The main item on our agenda today is the continuation of the review of tax reliefs and exemptions submitted to the Department of Finance. Members will recall that we heard from officials in the Office of the Revenue Commissioners, the Department of Finance and the Institute of Taxation. Today we are joined by representatives of the Arts Council. The delegation includes Ms Olive Braiden, chairperson; Ms Mary Cloake, director, and Mr. John McGahern, a member of the Arts Council. On behalf of the committee, I welcome and thank them for attending today's meeting. I advise that while the comments of members are protected by parliamentary privilege, those of visitors are not so protected. I remind the committee that members should not comment on, criticise or make charges against a person outside the committee or the Houses. In our letter of invitation we indicated that the committee would like the delegation to concentrate on the rationale behind its submission to the Department, rather than specifically go through the submission which we have all read.
Tax Reliefs and Exemptions: Presentation.
Ms Olive Braiden
I thank the joint committee for inviting us to explain the rationale behind our submission to the Department of Finance on the artists' exemption scheme. I thank it for postponing our appearance two weeks ago following the unexpected and tragic death of our deputy chairman, Mr. Jerome Hynes. I also thank the many Members of the Oireachtas who sent expressions of sympathy to us and his family. I am accompanied by Ms Mary Cloake, the director of the Arts Council, and Mr. John McGahern, the renowned writer and member of the council. We will divide our initial ten minutes between the three of us and will be happy to answer any questions posed.
We made our submission to the Department on the artists' exemption scheme in April. Our unequivocal advice to the Minister was that the scheme should be retained in its entirety. That position has been supported by many groups, including artists and arts organisations. Members may have read an article in The Irish Times last Friday by Mr. Dermot Bolger who made a strong case and carefully explained why the scheme should be retained in its entirety. The Arts Council will shortly publish the life stories of ten artists which will explain their situation, why the scheme has helped them and why it should be retained.
Our rationale for wanting the scheme to be retained was manifold. During the years the Government and others have had a stated policy to provide for the support of artists and the arts within the State to enhance the public good. The artists' exemption scheme is an instrument designed to further this policy of Government support for Irish artists. If the exemption is withdrawn, pressure will be exerted on the Exchequer to replace the income lost. It will have to supply such income from State resources, as the market now provides, or the art world, the country and other jurisdictions will lose entirely or in part a considerable number of artists.
The artists' exemption scheme is not a rich man's relief, as was represented in some quarters. The greatest number of its beneficiaries struggle for financial viability on a yearly basis. That is true of relatively unknown beneficiaries as well as some of Ireland's most internationally renowned and critically acclaimed artists. I know the Chairman outlined the dichotomy between the majority of low earning artists and the minority of high earning ones. That is correct. However, that dichotomy clearly reflects the dire economic circumstances in which many of our creative artists live in Ireland, as well as the major global successes of a small number of Irish artists, mostly musicians and a number of writers. The total number is 28 based on the 2001 tax year. Poets and visual artists are thought to dominate the lower earning categories. The ground between these two extremes is sparsely populated.
If the exemption is abolished, a number of consequences will flow. Artists will emigrate in search of lower costs of living in proximity to cultural hubs. Others will be forced to abandon their art to pursue alternative employment, which would be a great loss to this country. If the exemption is capped, there will be one particular extreme as artists living in Ireland solely for tax purposes will repatriate and those at the low end who might have possibilities to make it to the middle or high ground will not have the infrastructure or the inspiration given to them by other major artists to do so.
The artists' exemption scheme has helped to counteract some of the disadvantages of being an artist in a small country. It allows and encourages creative artists to remain on home soil and affords them the financial wherewithal to get the expertise required overseas. On a symbolic level, the introduction of the exemption constituted a formal acknowledgement of the important role played by creative artists in society. This has won Ireland many international plaudits during the years. It is important to have internationally famous artists resident in Ireland such as Seamus Heaney, Roddy Doyle, John Banville, Colm Tóibín, Enya, Robert Ballagh, Anne Madden and many others. Apart from the global perception this gives to Ireland, it also helps to put in place a world class local infrastructure in artistic management and technical expertise which is of considerable assistance to up and coming artists. Without the high earners who support the infrastructure in a major way, this professional layer would be lost to Ireland.
Ms Mary Cloake
The artists' tax exemption scheme is the most established of the tax reliefs being reviewed by the Department of Finance. The rationale underpinning its introduction constituted an official recognition of the substantial financial difficulties faced by creative artists resident in Ireland as opposed to any overt attempt to reduce the tax burden on the super wealthy or to divert funds to any particular form of investment, as indicated by some of the others. There is now an impression that the cost of the scheme is rising and that is why we are having this debate. This is a measure of the success of the exemption. The figures for 2001 are a legacy of an exemption which has been in place for a generation of artists since 1969. This generation of artists would not have had success if there had not been such an exemption in Ireland in their formative years.
It is often forgotten in this debate that the exemption is not available on all artistic earnings, but only and strictly for incomes derived from original, creative works in a small number of categories. This means large numbers of professional artists in Ireland do not qualify for the scheme, including actors, musical performers, choreographers and dancers. In many ways, the scheme can be said to be limited rather than overly used. For certain of Ireland's most commercially successful artists, especially musicians who have attracted attention, earnings from original and creative works constitute a relatively small share of their incomes. While musicians make money from writing songs, they also make money from recording and touring, the income from which does not qualify for the exemption.
