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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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