The Taxing Truth About State Funding and The Bad Budget for the Arts

Bear with me, because this is about a great truth underlying state funding and the cultural economy. It’s also a way that artists could secure almost limitless additional funding.

Section 481 is the tax incentive programme, managed by the Department of Culture through the Revenue Commissioners, for the benefit of the audio visual industry. Its a model of simplicity. Roughly here’s how it works.

Section 481 is managed by the Department of Culture and the revenue commissioners. I want to shoot a film/ documentary/TV series in Ireland. 32% of the projects “eligible Irish expenditure” can receive 481 approval. Eligible expendure is defined as “The cost of all cast and crew working in Ireland and all goods and services sourced in Ireland”. So I go to the minister, the department approve the application and revenue give me 32% of the local spend. Now, there’s a bit of trickery here as its not termed “funding”. It’s a tax credit against my corporate tax liability should I make a profit. But if I don’t then i get the full 32% in cash.

The second bit of trickery is the ” fiscal net impact” argument. The department has worked out that the scheme has a “fiscal net impact of just over 1”. This means that the scheme is cost neutral, which means that if they give my movie €100,000 they are confident that they will collect €100, 000 in direct and indirect taxes directly related to the economic activity created by my film’s eligible Irish spend.

Consider that for a second. The 481 scheme acknowledges that state funding is not an expenditure, and that funding is reclaimed by the state through various taxations: that funding can “cost” the state nothing.

In 2016 section 481 provided €91.9 million to the audio-visual sector, which had a total tax-revenue impact of €93.3 million, and an estimated Gross Value Added of €259.1 million. The section 481 scheme is more than either the total Arts Council Spend, or the total local authority Arts Programme Spend in 2016.  That’s worth considering for a moment.

Yes its a tragedy that the government continues to “underfund” the arts (and everything else) while they grab every passing artist in a co-ordinated campaign of drive-by photo ops and never even consider paying an appearance or an endorsement fee. But consider this- if section 481 for the audio visual industry has a net fiscal impact of 1, then let’s design a 481 for arts, heritage and culture. Because, lets be honest the average arts budget will spend close to 100% in its local economy, so there’s the solution. No cost to the state, no deadlines, and the only criteria are numbers.

If money from the department of finance is “granted” to the audio-visual sector on the understanding that its coming straight back to them, then surely money granted from the Department of culture directly and via the arts council behaves the exact same way. The only real difference is that a sum of money allocated to an agency turns up on the books as an expenditure, but a tax credit doesn’t.

So let’s get creative with the way we fund.

Of course they won’t do it. The question then is why? And the answers to that could prove very, very interesting.

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