Far more people are choosing to have careers as artists in Ireland, which is a very positive outcome of the scheme. We have figures to support our claim that it represents a contribution to the artistic vibrancy and gaiety of the nation. In 1969 very few artists who applied failed to qualify for the scheme, which was also true as recently as 1994 as few applied. In recent years 100 of the approximately 500 annual applicants failed, which indicates we have many more artists and are more discriminating about the work which qualifies for the exemption. Because the scheme has been successful for one generation of artists does not mean it is not needed by the next. While Ireland has changed radically since the scheme's introduction, we continue to swim against the tide to retain the top creative artists for a number of reasons, on some of which Ms Braiden touched. We have a small market for many art forms. In a small population there are fewer people to buy works of art. We are a step removed from the artistic hubs of Europe and, as we all know, the cost of living here is high. The mobile nature of some forms of artistic endeavour such as writing or painting places Ireland at a disadvantage vis-à-vis other European locations. It might be cheaper and more effective to make work for an exhibition in New York near New York as opposed to making it in Ireland if it were not worthwhile from a tax perspective to reside here.
The vast majority of artists who benefit from the scheme earn very little from their work. The average earnings of the bottom 50% of beneficiaries in the scheme comprise wages of less than half the minimum wage. The other 50% of beneficiaries are broken into two categories of 48% and 2%. The 48% are those claiming relief under the scheme who earn between €10,000 and €50,000, the majority of whom are emphatically towards the lower end of that income bracket. Much of the comment in recent months has held that the exemption should probably continue for those 98% of beneficiaries. We welcome the unequivocal support this represents for the arts. However, an equal level of comment has concerned the 2% of high earners who are perceived to be the most significant beneficiaries. We contend that some of this comment is uninformed. Benefits from the scheme have been variously presented. The year for which figures were available, 2001, may have been exceptional as a number of world dominating albums were released by Irish artists. Our belief that figures were substantially smaller in subsequent years was borne out by the publication of statistics for 2002.
The top 2% of earners are engaged largely in popular music, although there may be a very small number of writers among them. We estimate that one third approximately of the income of top earning musicians qualifies for the exemption, which means they are liable for income tax on the other two thirds. While a musician's earnings from copyright for songs written will be exempt, he or she will be liable for tax on income from touring and recording. There are some implications arising from this. If the exemption was not available, there is no doubt that the people concerned would move elsewhere for their work with the consequent loss to the Exchequer of the tax revenue from the two thirds of their income which is liable. If the exemption was capped, which we believe strongly would not be a good idea, much less revenue would be yielded to the Exchequer than speculation suggests.
We contend a cap would in the medium to long term serve to drive out artists who make significant contributions from non-exempt income. It would also discourage artists at the early stages of their careers who might have the potential for significant commercial success from staying here. We would lose an entire generation of new and emerging artists to the commercial centres of the arts around the world. Furthermore, any capping formula which attempted equitably to reflect the variations between artists' lean years and the very few high earning years and the period between the initiation of a work and its completion would be complex and unmanageable. For example, it might take a painter five years to make a series of works available for an exhibition. While such an artist might have high earnings in one year, he or she must discount those earnings over ten years. These are the previous five years when the work was being created for the exhibition and the following five in which work is being made for the next.
The artists' tax exemption scheme represented a very small proportion of income tax receipts in Ireland in 2001, just 0.5% of the total figure. Moreover, the cost to the Exchequer was considerably less than €37 million. Nobody knows exactly how much the exemption costs as the tax affairs of individuals are confidential. While the Revenue Commissioners know the figure, our sums are based on assumptions we make having spoken to a number of artists. Our assumption is that the abolition of the scheme or its significant amendment with a cap would have yielded a saving of just €13 million for the Exchequer in 2001 rather than €37 million as has been claimed. In a national context and based on the return to the State in credit terms of an enlightened policy, €13 million represents a very small sum. The saving would also diminish significantly over time as artists with the potential to achieve significant commercial success would seek alternative residences close to major markets in a relevant hub during the formative stages of their careers. This would lead not only to losses to the Exchequer of non-exempt earnings of artists and their management, but also mean from a tax structuring point of view that the artists would not be able to work in Ireland at all. It must be remembered that much of the income of the 2% who are considered to be high earners, most of whom work in the field of popular music and one or two of whom are writers, comes from foreign earnings.
Most of the income of artists who earn more than €100,000 per year comes from abroad. These earnings would not come into the country at all if the scheme was capped as commercially successful artists would work elsewhere. If artists were prevented, in effect, from doing even one day's work in Ireland, we would lose additional tax revenues, the significant contribution their earnings would have made to the economy, jobs and the artistic know how the work of successful artists brings to the country.
Mr. John McGahern
I support everything Ms Braiden and Ms Cloake said. Rather than say anything, my intention is to make myself available as a practising writer for the past 40 years to answer any questions the committee wants to ask me.
Ireland has a reputation abroad which is out of all proportion to its size. For good reasons or bad, whenever I travel abroad, whenever work of mine is translated or whenever I represent the country, the tax scheme is seen as enlightened. I do not think it costs a lot of money. If it is tinkered with in any way, this sense of enlightenment will disappear immediately. I have had a few good years but write slowly. If my income was spread over all the years I have been writing, it would probably be a good deal less than that of a national schoolteacher, which I once was.
And still are.
Mr. McGahern
It is worth remembering that only two out of 100 books published sell more than 5,000 copies. That would hardly buy one a Christmas dinner nowadays. I will answer as best I can any questions the committee asks me.
As there are so many members who wish to speak, I propose to limit each party or group to ten minutes to give everybody an opportunity to speak before the Order of Business. Members may have an opportunity to speak a second time later.
We appreciate the contribution the arts make. Even though this is a finance committee, we are not Philistines.
We are the opposite.
