Horsen Around With Tax Laws

If the promoters of Madonna‘s August 24th show at Horsens Ny Theatre in Denmark have to pay VAT on the tickets, they’ll drop US$680,000 on an 85,000-capacity sellout.

The Danish revenue is expected to come through with a ruling that says Eigils Musikforening – the local Horsens music society that has VAT exemption – is no longer entitled to that status.

But Ny Theatre chief Frank Panduro is furious and said making the local organization pay the tax on that show is “backdating the law.”

The row over Horsens tax status flared up in December, when the local music society beat Copenhagen Parken – the national stadium and former Midtfyn promoter Knud Bjerre in what turned out to be a bidding war for a date on The Rolling Stones‘ Bigger Bang Tour.

Both complained to the media, with Parken chief Flemming Østergaard telling Politiken that bidding against an opponent with a charitable VAT-exempt status hardly constitutes doing business on a level playing field.

Bjerre estimated the saving on the VAT (25 percent in Denmark) was putting something close to an extra 11.2 million Danish kroner (US$1.79 million) in the Horsens pot.

An article in Herning Folkeblad pitched the saving as high as 16 million kroner (US$2.6 million).

Politiken questioned whether it was fair that a “loophole” in the law meant a provincial music club should beat the national stadium – which is based in the capital – for the likes of R.E.M., David Bowie, Elton John, Madonna, Bob Dylan, Robbie Williams, José Carreras, Mark Knopfler, Anastacia, Westlife, Bryan Adams, Joe Cocker and Paul McCartney.

The big glitch in the Danish tax law governing the charitable status of local sport and cultural clubs is that it’s being interpreted in different ways by the numerous tax districts that are spread across mainland Jutland, Zealand, Funen and the country’s 75 smaller inhabited islands.

Also, Danish governments are most often minority administrations and can only rule with the support of at least one of the other parties.

This means the country’s politics is characterized by inter-party compromise. Since 1909, no single party has had the majority of parliamentary seats. Many policy matters are decided locally. Regional administrations have a lot of autonomy.

The upshot was that tax minister Kristian Jensen announced he was going to unify the law by throwing a blanket over it and saying that future exemptions will only be granted if the profit goes to charity immediately, and there’s to be no more “carrying over” or “storing up” income from gig to gig.

He also set up an independent review of the Horsens situation and appointed the tax auditors from the Danish island of Bornholm to make a feasibility study to consider whether it was time for an overhaul of all the national and local laws regarding charity status.

Panduro agreed any money from the Stones show would be paid to charity immediately and admitted to expecting major changes in the tax law in the future, but he was still stunned when he got a note from the revenue saying the local Eigils Musikforening would have to pay VAT on the Madonna show.

“I’m sure this can’t be done and the lawyers here say we should take the tax authority to court if it tries,” Panduro told Pollstar.

His claim that the revenue department’s lawyers are trying to backdate legislation is based on the fact that he submitted the VAT exemption forms for Madonna before he put in the ones for the Stones.

“They have accepted the form for the Stones show, although we will have to hand over our intended donation to cancer research immediately, and then turned us down on one that we’d submitted before that on the grounds that the law is changing,” he explained.

He said the extra VAT burden is no danger to the show because the large local companies that comprise the Friends of Ny Theatre – and they include BG Bank, Damstahl steel foundry, Hattering Bageri (which exports sausage rolls worldwide) and mortgage provider Nykredi – will meet the extra cost.

He also expects they would probably fund any court appeal that the local music club may have to launch.

– John Gammon