ireland's self-confidence as a nation with an understanding of, engagement in and commitment to the life of the imagination and creativity, without analysis, sophisticated consideration, statistics or serious debate about what should happen. The decision will be made on the basis of an over-simplistic statement that millionaires should pay more in tax. I thank members for the political advice which we need, as we are not politically sophisticated. However, despite what they say, we want to defend high earners and argue that they should not pay tax on their creative income. We say this because we are certain that the individuals concerned contribute hugely to the reputation of Ireland internationally and to the development of the arts in Ireland.
The Chairman spoke about whether the artists in question should be encouraged to contribute in an organised way to the development of younger artists. I assure her that they actively and seriously do so, not least by employing such artists to work for them on a regular basis. For example, world famous film-makers living in Ireland make films here regularly. When they make films, they employ Irish technicians who learn much from working on these projects. In a practical, economic sense the fact that they are resident in Ireland has a huge knock-on effect for younger, less established artists who see them as models they can emulate. They are immensely generous with their time. Some of them have been immensely generous with their cash in helping various organisations trying to establish arts activities. It is not uncommon for an arts organisation to have one of the high earners on its board, its finance raising committee or quietly signing cheques to help it. High earners are integral to the arts. We want them here in Ireland. We want them to be Irish rather than international artists. It would be a great pity, therefore, if a simplistic statement led to the closing off a scheme that we know is extremely successful.
Mr. McLoughlan
I echo that contribution and stress the same points. What I have to say amounts to repetition. The presence of a high earner in the context of the infrastructural picture of film production studios, music recording studios, theatre venues, production facilities, etc. is similar to that of the anchor tenant in a shopping centre. If we pulled Dunnes Stores or Tesco from a shopping centre, all of the little shops would die and close down. Chasing away the anchor tenant may remove the lynchpin.
This brings us back to the statistics. There is a danger that a review will take place that has no worthwhile facts or statistics at its disposal. This is something we three suspect, having considered the matter for approximately a year and a half. In film production, rock music and other areas it is well known that certain individuals have striven far beyond the call of duty to raise production conditions in the country, which has impacted on the local economy and acted as encouragement and an incentive for the younger generations who, while they may not reach that level, are all part of the community. We must remember that a cap on the scheme could have a strong effect in that regard. The number in that bracket is much smaller than the number counted in any year. I apologise; that is another point from my submission, which does not follow.
It seems strange and ironic that a cap on or a scrapping of the artists' tax exemption scheme may happen as it would be merely caught in the wake of a general reform of tax exemption schemes. The review of those other schemes, of which the most famous relate to property investment and stallions, is about restoring equity to society and noticing that there is an increasing gap between rich and poor. Eliminating these schemes may narrow those gaps but we have no evidence that the artists' tax exemption scheme is anything like them as we do not have the statistics. We have made all of our submissions based on four year old statistics from Revenue which were kindly put on the website and other statistics from 2000 from the Arts Council. Those are the most recent statistics for artists' incomes. It seems extraordinary that the Government should make decisions on so ill-informed a basis. I cannot imagine its doing so in any other sector. Perhaps I am just naïve and it may do so.
Mr. Dennett
This issue has received considerable coverage. It is a very hot political issue in the press. The amount of coverage it has received seems unfair. Obviously, I appreciate there was considerable pressure politically to put a cap on the artists' tax exemption scheme without even considering the other schemes. However, we make the case that throughout this coverage the facts of the issue have not been put forward clearly. Artists pay a substantial amount in tax: high earners pay tax on two thirds of their income with one third covered by the exemption. The low earners, many of whom are represented by our organisation, would not necessarily be affected by a cap. However, there are longer term knock-on effects of removing those major figures within the arts world in the country.
We call on the committee to retain the tax exemption scheme unchanged, as has the Minister for Arts, Sport and Tourism and the Arts Council.
We can write to the Minister enclosing the transcript of this meeting which will give him a flavour not only of what people have said in favour of the groups represented here, but also the other side of the argument in response to those comments. There is broad support here and that support is unanimous regarding looking after those at greatest risk. The argument affecting the remaining 2% has also been well covered. Is that course of action agreed by the members? Agreed.
I thank our guests. Although they may have said they did not have the skills, they appeared sufficiently well skilled. We value their input regarding the argument about trying to keep the arts to the fore, given that the committee covers arts, sport and tourism, rural development, community and Gaeltacht affairs. We are always happy to try to keep the arts centre stage because, as our guests stated, they are centre stage internationally. Without some of us to fight their corner, the social, economic and educational benefits to our young people involved in the arts as well as being the audience of the future might not be realised.
The joint committee adjourned at 3.25 p.m. until 4.15 p.m. on Wednesday, 28 September 2005.