There is no question of the artists' exemption being tampered with for artists on low incomes. Nobody in these Houses would stand over such a move. The debate centres on tax equity which the delegates have dealt with in detail. It was mentioned that 2%, or 28 individuals, received 47% of the benefit in the year for which figures were available. The committee will draft a report in which I will suggest that before the Department contemplates making any changes, it should look at the cost of the scheme and the benefits associated with it in the broadest possible terms.
It is impossible to quantify the benefits of the artists' exemption to the people. Whenever I travel abroad on holiday — I still consider myself to be a relatively young person — I hear Irish musicians and artists such as U2 and Enya or the music of "Riverdance". One could go to the darkest part of the Amazon and hear Irish music in the local equivalent of the pub. In recent times the Irish artist has replaced the Guinness harp as the most recognised symbol of Ireland. That is good. Ten, 20 or 30 years ago the Guinness harp was seen as the symbol of Ireland overseas. Now, thankfully, people overseas know about Irish music. This is a cultural change for the benefit of Ireland. However, the benefits are impossible to quantify.
There is the possibility of a cap or a tax rate to ensure high income earners would pay tax. Since the figures mentioned were issued earlier in the year, a report published by Goodbody and commissioned by the Irish Music Board has come to my attention. I do not know how well known it is to the public but I will read from it. Of the total income of €268 million earned in 2001 by recording artists, €251 million, or 94%, was earned by the top 20. This is the most important point in our debate. It was estimated that the foreign earnings of all recording artists amounted to €250 million, of which €244 million, or 98%, was attributable to the top 20. It was estimated that 97% of their income came from abroad. That is a point which has been missed in this debate.
The artists' exemption scheme allows artists resident in Ireland to bring €244 million into the country tax free in income they have earned in other countries. Because they can claim an exemption in Ireland they do not pay tax in other countries, with a few exceptions such as America where there is a withholding tax. If we abolish the exemption, there is a risk that money earned abroad will be prevented from coming into Ireland. I am not even talking about the other activities generated here. If the exemption was abolished for high income earners, or above a certain point, there is no basis for suggesting this 97% of income would come into Ireland. Therefore, this debate is not about income generated in Ireland, but about foreign income. No matter how one looks at it, it is a benefit to the country.
On the issue of equity, people like to see everybody paying his or her fair share. There are several ways of doing so. One can pay directly by way of taxation or benefit in kind. As Chairman of this committee, I am suggesting this issue for public debate. There is a scheme under which one can obtain tax relief on investment in stately homes which must be opened to the public for at least ten days. Therefore, there is a reference to the common good, even though one qualifies for a tax exemption.
I suggest a scheme under which highly paid artists who want to claim the exemption would have to come up with a scheme by which they can make a contribution or help the younger or budding artist in their field. Some are probably doing this already. They should make a contribution to the industry of which they are part and help nurture the next generation. If they were seen to make a contribution in kind, that would be a significant advance.
These are not direct questions but suggestions to be considered in the general debate, most of which has centered on income earned in Ireland. As it transpires, over 90% of the money does not originate here. It is important that we do not prevent it from coming into the country by changing the artists' exemption scheme. If we do change the scheme, the European Union might feel the door is open to examine any changes the Oireachtas makes to our taxation regime. While I know there are exemptions for state aid in respect of cultural activities, I would not like to open the door to the European Union.
The Chairman defends the exemption for artists on the basis of what would be regarded internationally as unfair tax competition——
Yes.
——in other words, attracting revenue into the country where there would be a zero tax liability. That is a dangerous basis on which to build an argument in favour of tax relief. It would certainly open us up to scrutiny by the European Union. We are also bound by OECD conventions on the avoidance of harmful tax competition. From the way the Chairman presents it, it has nothing to do with promoting the arts; it is just a matter of grabbing money earned overseas and bringing it into Ireland tax free. It is only fair to point to the dangers in that argument. While it looks like a win-win situation for us in the short term, it opens a Pandora's box.
It is said that economists know the price of everything and the value of nothing. We are always exposed to that risk when talking about exemptions for artists and what we should be doing about the arts. The Arts Council distributed less than the whole value of the exemption. It has its own budget and with this it supported 820 individuals, 285 festivals, production companies, venues, service organisations and so on to do things that appear to be promoting excellence and high standards in the arts. By contrast, in terms of the tax exemption, as the Arts Council has admitted, 57% of the money goes to the top 2% who got an exemption on €1.7 million of their income in the year about which we know. In terms of taxpayers' money, we asking people to pay more in order that we can spend. One must ask whether it should be a priority to continue a tax exemption in respect of which the huge bulk of the money clearly goes to a very small number of individuals. Should we instead not try to tailor a package of measures, including scholarship schemes, festival support and some element of tax exemption that promotes participation and excellence in the arts and extensive support to struggling artists, and let that be the focus of our effort rather than asking people to pay more tax in order to support the really high earning successful artists? Effectively, that is what we are doing. On those figures, if there had been a cap of €100,000 in 2001, 78% of the money would have been saved and could, perhaps, have been ploughed back into better work by the Arts Council.
These are the choices we must examine rather than viewing those who want this mechanism to be modified as being against the arts. Everyone recognises that we need to do something. Mr. McGahern justifiably pointed to the fact that five years of creation leads to one year of earnings. Perhaps we should examine the tax code. Are there averaging rules? Such rules apply in other sectors to deal with that type of peaking.
