10 Better Regulation & Taxation Of Music

Music Industry Stakeholders would like to see the passage of a Live Events Act that addresses the particular problems of applying laws and lower level regulation for music businesses. Such regulation may take the form of a broader legislation that is not only concerning concerts, festivals, and music recordings, but also the very similar problems of performing arts and sports events. Joining forces with these creative and cultural industries increases the chances of success and can lead to further cooperation on more creative-friendly economic policies, including tax policies.

The Music Industry would like to see a more creative activity friendly tax administration and tax policy, because creative industries have a bigger potential to create jobs and contribute to public expenses than other, more favored industries. This effort goes hand in hand with 8 Alliance With Creative Industries, because broadcasting, advertising, film production, and other creative professions suffer from the same economic policies. In Europe work-related legislation and taxation, similarly to funds for life-long learning and vocational training programs are increasingly managed in a social dialogue between employers, trade unions and the government. The problem of the creative industries is that because of the dominant freelancer and microenterprise structure, they are not well present in this dialogue. Musicians typically do not have a clear employer, and especially young composers and performers do not see the merits of unionization. Supporting professions, such as engineers, stage crew are not represented by anybody.

No wonder that the music industry is usually taxed more than most professions, and there are no clear procedures to avoid double taxation on foreign tours - not even within the EU.

10.1 Program Considerations

The live music industry is subject to a vast array of regulation because it is working with dangerous technology, temporary installation and large crowds. Fire, safety, noise, building and technical regulations, as well as certifications and tax administrations affect artists and event promoters, venue operators in a rather special way, and the stakeholders would like to see a legislative act that clarifies such regulation for the music sector and potentially for other performing arts and sports events.

Much of this regulation is national regulation, but a lot of local regulations apply too, which are usually created by less knowledgeable municipal authorities, who sometimes have no experience with live events or festivals at all.

Several countries realized that the live music sector is under a very serious threat. All over the world, in the CEE region, the rest of Europe and globally there the vast majority of the available stages, clubs closed down in the last 15 years, because the increasing regulatory burden and the increasing investment needs into modern stage technology made smaller venues (under 1000 audience capacity) is not viable. The United Kingdom was the first country that mobilized enough grassroots support, and eventually cross-party support in the legislation to create a Small Venues Act. (See for example: (Music Venues Trust 2015; Larney 2015)) In the Czech Republic, a similar initiative would be necessary in the coming years with a slightly similar focus. In the CEE region, due to the weak infrastructure, festivals operating on a temporary infrastructure are equally important as small- and medium sized venues.

The revision of the EU VAT system is under review, and this is an excellent opportunity for music stakeholders to make an economic impact analysis of their situation and present their ideas via the social dialogue in Czechia and on the EU level, too (European Commission 2017; Commission 2018).

10.1.1 Impact On Artists, Professionals & Enterprises

Please give your personal example, if the change above would start, what positive impact you would expect to feel on your professional career or on your enterprise / organization?

Karolena Pavlova, chairperson of Gigs Associations: We are lobbying for a Live Music Act for years, but I had little knowledge about the experience in other countries. I believe that learning from the UK experience was really help us get focused in our work.

Jan Svoboda, talent managers, Artist Management s.r.o: I have given up on the taxes that we paid on our last tour, The Devils in the US. I know that there is a treaty between Czechia and the U.S. on this topic, but we could not find anybody at the tax authority who would have been able to help which form to declare. There is simply too much paperwork for each show, and we end up paying twice. I am also not convinced that our bands receive their composer royalties next year from OSA. These things just do not work very well in Czehcia yet. I am sure that if we had at least some sample forms, we could get a lot more money back for our artists and our company and I would appreciate any help.

10.2 Digital Single Market Directive

The Digital Single Market Directive is the single most important legislation that will affect the composers’, producers’ and performers’ royalties in the next decade (“Directive (EU) 2019/790 of the European Parliament and the Council of 17 April 2019 on Copyright and Related Rights in the Digital Single Market and Amending Directives 96/9/EC and 2001/29/EC” 2019).

The DSM Directive was also the most fought ever legislation in the field, because large tech companies, particularly Google, financed an unprecedented PR campaign and gave support to privacy NGOs to fight against increasing royalties from media platforms.

This fight is now in Prague, where the directive must be transposed into national law. It is very problematic that in Czechia through the Pirate Party there is a popular and populist opposition against paying artists’ royalties. Therefore, Educating the Public - Advocacy Program element and particularly a Dialogue between the Czech music sector workers, fans and the Pirate Party is particularly pressing. (see 3.5, 3.5.1)

10.2.1 Calculating The Value Transfer To Media Platforms

Measuring the Value Transfer To Media Platforms 7.4.4 is a necessary first step to calculate the value at stake and inform the legislation and the public about how much money Czech composers, producers and performers are loosing every year because of this regulatory loophole. Tech companies will create arguments that will claim that the loss is negligible, however, in Hungary and Croatia we have shown that several million euros, about 15-25% of the total copyright and neighboring right royalties are at stake.

