LEADING musicians and writers have indicated they will leave Ireland if the artists’ tax exemption scheme is scrapped.

A survey by Price Waterhouse Coopers for the Arts Council has found that two of Ireland’s 12 biggest-earning performers will consider permanently changing their tax residence if the scheme is changed by Brian Cowen, the minister for finance. Another three said they may change tax residence in years that their earnings are high.

A further three said they will “bite the bullet” if Cowen ends the scheme, but will have to cut back on their non-commercial activities, such as donations to charities, and giving help to aspiring artists.

The Arts Council will not reveal the identities of the 12 artists, other than saying they are “internationally acclaimed and commercially successful”, but it is understood that members of U2 were among those interviewed. Bono has already said that while the tax exemption scheme encouraged the band to stay in Ireland, they will not leave if it is abolished.

Among the biggest beneficiaries of the scheme are thought to be Van Morrison, Enya, the Corrs, Westlife, Bill Whelan of Riverdance, the painter Louis le Brocquy, the screenwriters Jim Sheridan and Neil Jordan, and the novelists Roddy Doyle and Eoin Colfer.

Critics of the scheme point out that almost half of the income exempted from tax is earned by only 2% of the artists. Twenty millionaire artists benefited from the scheme in 2001, with one performer earning €10m that year.

But the Arts Council has told Cowen’s officials that if the scheme is abolished there will be little net benefit to the exchequer, with leading artists leaving the country or devising ways to reduce their tax bills. Rather than recouping €37m as expected, the saving to the exchequer would be about €13.3m.

“There are very strong reasons to believe that the value of this saving will be short-lived,” the council has told the Department of Finance. “The most important of these is the important role the scheme has played in holding emerging artistic talent in Ireland, when other factors promoted emigration.

“The gradual outflow of emerging artistic talent from Ireland, as a result of the diminished attractiveness of the taxation regime, will mean that the value of income subject to tax will fall gradually over time.”

The council also argues that if leading artists move abroad, they will bring their non- exempt income, estimated at €105m a year, with them. This would mean a net loss to the exchequer. U2 has said that only a third of its income, the part derived from publishing, is exempt and they pay tax on the rest. PRSI is paid on all income.

Department of Finance officials, however, have indicated, in private talks, that they accept there may not be a windfall if the scheme is scrapped, but they want a more equitable tax system.

There was widespread anger last year when Joan Burton, a Labour TD, discovered that 11 people who earned more than €1m in 2001 paid no tax at all. Cowen announced soon afterwards that all tax shelters, including the artists’ exemption, would be reviewed.

There is growing pessimism in artistic circles about the minister’s intentions, mainly because few artists are lobbying in support of the scheme. When a film tax break was under threat two years ago, producers mounted a vigorous lobbying campaign, targeting TDs in their clinics.

The Arts Council will step up its campaign this autumn, and is to ask 10 high-profile artists to defend the scheme publicly. Among those likely to be approached are Bono and Maeve Binchy.

The council’s campaign will make the point that struggling artists are the biggest beneficiaries of the scheme, with the average earnings of the bottom 50% of those who benefited in 2001 being €5,213. “Any suggestion that this is a scheme for the rich is misplaced,” it says.

But the threat by rich artists to leave may ultimately be what sways Cowen’s decision. All of the 12 interviewed by Price Waterhouse Coopers are said to be “very well established and in family-life stages or beyond”.

A third said they would not change tax residence but would consider means of minimising the tax paid on income that is now exempt. “Consultations with Ireland’s most successful artists indicates that, while deep-rooted family and social connections render a change of residence undesirable, they might not be resident in Ireland had the exemption not existed in the formative stages of their career,” the Arts Council said in a submission to the Department of Finance.

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