There is a danger that people will relocate. However, we are also talking about very high earners who want to come in during the day and clock out before midnight in order to avoid paying tax. The prime issue of consideration is whether very high earners will leave these shores. That is a problem with any tax code. We should focus on how best to promote the arts. A balance needs to be struck more towards the kind of thing the Arts Council is doing in its work rather than towards an arm's length type of intervention where we do not know where the money is going or who the beneficiaries are. We can have an element of both. We can have tax exemption up to a figure — it might be €100,000 or €150,000 — that is felt to be appropriate. That seems a better way to proceed and still fulfils the mandate of creating a good environment for the development of the arts. That needs to be considered by the Arts Council as a balanced alternative.
Deputy Ó Caoláin
I also welcome the delegation from the Arts Council. I extend my sympathy to the members of the delegation on the death of their colleague, Mr. Jerome Hynes.
I listened with interest to the contributions that were proffered. Ms Braiden spoke of any move towards a rejigging as being too complex. Ms Cloake stated that the Revenue Commissioners would know what relief was enjoyed by the arts earners. However, it is interesting to note that they did not obtain this information. Neither could the Department of Finance provide an answer, when we put the question at this committee, as to what exactly was the net effect as regards overall Exchequer funds. Mr. McGahern said that any tinkering with the scheme would undermine it. If I believed that, I would not entertain any change because I have long been a supporter of both the exemption for artists and of film relief. They are absolutely essential and Ireland and our society have benefited wonderfully from the collective input of people within all the disciplines within the arts sector.
It is, nevertheless, the responsibility of us all to carry out an evaluation. A review is currently under way. We should look at the review in a positive way in terms of what opportunity it might present for a reconfiguration. I would not be afraid to examine the idea of restructuring with a view to better supporting the lower paid, younger artists who are struggling at this point. I wonder whether, within the arrangements in the scheme there is not potential for capping or for ring-fencing the revenue return from the highest earners and redirecting it to that great swathe of young, low-earning artists who are struggling and who need every support and assistance in order to climb the ladder of success in their respective disciplines.
Has the Arts Council given any consideration to ways in which revenue forgone through this exemption could be better spent in aiding its objective of assisting and encouraging people involved across all areas of the arts? I would be very open to such ideas and exploration. I take the view that it is not a threatening or negative position but is supportive, positive and facilitative. The Arts Council has mounted a very stoic defence of the current system. The message is that we should not touch it. I wonder whether that is the wisest course? Does it take into account the needs of all the people in the arts in a holistic way? I do not believe it does.
It is cited in the submission that those proposing a cap do not understand the relationship between artists with very high levels of exempt earnings and artists with very high levels of non-exempt earnings which are taxable within the State. Does that mean that artists who have high exempt earnings are likely to have high taxable earnings as well?
Mr. McGahern
I can answer that. When the scheme was introduced, many science fiction writers who had enormous earnings came here. However, our tax system was much stricter and tax rates were much higher than they are now. Thus, many of them found that while they were not taxed on their earnings, their investments were often greater than their yearly earnings and they were paying very heavy taxes. Therefore, most of them left.
Science fiction is not the way to go.
Mr. McGahern
I am only telling the committee something from within the trade.
I appreciate that.
Mr. McGahern
I could not imagine my investments even approaching the little I earn from writing. However, some people had enormous earnings.
Are there figures to support that?
Mr. McGahern
The evidence supporting it relates to the number of exits from the country.
I have made a particular case and I have asked the Arts Council to take it on board. I look forward to the response which, unfortunately, I might miss. There is no denying the fact that of the 1,323 artists who benefited in 2001, only 98 earned more than €100,000 per annum. That is a small number. Perhaps the type of proposition I made earlier might help to broaden the base and accommodate more than the 1,323 people who benefited in 2001. I do not know what the figures are today. I invite the delegation to look at the matter somewhat differently.
Ms Cloake
The members' comments are constructive and supportive. However, they are based on the assumption that revenue will accrue if there is a cap. There must be a tax take in order to have a fund to distribute to artists. We contend that there would not be a fund. As the Exchequer would not benefit, we would not have resources to distribute. Tax relief has an advantage over grants. We want to retain it because the impact is determined by success in the market and there is no cost if artists are unsuccessful. Tax relief is a cheaper form of support than grant aid.
As regards the relationship between exempt and non-exempt earnings, artists earn approximately one third of their income from creative work but the ancillary activity which is necessary to support a career is liable for tax. Does that answer the Deputy's question?
Yes.
The Arts Council's document is useful in that it examines all the exemptions. Artists are slightly different in that it is difficult to measure intangible benefits. It was stated that there will not be any revenue. This presupposes that people are only here because they get tax exemptions. I do not accept that. There are other reasons people live here, including the fact that this country has given them great potential. The focus for most of us will be on the top 20. It is difficult for someone who sits in traffic on their way to and from work and who earns the average industrial wage before paying tax to understand why people who are successful, and whom they have supported, are among the privileged few. The expectation is that if people do well they must make a contribution. The exemption merits further scrutiny. The difficulty with tax relief as a means of encouraging the arts is that it is targeted. The point was made about people who are not successful. If there is additional revenue, people can be given grant aid and the arts can be encouraged in the community. As regards the top earners, there is an intangible benefit which is difficult to quantify. I support it for people on lower incomes. However, the equity argument must be considered. The document states that the people support tax relief. However, that is not entirely the case. The people support it for those who are struggling, but they are concerned that it is inappropriately targeted at those who make a viable income and who are successful.
Ms Braiden
It is not fully understood that artists only get tax relief on their original and creative work. They pay tax on all their other earned income. The majority of big earnings in a small country like Ireland come from abroad. That money is not taxed in the country of origin and it is spent here. This is difficult to quantify and to explain to people who go to work every day and who pay their income tax on all their earned income. It is different for artists because it takes them years of not getting an income to do an exhibition or to write a book and then they are taxed on their success in that year. We have asked a number of artists, particularly those in the high income bracket, if they would leave the country if the exemption was capped. Some of them said they would do so but the majority said they would not because they want to live in Ireland. However, they would regulate their work in order that it was done outside the country and that would be a loss to the infrastructure for artists here. People who earn a great deal of money have ways around paying tax. We would lose out in that regard.
