Taxing the man
This month we get more indepth detail from a skills exchange member on the issue of tax and the state of the music industry in Ireland and what it means to Irish musicians
Last time we looked briefly at the changing face of the industry, and saw how publishing is becoming a more prominent aspect as agencies such as the PPI are moving to recoup all royalties due from all types of public broadcast – and you can bet that it’s only a matter of time before sources of streaming music such as Myspace and Accuradio will be required to pay a proportion of their revenue in royalty fees – after all your content is helping to make them money…
This week though we shall return to the Taxman – in business, as they say in politics, you keep your friends close and your enemies closer. I tried, in the December issue of The Mutantspace culture blog, to show that fear that the taxman will take your money is NOT always founded, as those on low incomes can legitimately earn money, buy new gear and pay NO income tax. However, the financial merde is now really hitting the global ventilateur and at this stage I think we probably all know someone who has lost a job.
Some people have seen at least 50% of their pension value wiped out because of the failures of the the Banks to follow their own guidelines, the Financial Regulator not stopping them, and the Government actively encouraging them. So you’d be forgiven (by me but not the state) for not wanting the banks or government to know anything about what you’re earning when they’ve made such a poor job of handling everyone’s money. Suddenly the people who hid their money under the mattress don’t look so silly – they’d seen it all before and learnt their lessons. What can we learn from this mess?
1) Cash Is King
2) No job is safe
3) Governments and Banks aren’t as clever as they think they are
So why the hell would you voluntarily tell this shower of incompetent numbskulls what you’re earning? Seeing as all they’ve done so far is bring us to the edge of bankruptcy isn’t it better to hide it from them? Well, to be honest, I still have to say no, and here I’m going to lay my cards on the table, because honesty is absolutely the best policy. I think it is right to declare ones earnings, and I believe there are valid reasons to do so:
1) Moral. In my opinion if you want the entitlements of citizenship you should accept the responsibility as well.
2) Legal. If they catch you ducking out on taxes they will prosecute you, and then you will have to pay even more.
3) Financial. If you declare it all up front and use your brain you will end up paying LESS in tax and maybe get VAT back from the taxman.
4) Beneficial. Illness, Jobseeker’s, Maternity, Adoptive and State Pension Benefits all depend on PRSI payments, and if you don’t pay (or have the credits) you won’t get the benefits.
Now IF you have declared yourself as a musician by filling in tax form TR1 (available in the tax office) you can tick the box to be registered for VAT. And just as there is a limit below which you don’t have to pay income tax, there is a limit below which you don’t have to pay VAT, currently €37,500 (Revenue VAT Guide 2008).
As of current revenue policy any VAT you incur on legitimate business expenses can be reclaimed, meaning that below these limits you are effectively Income Tax and VAT exempt, and so any tax you have paid, including the VAT, is refundable.
So – you’re an otherwise unemployed musician but had a good gigging summer and made €2,000 on the festival circuit and you decide to go into the shop and buy yourself a nice new microphone and mixer, a laptop to record yourself, a stereo to monitor recordings with, totalling €1,000 all of which is a business expense because you’re now officially registered as a self-employed musician.
It cost you €200 in travel expenses that you have receipts for so your actual earnings is €2,000 – (€1,000 + €200) = €800.
If summer is 13 weeks then you earned just over €60 a week, and the welfare office allow you to earn €20 a day for three days a week without losing entitlements. Bingo.
As it currently stands once registered for VAT you can then claim the VAT back on your purchases. In the above example that would be about €210.
Admittedly this would count towards your income for that period meaning you might lose €16 a week from your giro, but you’re still €60 up each week. Also true, you will be required to pay PRSI, and that is a flat rate of €253 or 3% of your income (2008 figure), but as we’ve seen, one good VAT return will cover that. So finally you’ve earned legitimate money, the returned VAT covered your PRSI state pension contribution, and all above board.
And the paperwork? – you kept your receipts in a folder and wrote up your earnings in a book. Once a year you fill in a form with the Revenue and they do the rest.
At least, I think that’s how it goes!
Hey ho, I think that’s enough for today class.
Keep Strumming
Dr. Chris L.Aserboy
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