German pop promoters pin their hopes on ECJ

Date: 13/06/1996

By Thomas Klau

GERMANY'S concert organisers are considering taking their government to the European Court of Justice following Finance Minister Theo Waigel's refusal to scrap a controversial new law increasing the tax bill for foreign artists performing in Germany to more than 30&percent; of takings.

The desperate scramble for new resources to enable Germany to meet the Maastricht deficit criteria has lead Waigel to put the squeeze on foreign performers, sparking an outcry from concert organisers and prompting pop stars such as Michael Jackson to cancel tours.

Until the end of last year, foreign artists touring Germany had to pay an income tax of 15&percent; on their gross earnings which, in conjunction with VAT and the solidarity surcharge to finance rebuilding east Germany, amounted to an overall tax bill of less than 20&percent;.

Technically, the artists were allowed to claim 70&percent; of their takings as expenses, leaving 30&percent; of their revenue to be subjected to a 50&percent; income tax.

But since January 1996, the finance ministry has sharply lowered the threshold for deductible expenses to 50&percent; of takings, leaving a full half of performers' gross earnings liable for income tax.

In addition to VAT and the solidarity surcharge, the total bill thus amounts to 30.91&percent; of takings, says the German association of concert organisers (IDKV). It claims that for concerts requiring expensive technical infrastructure, the tax increase might lead artists or concert organisers to lose money even on concerts which are sold out.

In a highly publicised decision, Michael Jackson decided to cancel the German leg of his world tour this summer, prompting Waigel to send the star an explanatory letter - which was reprinted in full by the tabloid newspaper Bild-Zeitung.

However, following the public outcry, the Bonn finance ministry has recently decided to press for an easing of the new fiscal regulation.

The German parliament is soon to vote on a retroactive law allowing artists to submit their yearly earnings and expenses bill to Germany's tax authorities. This would allow them to claim some of their lump tax payment back, should the expenses incurred overshoot the 50&percent; which are now immediately deductible.

But leading concert organisers such as Mama Concerts & Rau in Munich argue that the 12 to 18 months it would take for refund payments to come through is far too long, and would leave promoters with a massive bureaucratic and financial burden.

Fiscal experts in the European Commission, however, remain unconvinced by the argument that the new tax on foreign artists performing in Germany breaks EU law, and might be overturned by the European Court.

“There is no evidence that foreigners are being discriminated against,” said one. “Germans are not being treated any better.”