Mr. McGahern
For better or worse, it is seen abroad as an enlightened act. I am not making a moral comment on it. If we tinker with it, we will not benefit the taxpayer. We might benefit a short-term perception but we would not gain anything. We would lose everything we had gained in terms of the perception abroad that it is an enlightened act.
We understand that. However, I am sure Mr. McGahern understands how the figures look in terms of well off people not paying tax.
Mr. McGahern
I know that.
That is an issue for many people and that is why we are trying to tease it out. I am sure Mr. McGahern understands why it is an issue.
Mr. McGahern
The idea that people who make a great deal of money should be encouraged in some way, without tinkering with the scheme, to make a contribution is good.
It is only a suggestion.
I apologise about the time constraints imposed upon us. The ringing of the bells means that we must be present in the House for 15 minutes in order to participate in the television show that is Leaders' Questions.
Arguments to the effect that the artists' tax exemption has benefited this country enormously are correct. When Deputy Michael D. Higgins became the first Minister for Arts, Culture and the Gaeltacht he was involved in promoting a scheme to help the film industry, which also offered tax concessions as a way of bringing television and cinema film production to this country. That has been successful. A year ago the committee had detailed discussions about how the scheme could be altered to improve it and cut out an element of tax-scamming which had crept in and which was not benefiting those genuinely involved in making films in Ireland. That is the general background, on which almost all parties in the Dáil are agreed.
The issue of the artist's exemption was never included in the general debate on the review of tax breaks which was focussed on property based tax reliefs, of which there are many. The delegates may have seen statistics demonstrating that people on extraordinarily high incomes who can invest in various property schemes have paid little or no tax. For those in the PAYE sector, this state of affairs has become something of a running scandal. I am somewhat intrigued, therefore, as to why the Minister for Finance, Deputy Cowen, has taken the initiative to specifically include the artist's exemption scheme in the review. Perhaps the delegates have a view on this. It has never been clear why a review of property based tax reliefs should include a scheme with a rather different basis, historical context and standing among parties in the Oireachtas. The joint committee debated property based tax reliefs on a number of occasions. Have the delegates had an opportunity to discuss the matter with the Minister for Finance? I am not aware that he has spoken about it other than to hand the job to consultants who are a little distant and with whom one communicates by letter.
Are we sure consultants are involved? While consultants were engaged to consider the property based tax reliefs, certain other schemes are being examined directly by the Department of Finance and the Revenue Commissioners.
The Minister drew up the terms, in which he included specifically the artist's exemption scheme. That is the history. My question is whether the delegates have discussed the inclusion of the scheme in their dialogue with the Minister for Arts, Sport and Tourism and the Minister for Finance. The construction industry and property interests had long discussions during which their views were made known on the parameters of the examination of that sector. Has anything like that happened or has the opportunity been taken to hold discussions?
Ms Cloake made reference to highly paid artists, the ones Deputy Murphy said people will identify. Ms Cloake suggested most such artists were involved in the music industry as worldwide recording artists with a great income as a consequence of their success as performers. Can we get some information on this? Once upon a time religion was the holy mystery in Ireland, but taxation has taken its place. Will Ms Cloake cut to the chase and tell the committee who some of these people are? It is a sanctimonious statement that the tax affairs of individuals are completely confidential, even if they concern matters of a private nature.
Ms Cloake intrigued the committee when she suggested that while high earners were concentrated among a specific number of music artists, the Arts Council could not discuss the matter as it could not tell the committee anything about it. If we are to tease the matter out, it is important we know what is involved. While we are all aware that paintings for an exhibition or, as in Mr. McGahern's case, a novel are likely to be three or even ten years in production, it would be helpful to have more information on the breakdown of the numbers. Ms Cloake suggests the artists in question are those who have significant inflows of income into the country in foreign earnings. If one stands in a lift in Los Angeles or Vladivostok, one is likely to hear "Lady in Red" or another song written in Ireland. Is that what Ms Cloake is talking about?
Nowadays people who are part of a community like to give something back. Does the Arts Council have any proposals in this regard? The argument can be carried to an absurd degree whereby it is suggested that had the artist's exemption been available, James Joyce might have stayed here or Beckett might not have gone to Paris. Are we into that mad territory? Most artists will wish to travel at some stage. Perhaps Mr. Haughey introduced the scheme because of a very cruel and oppressive society in which there was a great censorship. I am not sure the issue was monetary. My reading indicates the scheme was formulated on the basis that the country was a cold and bleak place for artists and most others also. While it is argued artists might leave, many love their home place and have an interest in it. I am not sure the tax system makes a great difference in that context. While I am sorry we are under these pressures, some of the arguments I have read seem slightly absurd in the context of material I have read by the authors in question.
As some artists age, they encounter significant pension problems. Has the Arts Council given any consideration to the issue of donations by artists to national collections and universities? Important material is being lost to institutions abroad. Has the council given any thought to schemes which might benefit some artists who in older age are not especially productive and who might not have been clever enough to put money aside in a pension scheme because they were busy being artists?
Ms Braiden
While we did not discuss the reasons the artists' exemption was being examined with the Minister for Finance, we did have discussions on the matter with the Minister for Arts, Sport and Tourism. I understood all tax relief schemes were being examined to determine whether they were viable.
Non-residents who are very wealthy and hop in and out in a helicopter at 11.55 p.m. are not included.
