On Using The Tax System To Boost Funding For The Arts

Scoop

15 hours ago

Despite the myriad concerns being expressed about the Regulatory Standards Bill including misgivings by his own Regulations Ministry and scorn from constitutional law expert Sir Geoffrey Palmer David Seymour has professed to find no merit in …
Despite the myriad concerns being expressed about the Regulatory Standards Bill – including misgivings by his own Regulations Ministry and scorn from constitutional law expert Sir Geoffrey Palmer – David Seymour has professed to find no merit in any of the objections.
Sure, he'll add in a reference to the Treaty if people can make what he considers to be a sound argument for why he should do so – but in the same breath, Seymour made it clear that he had no intention of actually honouring any Treaty responsibility to Māori. Truly, there are none so blind as those who will not see.
Show Art The Money
Often, a false division gets made between art and commerce, and that helps to explain why art tends to be treated as a social luxury: an optional extra, and not one of life's essentials. Everywhere you look, the arts are coming under pressure from rising costs, changing patterns of arts consumption, and declining support from donors and philanthropic foundations.
What's to be done about it? Well…last weekend, the NSW state government announced plans to hold an 'arts tax summit' at the Sydney Opera House in September. The gathering will explore ways to radically reform the tax system with the aim of shoring up support for the arts in Australia.
The ideas being floated include: giving wealthy patrons added tax incentives to donate to the arts, offering tax relief to the owners of vacant commercial premises if they rent them cheaply (or for free) to artists, and allowing artists to claim a wider range of production-related expenses on their tax returns.
Reportedly, this NSW arts summit will be attended by NSW Treasurer Daniel Mookhey, and about 150 donors, venue operators, art investors and tax experts. [Just how many artists will be invited is unclear.] 'The sector is telling us,' Mookhey told the Sydney Morning Herald, ' that tax policy settings are a significant impediment to artists' business viability, international competitiveness and income stability.'
Arguably, artists deserve better. At last count, the arts and culture sector contributed an estimated $A123.3 billion annually to the Australian economy. In the year to March 2024, New Zealand's arts and creative sector contributed $NZ17.3 billion to our economy, or 4.2 % of GDP.
In other words, the arts and cultural sector more than pays its way. According to Infometrics research in 2023, the arts/culture sector grew by 5.3% that year, compared to only 2.9% growth for the rest of the economy. Some 117,0000 people were employed in the arts/culture sector in 2023. Only 11,000 of them identified as Māori, well below the ratio of Māori within the general population.
So, even on strictly economic terms, the arts sector is punching above its weight. As the Infometrics survey pointed out :
Productivity (measured as GDP per FTE) in the Arts and Creative sector grew by 1.7% to $155,539. Over the past five years (2018-2023), productivity has grown by 3% per annum on average, where the total economy has remained relatively flat (0.2%).
Point being: arts funding deserves to be treated as an investment, not as a handout. One of those tax incentives being seriously considered in Australia i.e enabling vacant commercial premises to be made available to artists at little or no rent, deserves to be investigated here in order (a) to give creative people a place in which to create and (b) to help to revitalise the depressed commercial areas in our towns and cities. Reportedly, its worked elsewhere.
Footnote: Other countries are treating arts funding as an investment in social wellbeing and economic growth. Last year, Ireland extended its Basic Income For The Arts funding programme into 2026, and put $35 million euros more into it:
Launched in 2022, the pilot scheme is examining the impact of a basic income on artists and creative arts workers over a three-year period. Payments of €325 per week [that's $NZ634! ]are being made to 2,000 eligible artists and creative arts workers, who have been selected at random.
Here's the rationale :
' I believe that Ireland holds a unique position in the world, where our culture, Ár dTeanga and our artists are the beating heart of our society,' Minister Paschal Donohoe commented. 'There are record numbers visiting our national cultural institutions. Irish writers are some of the best in the world – giving us pause to reflect on the world around us, to make sense of it or, indeed, to escape it entirely for a moment.'
Not surprisingly, artists in Ireland like the scheme a lot, and say it improves the quality of their work.
Footnote Two : On that score, it is worth noting that in New Zealand, Budget 2025 kept the level of our Large Budget Film Production Grant at only 20%. This rebate is available to international film productions in return for the increased spending, jobs and skills expertise that these major film projects inject into the New Zealand economy.
Problem being, our current rate is no longer competitive. In Australia, it is 30%. In Ireland, the headline equivalent rate is 32%. As in NZ, there is no overt cap to Ireland's film production incentive, which is based on whatever is the lowest figure: 32 % of qualifying expenditure, 80% of the film's total production costs or 180 million euros.
As for government support to Ireland's own film industry, there was an 8% increase last year to the incentives for local feature film productions that utilise Irish creative talent. The coalition government has provided no similar, additional stimulus to our own local film industry.
The Art Budget blues
Given New Zealand's current ideological fixation on cost cutting for its own sake, Creative NZ's retention of funding of $16.6 million in Budget 2025 counts as a relief, even though inflation will erode some of the funding's net value.
Direct government funding provides about 25% of Creative NZ's revenue, with the other 75% coming from Lotteries Board money, which has inched up to $52.78 annually for the next four years, from $49.5 million in 2023/24. The current lotteries plus government funding comes to an annual total of $69 million, well down from the $87 million the arts received during the last year of the pandemic recovery period.
In a familiar gambit, 're-prioritisation' has also seen funds shifted from one scheme and added to another to create an illusion of extra government support. At Creative NZ for example, funds for the umbrella Toi Uru Kahimakea programme (formerly praised to the skies by Creative NZ for expanding the range and reach of the arts in New Zealand and for being one of the organisation's 'most significant annual investments') will now be poured into the general funds available to arts organisations.
