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Art for Art`s Sake: The Ultimate “Hobby”

Rainer Partl

YOUNG ARTISTS STRUGGLE TO BECOME ESTABLISHED ON THE ART MARKET. IT OFTEN TAKES THEM A LONG TIME TO CLINCH THE FIRST SALE OF THEIR WORK FOR A SERIOUS PRICE. INCOME TAX AND THEIR TAX RETURN ALSO HINDER THE FIRST STEPS ON THE ART SCENE AND STOP THEM FROM MAKING ART THEIR MAIN PROFESSION WHICH, ULTIMATELY, IS THE SINE QUA NON FOR A SUCCESSFUL ARTISTIC ACTIVITY.

Tax return regulations imply that only activities yielding a long-term, overall, positive income should be considered as taxable sources of income. Indeed, only these activities can be declared and will be considered in one’s tax return. Should, in the long run, an activity yield a loss, what has to be assessed is if the taxpayer wants to accept these losses as ‘personal’. In this case, the activity cannot be recognised as a source of income and the resulting losses aren’t tax-deductible. Art thus becomes a labour of love, a ‘hobby’. Legislation regulating the Definition of income is complemented by the ‘Hobby Order’ wherein specific activities are recognised by a legal presumption and are excluded right from the start from the scope of income and taxable income.

These ‘traditional’ hobbies can be traced back to tendencie which originate from every artists‘ lifestyle. This hinges on the very artistic endeavour at the heart of one’s supposed income, for every artistic activity can be traced back to a skill and tendency of the artist. Otherwise it wouldn’t be possible to create works of art that can be taken seriously. Hobbies may be the cause of economic losses which result from the management of economic assets in line with standard market practice, ideal to be used on an everyday basis and which typically reflect a specific tendency originating in their lifestyle. This second fact doesn’t target artists, rather art-conscious purveyors and massively Limits the taxable value of the investment. To cut a long story short, these conditions are anything but useful for the art market. Let’s try walking a mile in the shoes of the soon-to-be artist. They’ve just finished their training, and hard work and time-consuming efforts are required for further development. Open funds are limited; most times their income is generated by complementing and supporting their artistic activity with another job. From an artistic point of view, this greatly reduces the scope of an artist’s development. This is worsened by an unpleasant tax situation.

The income from the second job falls completely under the scope of the tax return while the financial losses from an artistic activity can’t be assessed when declaring their personal income for the above mentioned regulations. Therefore the artist’s effective income isn’t taxed: what is taxed is their income deriving from the ‘regular’ job. The relevant finance authority issued this hobby order to meet taxpayers halfway. Artists have to produce a well-reasoned estimate where they prove that their losses represent start-up costs. These high running costs occur especially at the start of their activity as sales generating sufficient money are but a vague hope. However, no taxpayer will succeed in producing an estimate of their source of income and ‘hobby’ activity at this moment in time.

At some point – we hope – the period of drought will end. The artist will yield a positive income from his sales. From this moment on there will be a traceable source of income and these have to be taxed. Now it becomes indispensable to declare where these incomes come from, as they can be traced back from a personal skill or passion of the taxpayer. The ‘personal tendency’ only restricts the possibility of value depreciation. Every step taken in the freelance world is one met by obstacles. Artists move on a very sensible market, which represents an extra risk for the young entrepreneur. The tax accompanying measures for the development of young artists still are very questionable.

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Written by

Steuerberater, Certified Public Accountant, Universitätslektor, Prüfungskommissär der Kammer der Wirtschaftstreuhänder.

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