Double Or Nothing

Within the next couple of days, Dutch finance minister Gerrit Zalm is expected to announce that the country is abolishing the taxation of non-resident artists and athletes as of January 1, 2007.

The government believes this action will remove an obstacle for both international performing acts and athletes, leading to fairer taxation. It also plans to ask Paris-based OECD, the organization that frames international tax treaties, and other EU countries to follow suit.

The argument for such a course of action first appeared in Dick Molenaar’s “Taxation Of International Performing Artistes,” the thesis the All Artistes Rotterdam director wrote when studying for his doctorate.

“It’s what we’re aiming for everywhere,” he told Pollstar while admitting that he was somewhat stunned that the Dutch government had taken up the idea so quickly.

He sent Zalm a copy of the book, which has a chapter explaining why Article 17 of the Organization for Economic Co-Operation and Development’s “Model Tax Convention” could be scrapped in favour of artists and athletes being taxed on their foreign earnings in their residing countries, instead of the country of performance. The “Model Tax Convention” has been adopted by most EU countries.

Currently, as with most countries, the Dutch have the right to levy a source tax from non-resident artists and athletes under 74 of its 78 bilateral tax treaties, all of which closely follow Article 17 of the OECD model.

However, the Dutch government has now been persuaded to think that taxing foreign artists, who then get a credit in their country of origin, and crediting their own artists against what they pay abroad is an unwieldy way of doing things.

The revenues it brings in amount to about euro 6.4 million per year, but that’s less than 0.01 percent of the Dutch treasury’s euro 100 billion annual tax income. When the credits have been paid out to the Dutch acts, the net tax income from artists and athletes is close to zero.

The downside for Molenaar and his German colleague Dr. Harald Gramms if his government adopts the same strategy is that they’re currently filing about 500 tax refund claims each year and they’ll lose the revenues that yields.

“It’s still better to have a fairer and more efficient tax system,” Molenaar explained, “particularly as the current way of doing things involves promoters in such an administrative burden.”

The new method of dealing with artist tax will only apply when acts revisit from a country the Dutch have a tax treaty with. Acts based in a tax haven, like Monaco for example, will still have to pay because they can hardly claim to be paying the tax in their country of residence.

Zalm was expected to announce the changes September 19th as part of his annual budget, but Molenaar inadvertently let the cat out of the bag by submitting an article to U.S. finance magazine Tax Notes International, which was so impressed it already made the September 11th issue.

– John Gammon