Page last updated at 07:36 GMT, Wednesday, 9 September 2009 08:36 UK

Tax free era for Irish artists may end

Julie Kirby
BBC News Dublin reporter

For decades Irish-based writers, musicians and visual artists have been exempt from paying income tax on their earnings under the Republic's tax laws.

The exemption limited U2's tax bill for years

Now that special treatment could be coming to an end as the recession forces the country to overhaul its tax code.

Over the years writers like Irvine Welsh, DBC Pierre and Frederick Forsyth have moved to Ireland to avail of the generous arrangement.

The ruling has also been credited with persuading local artists such as U2, Enya and Seamus Heaney to remain.

The tax exemption was introduced by former Prime Minister Charles Haughey when he was Minister for Finance in 1969.

Intended to help struggling artists, it has been criticised in the past because high-earning performers such as U2 were paying no tax on millions of euros worth of royalties.

In 2006, the level of earnings before tax was capped at 250,000 euros.

However, the scheme has once again come under scrutiny with Ireland's Commission on Taxation labelling it unfair and recommending that it should be scrapped.

Its report, which was published in Dublin this week, aims to make the Irish taxation system fairer by spreading the tax burden more evenly.

With more than 200 recommendations, the commission proposed a wide range of measures from the introduction of property and water taxes to the abolition of a range of tax reliefs.

The report recommended introducing a tax rate for artists based on average earnings over a number of years.

Chairman of the Arts Council Pat Moylan warned that if the exemption was scrapped Ireland could lose a considerable number of artists, either to other countries or by discouraging young artists at the early stages of their careers.

Ronan O'Gara steered Munster to victory over Wasps
Ronan O'Gara took advantage of the exemption when he published his autobiography

"The artists' exemption scheme is not a 'rich man's relief as has been portrayed in some quarters - Arts Council research has shown that over half the beneficiaries of the scheme have average earnings of less than half the minimum wage," she said.

"Of the 2% who are considered high earners, most of whom are in popular music and writing, only one-third of their income qualifies for the relief."

While the artists' exemption includes royalties from the biographies of sports stars and music impresarios such as Ronan O'Gara and Louis Walsh, figures from Visual Artists Ireland, a body representing professional artists, illustrate that 67% of artists earn less than 10,000 euros from their creative works.

And a further 24% only earn between 10,000 and 25,000 euros.

Multi-media artist and filmmaker Grace Weir has already moved from Dublin to rural County Leitrim to keep her costs down.

She feels very strongly that removing the tax exemption would be short-sighted and would encourage artists to leave.

"It's a false economy to tax artists. I might be working on a show for 18 months, and then it may sell or may not," she said.

"It's hard to make a living here because the market is so small.

"The tax exemption makes me feel appreciated and supported in my own country. If it's withdrawn, it just shows there is no understanding of what we do. There are better opportunities abroad."

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