Ms Braiden
The Cinderella people.
While I will not allow a debate on this issue today as it will come up under the heading of correspondence the next day, I wish to clarify that as residency is not an issue in respect of tax relief, it does not, therefore, come within the terms of the current examination by the Minister. While it is very important, it is a different issue, to which I have no doubt we will come back.
Ms Braiden
We were disappointed to hear the artists' exemption was being examined as it does not involve a great amount of money. As it was being examined, however, we felt we had to support its retention very strongly. On that basis, we commissioned a survey by PricewaterhouseCoopers.
Has the council had an opportunity to meet the Minister for Finance, Deputy Cowen? Did he invite the Arts Council to discuss the matter?
Ms Braiden
No. We did not ask to meet him on the issue. Howwever, we are interested in meeting to discuss other matters.
Deputy Bruton wondered whether we should talk to artists about the high earners. We tried, as did PricewaterhouseCoopers, to obtain the best information we could for our submission and found that a number of them were willing to talk but others were not. The answer we received was that their tax affairs were private. We can understand that as well. However, it is such a small number that people generally know who they are. It is not for us to name them.
I might sound stupid but I do not know who they are.
We cannot mention names. We all presume some of the better known artists are claiming artists' exemption one year but they might be on a world tour the following year and, therefore, they are not resident. It is a volatile situation. I am satisfied that there is no simple, straightforward answer such as that people have claimed the exemption for each of the past five years. Some artists could be out of the country for a certain number of days in a given year and they might get it one year but not the next. We all know it is not the job of the Arts Council to name individuals in respect of their tax affairs.
Ms Braiden
Deputy Burton wanted to know if we had considered pensions. I ask Ms Cloake to answer that question.
Ms Cloake
We make assumptions about the artists but the facts are known by the Revenue Commissioners and they would be able to make them available to the review group. We made assumptions based on talking to the people we knew.
Good proposals were made about artists giving something back. I will not go into detail about them. We in the Arts Council feel that artists give a lot at present. They make a big contribution to their peers, to the people following after them and to society generally. Some of it is visible, while some of it is invisible. It is hard to quantify and it would be difficult to turn it into a formal scheme. I can go through some of the things people do, if that helps the committee.
Can the delegation distinguish between people who benefit from the exemption, such as those mentioned and other artists, particularly Irish actors, many of whom are known nationally and internationally?
Ms Cloake
The variable nature of actors' earnings is an important issue. Some household names could be living near the poverty line because the industry is unreliable in terms of employment. An important issue for performing artists is that they need to be able to average their income for a number of years. However, they are not able to do that at present. There is no question that performers, choreographers and artists of the interpretive kind would benefit from the exemption. The difference is that the people who are creative are seen to produce a work. It is a productive act and there is something to show at the end of it. That makes it easier to assess for tax exemption purposes because they are either working and getting exemption on something or they are not. That is the main difference.
The reason we have an Arts Council is to advise the Government, the Oireachtas and the public about what is best for the arts and the arts community in Ireland. We seem to be hearing a unanimous voice, not only from the Arts Council but also from other bodies that represent a wide range of artists and writers, to the effect that it is important for this country to keep this scheme. We should give some weight to that advice. Given the nature of our duties, not to mention our briefs, most of us have only a limited amount of time to devote to cultural pursuits. This is an occasion on which we should listen and pay careful attention to the experts.
Deputy Burton is correct. A millionaire cannot suddenly decide to put his assets into writing books of poetry so that he can gain exemption under the scheme. It is radically different from the other reliefs, including film relief, where wealthy people can put money into them to reduce their tax bill. One cannot decide to become a painter or an artist to shelter one's income from tax. It does not work like that.
I accept the argument that it has been a tremendous benefit. Ireland stands high in the world today for several reasons but culture is one of the two or three main reasons. At a crude political level, I hope political decision-makers understand what the enlightened despots of the 18th century, such as Catherine the Great and Frederick the Great, recognised, that to have a regime friendly to writers and artists was of benefit to them politically and in terms of the reputation of their countries. Some would say that the person who introduced this scheme, namely, Charles Haughey, was an enlightened despot.
I have two queries which relate to how the scheme is administered. There has been an evolution in that respect over the years. It is probably not the identical body of people today that it was 30 years ago. I have reservations about people such as ourselves with steady jobs. If any of us write a book of memoirs, there is no reason that it should benefit from the exemption. I published a collection of essays two years ago. Whether it qualified, I would not dream of applying for the exemption. However, others take a different view. A columnist in The Independent, for example, thought his newspaper columns, which were creative, should have qualified for the scheme.
They were creative.
Was it originally intended for people with university posts who wrote history books?
I would like to probe what the director of the Arts Council said about choreographers. My understanding is that the work of famous choreographers can be imitated and copied. One can put on "Swan Lake" according to the choreography of someone who may have died 40 or 50 years ago. Choreographers fall on the other side of the boundary. I know that is the view of the dance community. If it is not a once-off production but is similar to how a composer operates. Perhaps that should be re-examined rather than being put into the category of actors.
As regards the cultural benefit, Deputy Bruton is wrong to suggest that taxpayers have to pay more tax because of these exemptions. Any attempt to cap, change or remove it means that notional tax revenue will disappear into thin air. One of the subjects of the work of people such as Michel Déon, a French novelist who lives in Galway much of the time, or Gottfried Helnwein, an Austrian artist who lives in Tipperary and who had exhibitions last year in Clonmel and at the Crawford Gallery in Cork, is Ireland. That projection is of enormous value to us.
