ART has suddenly become a more taxing business. The 1% income levy introduced by Brian Lenihan, the finance minister, last week will draw hundreds of artists, writers and musicians into the tax net for the first time.

Ireland’s artistic community earns more than €100m a year, which is exempt from income tax thanks to a scheme Charles Haughey introduced in 1969. The perk costs the state about €30m a year.

Lenihan has confirmed that the new 1% levy will apply and top-earning artists, the likes of painter Louis le Brocquy, novelist Cecilia Ahern and musicians Ronan Keating and Enya, will pay 2% on everything they earn over €100,000 a year. The net gain to the state will be up to €3m per annum.

The finance minister has promised to keep the artists’ tax exemption in place. There is already a cap of €250,000 a year, which prompted U2 to move its operation to the Netherlands.

“One of the advantages of the artists’ scheme is that it attracts a lot of people into the country who wouldn’t otherwise be there,” the minister told RTE Radio. “But the income levy is applied before the artists’ exemption so it will apply to all their income.”

The most recent figures from Revenue show that 11 artists earn more than €1m a year, while 15 earned between €500,000 and €1m and 100 got between €100,000 and €0.5m.

Six of these 126 artists were foreigners, and they are thought to include Irvine Welsh, the author of Trainspotting, and DBC Pierre, the Booker Prize-winning novelist who lives in Co Leitrim.

Yesterday Frank Dunphy, the Dublin-born manager of Damien Hirst, said the British artist had considered moving to Ireland to take advantage of the exemption but decided against it.

Mark O’Neill, one of Ireland’s most commercially successful visual artists, said he had no problem responding to Lenihan’s call to patriotic duty. O’Neill, who like Hirst sells his work through an auctioneering firm, was affected by the introduction of the €250,000 cap after a sell-out exhibition in Adam’s in 2006.

“I think in today’s economic climate, where everybody has got to tighten their belts, it probably is right that artists carry the can as well,” he said yesterday.

Noel Kelly, chief executive of Visual Artists Ireland, which represents 1,500 artists, said they are as upset as everyone else in the country about the 1% levy “especially as most artists are on low incomes”.

Kelly pointed out that artists already pay PRSI, and since few can support themselves by art alone, they pay tax on incomes from other work. “About 80% of artists who avail of the exemption scheme earn under €10,000 a year,” he said. “I’m hoping that this ‘temporary’ levy will be as temporary as possible. The Arts Council’s budget is already down 12%, and this will also have a direct effect on artists.”

The 1% levy will also apply to artists’ grants from Aosdana — known as a cnuas — and to earnings under droit de suite, the resale royalty introduced two years ago. A few artists, such as Le Brocquy and Sean Scully, are earning six-figure sums from the levy.

Concerns that a small number of musicians were benefiting unduly from the exemption has prompted the government to draw artists further into the tax net. The department of finance was unhappy that the top 26 claimants paid only €750,000 on non-exempt income of €6m in 2002, “indicating aggressive use of the various property and other tax reliefs by the individuals concerned”.

The identities of most of the 2,000 artists who benefit from the exemption scheme have never been published, but there are few visual artists among the top earners, which are dominated by musicians such as Van Morrison, The Corrs, Westlife and Boyzone.

The arts sector was one of the hardest hit by Lenihan’s hairshirt budget. Apart from a cut in the department’s and the Arts Council’s budget, the funding for the Irish Film Board was down over €3m to €20.5m.

“From the point of view of the arts this budget is an unmitigated disaster,” said artist Robert Ballagh.

“The cutback in Arts Council funding will undoubtedly lead to infrastructural destruction, with irreparable consequences. I cannnot see anything to be gained from this hare-brained amalgamation of the National Gallery, the Crawford Gallery and the Irish Museum of Modern Art (IMMA) other than a saving in photocopying expenses.”

The National Library of Ireland, the National Archives and the Manuscripts Commission will also be amalgamated, with Martin Cullen, the arts minister, saying the fusion “will lead to economies of scale and costs”. The announcement has caused widespread confusion as to what the practical consequences will be. The National Gallery has merely received notification that it is to merge with the other museums.

Raymond Keaveney, its director, said: “While it was public knowledge that there was a proposal to ‘amalgamate’ us with IMMA and the Crawford, few of us thought it likely to happen. Now the government has taken the decision, we must await clarification on what exactly is being proposed.”

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