Similarly, the Ministry For Culture and Heritage will see much of the funding for the National Fale Malae Project ( an intended showcase for Pasifika art and culture) being 're-prioritised' for other purposes. The recent funding cuts and job losses at the Ministry (which will sharply reduce the country's awareness of its own history)have been met with horrified public opposition. To no avail, so far.
As for the community funding for arts -related community assets such as libraries, community organisations and events…Finance Minister Nicola Willis once again raised (on RNZ yesterday) the spectre of National imposing a cap on the annual rates increases that local councils are allowed to propose.
This pandering to property owners resentful of anything being spent on community facilities and events they don't personally use, is deeply alarming. An arbitrary rates cap poses an obvious threat to council spending on the likes of libraries, community arts events, and public transport.(Yesterday, Willis spoke about the need to reduce council spending 'on fanciful projects.')
By driving down rates revenue, a rates cap policed by central government would force communities to make ugly choices about which public facilities councils can continue to support. In the process, the rates cap would also undermine the international credit rating of councils, and increase the costs of their borrowing for essential infrastructure. Instead of an imposed rates cap, Local Government NZ President ( and Selwyn mayor) Sam Broughton wants local and central government to collaborate on solutions:
'From the international analysis it is clear that a rates cap will have unintended consequences on communities; it will restrict the ability of councils to invest in infrastructure and risks their financial instability, and we need to avoid this…..Australian examples show that a rates cap will have the opposite effect to what the Government wants to achieve.'
Footnote: BTW, and in the interests of informed collaboration, there is nothing 'fanciful ' about local council or central government spending on the arts. Artists pay taxes and help lift the nation's GDP, as well as enhancing the public's sense of wellbeing and cultural identity.
If artists could afford to live downtown e.g. if tax system changes did enable unused commercial properties to be occupied at peppercorn rentals – this could revitalise the inner city, boost retail spending, provide part time labour for cafes and restaurants, and enhance the value of adjacent downtown properties through the added foot traffic (and tourism) being generated.
Footnote: In 2019 Victoria University academic Jonathan Barrett analysed how a capital gains tax could make more people feel inclined to invest in art.
Don't Rely On The Market
Some people, including a few artists, find the very notion of state funding of the arts to be a hard concept to embrace. For one thing, there's a certain lack of romance involved. An artist starving in a garret is a more heroic image (at least, until the gum rot sets in) than an artist pulling a government cheque from the mailbox en route to the potting shed.
Charges of elitism over arts funding (why this art form over that one, why them, not me) tend to clang up hard against the sense that this stuff is really important, contributes to our national identity etc etc. All of which is worthy of debate, provided it doesn't lead to policy paralysis,
One way to justify spending on the arts is to demand a commercial return, as one would with any other commodity. That argument is self defeating. Why? For one thing, society benefits from what economists call the 'spillover' benefits of arts creation and consumption, just as it does in other non-quantifiable areas.
Inevitably, the 'spillover' returns to society from spending on art, public healthcare, state schooling, science and the military are notoriously difficult to quantify, and establish a market value. Defence spending for instance is as costly as its benefits are nebulous. Yet for some reason, successive governments have been willing to write the NZDF – and them only – a blank cheque. Why not science? Why not the arts?
There is also a so-called 'option value' argument for arts funding, whereby whilst you or I may not choose to patronise an art gallery or a ballet, many of us would still like to see such things supported, and kept as a viable option for others, or for our grandchildren.
To illustrate this notion of option value, economists routinely offer the jokey old anecdote about the King of Naples, who once told the composer Antonio Scarlatti that he felt fine about supporting the Naples Opera, just so long as he was never actually invited to attend the confounded thing.
Another key economic driver for regular boosts in arts funding was a point made decades ago by the economist William Baumol – namely, that arts activity is simply not conducive to the technological advances and the productivity gains that have been obtainable elsewhere in the economy.
This syndrome – routinely called 'cost disease' or 'Baumol's disease' – applies equally to the funding for public health and education as much as it does to the arts. All such sectors entail services – creating art, educating kids, caring for sick people – that are next to impossible to automate and to mechanise. 'This means that as wages go up in these handicraft services,' Baumol said, 'there is no productivity offset to rising costs.' (Lorde, Taikla Waititi, Shane Cotton etc do not come off a production line.).
At this point, the free marketers would probably say – well, why not leave it the market? If people want art, then let them pay for it. Yes, Baumol wrote, but what quality would the prevailing market settle for? Wouldn't such a market be inclined to downsize by cutting out rehearsals and other production costs, and concentrate on the likes of sure-fire Broadway hit musicals, rather than on Shakespeare or on untried new talent?
In other words, the centre-right formula of holding the funding at current levels – and looking to the market and/or the community for extra money – is unlikely to result in (a) quality (b) diversity and (c) anything other than the recycling of the known and the safe. All of which would quickly erode the option value and the cultural capital of our art, both here and overseas. It would be self-defeating, in that it would diminish/destroy the value of the product.
Besides…at the very worst, an added investment by the state in art and culture is certain to deliver better social and economic returns than gifting landlords with a $3 billion handout.
Footnote : Australia is a wealthier country than New Zealand. Yet its artists hardly have it easy. According to the SMH article linked to above, the average annual income of professional artists in Australia is $A54,500, earned via insecure projects and commissions. A writer's average annual income is just $A18,000, and the median annual income for musicians is $A15,000.
Plainly, starving in a garret for your art isn't a lifestyle ' choice' that died out at the end of the 19th century.
Needing The Love
There's no particular reason for linking to this, beyond it being an all-time favourite video. Oh baby lady girl. Art is its own reward :