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 “net fiscal impact” argument. The department has worked out that the scheme has a “net fiscal impact of 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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Fun With Numbers – Where does the Money go?

I read a report recently – from Arts NI I think – about per capita spending on the arts. They were comparing the current absurdly low level of per capita funding in Northern Ireland with other territories in the EU. It struck me that there seems to be difficulty getting agreement on amounts invested and economic value created, costs and benefits etc., particularly at government level. A lot of the confusion stems from the old problem of are we talking about Culture or are we talking about The Arts, around capital as opposed to current funding, and around a fundamentally ideological problem surrounding the idea of state funding – is it investment or is it an expenditure. So I thought I’d skip back to the source data in an Irish context and see what I could find. The results are very interesting.

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Strategic Storytelling

I was having a conversation recently with a colleague about organisational strategy and culture. We were comparing our experiences with, and approaches to, various clients. My colleague works primarily from a communications perspective, analysing how organisatins communicate internally and how they manage their external or PR functions.

The conversation began to focus on the nature of the stories we tell, both within organisations and the stories we tell to present ourselves and our organisation to the wider world. We did a lot of name dropping in the course of that coffee, invoking the remarkable body of academic work on the function of stories within organisations by Professor Yiannis Gabriel, and of course we had to talk about Campbell and the notion of the Heroes Journey.

Its been my experience, working in the culture sector, that some clients get very excited when the business tools are deployed. The BCG Box, the Blue Ocean Graph, The SWOT and PESTLE, Weisbord’s Six Box Model etc. etc. However, I have found a healthy suspicion toward these tools with some business clients and students, a sense that a rational approach alone will not deliver the necessary insights.

So I developed the Story Box. Because clients love a good Box. Its proven to be a really insightful, useful and popular tool. And here it is:

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What Philanthropy does to the Arts Business Model

You would be rightly outraged if you discovered that Focus Ireland charged a homeless person for their services; and you’d probably take to the streets with pitchforks and torches if Concern Worldwide started charging famine victims for food support services.  Such behavior is completely contrary to the principles of charity and works against the very heart of what we understand as philanthropy.

And yet this is precisely what arts organisations are asked to do: charge our end users for our services, and then ask them for charitable donations. This is like Focus charging a homeless person for their services and then asking them for a contribution!

Every arts organisation has experienced this absurdity. As a potential donor once said to me “My partner and I spend a €1000 each a year on tickets, our tax contributes to your grant, and you want me to give you more money?” Its a good question: either charge the necessary price at the point of consumption or make everything free at the point of use because its a public good. But there’s a sleight of hand about arts being both free and commercial, both public good and wealthy private interest that – interestingly – goes to the heart of questions on value and inequality. 

This conceptual sleight of hand means that securing philanthropic support for the arts is different – very, very different – from securing it for “real” charitable causes. This difference means that if your organisation commits to securing philanthropic investment then your Business Model will need to make some very, very fundamental changes. Continue reading

Philanthropy and the Arts – What are the Odds?

€8,919,000 is the total amount of Private Investment (sponsorship and donations) raised by 177 Clients of the Arts Council Ireland in 2014.  That’s according to the 2into3 Private Sector Investment into the Arts Report: 2016, commissioned by the Arts Council. It is, to my knowledge, the latest such report available For clarity, the concept of “Private Investment” in this context is composed of Sponsorship (€3.609 million) and Voluntary Income  (€5.31 million) , which in turn is composed of gifts, donations, friends schemes, bequests etc. That’s an average – in the sense of an arithmetic mean – of just over €50,000 per client. Except that – anecdotally – very, very few organisations raised anything close to €50,000  private investment in that year. So, the question is, even with the best fundraising training in the world, what are the factors affecting my chances of raising €50K in 2019? Continue reading

“I have a way? Is that better than a plan?” The Truth About Strategy

I’ve spent a lot of time these last few months thinking about strategy, and talking to various people about strategy, and developing strategies.  In seems that within the culture and creative sector Strategy has become something of a buzzword. Strategy is right up there with “well being”, “co-working” and “entrepreneur”, “growth mindset” and “multi-disciplinary”  etc.  Its a word that’s used in a lot of contexts but its actually very difficult to get agreement on what the word actually means (It’s very revealing to ask a roomful of business students or a board of directors to define strategy). Continue reading

Artists, Housework and Learning to Unsee

Had a fascinating conversation with a student about business training for artists. As we all know the real problem in the development of artists careers is that they have no business skills. Which of course is a handy way of shifting the responsibility for the failures in the arts sector onto the shoulders of the artist, and making sure that the artists know that they’re not as grown up as the business folk. As the leading cultural economist Arjo Klamer points out the heroic figure of the Cultural Entrepreneur is primarily a fictional character in a very particular economic narrative.

There are however other economic narratives that we can consider.

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Report on Culture 2025 – A Campaign Update

Download the Joint Oireachtas Report on Culture, Arts and Heritage Here

“Far too many wonderful words have been written about culture in Ireland and far too little has been done that has been sustainable”

Joint Oireachtas Committee on Arts, Heritage, Regional, Rural and Gaeltacht Affairs

I think its important to take a moment and review what last years Uplift petition and the lobbying and actions it provoked have achieved to date.

Last year – in June I think –  Fianna Fail’s Niamh Smyth, in response to this petition,  put down a motion and called a special debate  in the Dail. In view of a packed visitors gallery various ministers spoke to the importance of Culture, Arts and Heritage and of course the majority voted against the motion. In the course of the debate we were assured by Minister Humphreys that the existing configuration of the Department of Arts, Heritage, Regional, Rural and Gaeltacht Affairs was ideal and no dedicated ministry was possible or desirable, and that additional funding would be made available as and when the economy improves.

Now, just over a year later we have a Department of Culture, Heritage and the Gaeltacht, and a Taoiseach promising to double the funding to the Arts over the next seven years.  Given the very low starting point doubling over a seven period is not a particularly ambitious target,  but it is something we can measure progress against.

I’d call that a win. Well done.

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