As the Chairman stated several times, adequate emphasis is not placed on explaining what this is all about. People assume that if one is eligible for the exemption, all one's income, regardless of how it is generated, is covered. Wealthier people are likely to have investments and other sources of income on which they are taxed. I do not think the public understands that.
It is important that the delegation knows this is the third meeting of the committee on tax exemptions. While I did not speak at length at previous meetings, I will not repeat what I said. I am completely opposed to any interference with the tax exemption for artists. I thank Ms Braiden and Ms Cloake for their contributions. I empathise with them and feel the emotion across the room. There is a visceral feeling from the delegates who are passionate about not wanting the exemption to be changed. I am honoured that Mr. McGahern is present. My husband is from County Leitrim and has said he would love to meet Mr. McGahern some time which is why I had a shock when I came in. I never thought he would be here.
Mr. McGahern
I never thought I would be here myself.
My aunt, Ms Quinn, taught with Mr. McGahern at Belgrove national school. When I came to Dublin in 1952, my vivid impression is of my aunt telling me about Mr. McGahern and his history at the school. The injustice involved stuck in my mind as a teenager. It is only as life unfolds that one gets to know of all the injustices which are out there. I thank Mr. McGahern for capturing Irish life and the pain and angst attached to it for our citizens.
Mr. McGahern
I thank the Senator very much. A man stopped me on the street, a former pupil, whom I thought was going to congratulate me on my book. He thanked me for carrying him on the bar of my bicycle from Belgrove in 1963.
That is marvellous. I disagree completely with Deputies Bruton and Catherine Murphy. I was surprised that Deputy Bruton nitpicked so fastidiously. Senator Mansergh and I were saying that we doubted taxpayers on their way to work are really concerned about this issue. I suspect the exemption is being reviewed simply because of the nature of the bureaucracy in the Department of Finance which has meant that all reliefs were rolled up together. The Fianna Fáil members of the committee will speak to the parliamentary party to argue that this change should not happen.
This sounds like the groceries order.
Fianna Fáil is against it. It is only the Government who is doing it.
It is Department of Finance officials who draw up these proposals.
Even though this is the Senator's first term, she is well up on things already.
I am only a novice. The products for which we are most famous internationally are our music and our literature. Modern Irish music is the one product one can buy in a shop in any country. We also have the legacy of our writers. Mr. Haughey demonstrated vision in his budget of 1969. I, as a Senator, have stated on many occasions that it is our duty as politicians to have vision. It was visionary of Mr. Haughey to introduce a tax relief for artists. When I sat my leaving certificate in 1962, one was perceived to be a bit slow if one was taking art. It was like taking domestic science. Thanks be to God that has changed and the Irish are no longer artistic philistines. I was on an architectural tour of Ranelagh at the weekend——
In the constituency.
As people commented on the condition of houses built in the 1870s, I thought what a pity it is that we did not consider the preservation of buildings and were not passionate about retaining the built environment in the 1960s. All of us will support the retention intact of the exemption.
I welcome and broadly support the artist's tax exemption. The current exemption does not extend to interpretive artists such as musicians who perform works by other composers. I am surprised in the context of dance, for which Ireland has become world famous as a result of "Riverdance" and "Lord of Dance", that choreographers have not been included in the Arts Council submission. Is there a reason for that? Choreographers are artists in their own right who create the dances which are performed. Is it an oversight or is there a specific reason for the omission? Can they be included? We should support choreographers as well as painters and writers.
I join the Chairman and other members in welcoming the Arts Council delegation. There is no special reason for the inclusion of the artists' exemption in the review. The position of the Minister was that he would review all tax breaks in the State. In recent years the committee has held numerous debates on tax breaks. If one reads public comment, one will see that there has been sniping at tax breaks for different reasons for many years. I am very supportive of tax breaks having seen what they can do to regenerate towns, villages and even the quays of Dublin. If one does not give investors an incentive, the State will not otherwise have the money to undertake certain projects. We will need to continue to operate many tax breaks because we are only part of the way to achieving our goals in many towns and villages. Where exemptions have been deployed, they have been successful.
Today, we are concerned with a very important exemption and it is vital to ensure the Arts Council's case is supported. Artists are the new ambassadors for Ireland. They create a good feeling about the country internationally. I travel to America and other countries on a regular basis due to family connections and I am always approached by people who speak highly about Irish artists and their international standing. While I have no problem with continued support and promotion of this, a review is a useful exercise. We will see what the report contains when it is published. The findings should be in favour of the submission made today.
I am impressed by the proposal made by the Chairman in respect of the contribution artists could make here. It is a novel idea and I would appreciate the Arts Council and others teasing out this question. I can see major benefits and perhaps many artists are willing but have not been approached. This would give the public to which Deputy Burton referred the opportunity to see the human side of this argument. There are important issues, other than bread and butter matters, to be considered in life and artists can contribute in this way. I am supportive of the tax exemption and it is essential that it should be maintained. The Chairman's suggestion should be pursued.
Ms Braiden
Senator Mansergh inquired whether journalists and published academics should benefit from the artists' tax exemption scheme. Ms Cloake can address that matter. In respect of choreographers, referred to by two members, they should be included in the tax exemption scheme. We were advised not to advocate the inclusion of something new and that it would be better to concentrate efforts on maintaining the exemption before asking for other groups to be added. We are not sure if this is the correct approach but there is a great body of support for the inclusion of choreographers and others. That will be another campaign if we succeed in retaining the artists' tax exemption.
Concerning additional contribution by artists, Ms Cloake has made the point that artists contribute a great deal but we can put this idea to artists and allow them to propose a workable scheme. It is important to start this debate and seek the views of artists.
Ms Cloake
I refer to two points made by Senator Mansergh. We consider choreographers to be creative artists and they are eligible for membership of Aosdána. Perhaps this concerns the guidelines on how to interpret the scheme rather than new legislation. This is a matter we will examine.
Senator Mansergh's point on the inclusion of memoirs and biographies in this scheme raises the question of definition of cultural value. One could say that a memoir is a documentation of an epoch or a person's perspective of society at particular time. As good biography, good memoir and good records of the era make a contribution to cultural life, perhaps, selectively, these could be included. The guidelines for this scheme need to be reviewed periodically. This could be done every five years to reflect changes in what is being written.
I do not see the justification for politicians' memoirs having tax exemption under the artists scheme. I accept that it is a different matter if a writer produces an autobiography. In the former case, these people have a regular job and a good pension. The administration of this scheme needs to be tightened in this area.
I wish to develop this question further. I understand Senator Mansergh's point. There are many well-known people and successful Irish business figures, including car dealers, writing books.
They are from all sides.
In the case of some of our best artists, 66% of their income is now generated from other activities. It would be dangerous to suggest that if one is earning a majority of income from other activity the artists' exemption should not apply. Some of our best artists have already moved into that category.
It is a matter of administrative ingenuity to avoid this pitfall but existing or past Members of the Oireachtas should not benefit from the writers and artists' exemption.
For breaching Cabinet confidentiality.
The reason I am sitting so quietly is I must declare an interest as a beneficiary of the artists' tax exemption scheme. I will take no part in voting. The point Senator Mansergh made is important. Since my name appeared on the list of those benefiting from the artists' exemption scheme, people believe I pay no tax. I received a small amount under this scheme. There is a lack of understanding and this hinders the work of the Arts Council. People assume it is proposed that some people should pay no tax.
I am not sure if people know how this process works. An artist's work is submitted to a section of the Department of Finance and the Revenue Commissioners. Officials in the section determine whether it merits the term "creative". I am very interested in how this works and what is the benchmark. A vellum certificate is then issued by the Revenue Commissioners. When I saw this I felt a burst of inspiration.
Mr. McGahern and Ms Braiden referred to a society that values culture. I have long worried about the generations and centuries of creativity lost to this country. If one discounts the past 50 years and considers the period before that, the preponderance of names such as Yeats, Shaw, Beckett and O'Casey all come from one side of the comfort line in society. We did not have a vernacular, indigenous artistry on one side of the community. People did not have the comfort to engage in artistic and creative pursuits because there were other pressures.
I thought O'Casey was a working class writer.
Yes, he was working class. I did not use the term "working class".
He was a religious artist.
He was a religious artist more than anything else. I took one year out of studying English, stopped going to lectures and visited everywhere O'Casey lived in Dublin. He never lived in a slum despite the view of him as a slum artist.
It is important that we create a culture where creativity is valued and can grow. That has developed over the past 50 to 100 years. We need a comfort zone for artists and we must support them. The idea that creativity comes from a cold attic is madness. People must eat, live and be comfortable. This is the root of the scheme we are discussing. As a beneficiary of the scheme, I have views on it. I will not express a view on that except to state that I agree with Senator Mansergh. The intentions of this are clear and the advice of the Arts Council must be taken seriously. The message that it only relates to the creative aspect of artistic work must be made clearly and publicly. I welcome the contribution of the Arts Council this morning.
Another important aspect of this debate is that writers and artists living in the community are role models for other people. I cannot match Senator White's gushing words but Mr.McGahern is aware that I have long been an admirer of his and he is an extraordinary role model. The point made by the Chairman and Deputy Burton on giving back to the community in various ways, such as archiving material, is important. Creative artists need to be accessible and be seen to be accessible to the community. They should be seen as part of the community and should give to that community.
Ms Braiden
Does Mr. McGahern wish to state anything further?
Mr. McGahern
My effort with regard to the community was to go to Galway University. I have a long connection with Galway and it was extremely easy. As a member of the Arts Council, I am, like the Fianna Fáil Party, fully supportive of it. I make no moral judgment on the tax business, right or wrong, but I emphasise the point that when I visit countries where my books have been translated and I represent the country at functions, we receive enormous kudos — along with that garnered from our great dead such as Yeats and Joyce — from what is seen as an extraordinarily enlightened act of a relatively poor country at the time. Any tinkering with the scheme would lose that and those perceptions work in broad strokes. We would gain little.
Ms Braiden
One point we did not make relates to architecture, a matter raised by Senator White. The Arts Council considers architecture an important art form and we work closely with the architectural society to ensure that from now on architectural heritage is kept, recognised and available to the country.
Before we conclude I will make a final observation. I suggested that artists should give something back as a contribution or a benefit in kind. I know Ms Cloake mentioned that artists do much but that it is invisible. It might be helpful to the case if what they did was made more visible and was formalised in some way. There are formal procedures in terms of film relief. A formalised system through the Arts Council or the Department and approved by the Revenue Commissioners might help the industry. The public could easily see at first hand how artists contribute, such as by assisting up-and-coming artists. It would help artists if it were more visible.
With regard to my earlier comments on the fact that most of the income earned by those gaining the maximum benefit from the exemption is earned abroad, I do not want anyone to suggest that this is part of a predatory taxation policy. That is not what I suggested. In any event, EU state aid rules normally exempt cultural activities and I do not want anyone to leave this meeting with the view that the artists' exemption scheme is part of a predatory tax policy to create an unfair advantage by enticing artists to live here. That was not the intention in 1965 and it has not changed. I made that comment but it is not what this committee is about.
We will conclude our business. I thank Ms Braiden, Ms Cloake and Mr. McGahern for their attendance.