Needless to say that the window of opportunity is closing every month, and any bad legislative solution will cap the income of all Czech artists, labels and publishers for at least a decade.

10.2.2 Legislative Proposals to Close the Value Gap

Various international organizations, for example, GESAC are offering a lot of PR and legislative training for this topic, but local evidence and a deep knowledge of the Czech legal system is necessary to make good proposals.

Needless to say that that tech companies have already a very strong lobby in place and they have excellent links to piracy campaigners and Pirates. They usually claim that the DSM Directive support the needs of ‘majors’, and ‘big business’, although in Czechia it supports only freelancers and microenterprises.

10.3 Live Events Act

Many EU-level, national and local regulation applies to music businesses. The festival organizers have been lobbying for a separate act of parliament for some time. This may be desirable because it would draw attention to music and increase the public reputation of the music industry. Naturally, removing the regulatory barriers and problems in any form would provide similar benefits, and generally the stakeholders should not concentrate on the legislative form but the content of the proposed changes.

10.3.1 International Experience

International Experiences (RG1-1). The United Kingdom pioneered similar legislative proposal with the creation of the cross-party Small Venues Act.

10.3.2 Factfinding Tour In Czechia

Factfinding guide for Czech Venues (RG2-1). It seems that nobody has a comprehensive view on the regulatory problems faced by festivals and various music clubs, culture homes, restaurants with a stage and other small or medium sized venues. These venues often do not have the necessary professional staff.

  • We encourage a tour of facilities with inspectors of relevant authorities, and senior technical and managerial staff on at least 20 festival sites, culture homes, café venues, music clubs, and collecting all actual regulatory problems from zoning, crowd management, fire, safety, nose, and other aspects, and list all the unusual parameters for music venues, and all applying regulations (in case of municipal or lower level regulation, also higher level regulation that empowers local authorities to set rules.)

  • Based on this factfinding mission a simple technical survey should be created and sent to all known sites, venues, venue operators, and potential other venues, such as culture homes, even if they have not staged concert in recent years.

10.4 Plugging In Small Venues

RG4 Problem mapping, regulatory proposals for small- and medium sized venues. After considering international experience and actual, hard facts based on case studies, the industry should create a full problem map, i.e. considering every currently functioning and potentially renewable venues, including all problems of crowd management, fire and safety regulation problems, noise and zoning, potential logistics/transport issues.

  • Create a database of all venues, with all necessary regulatory and investment interventions.

  • Provide venue managers, who often do not have music professionals present (for example, in Culture Houses) with a practical guide on a) giving information on their technical parameters to bands b) receiving information or best value/for/money technical scenarios c) guidance on regulatory compliance d) model contracts to hire bands, stage/light/sound technicians. Standardization of model contracts, data about venues, riders can help designing interventions, re-open venues, prevent closures, and it significantly reduces the costs and risks of domestic touring.

10.5 Taxes & Tax Administration

Musicians and their technical and managerial support teams are facing similar problems in tax administration as other creative professions on one hand, and when they are touring, similar problems than ‘travelling professions’, such as stewardesses, pilots, train and boat crews. They are serving their audiences under various tax and social security regulations, and because of their low income, they often struggle to take advantage of double taxation avoidance treaties.

The CEE economic policies and tax rules are generally far more favorable for manufacturing and agricultural activities than for creative services. The Slovak Music Industry Report has shown that touring acts, compared to car manufacturers in the country are subject to proportionally up to 100x more tax burden on 10,000 euro turnover. The Hungarian Music Industry Report also highlighted the unfavorable tax administration as the biggest obstacle to music industry growth.

10.5.1 Reducing Double Taxation

RG3-1 Reducing Double Taxation. Through the participation in EMES, SoundCzech should import know-how on double taxation issues, and find local tax professional support to translate these into actionable recommendations for legislation.

10.5.2 Changing VAT regulation

RG3-2 More creative friendly VAT administration and brackets in Czechia. Similarly to the Slovak and Hungarian Economic Impact Assessments, a Czech impact assessment should be made within the Czech Music Industry Report that shows the disadvantageous tax treatment of the Czech music sector.

The first steps of the general overhaul of the 25-years old EU VAT system are already under way, and the Hungarian, Slovak stakeholders have created economic impact assessments years ago. This problem is more serious in Hungary, Romania, Croatia and Slovakia, but it should not be neglected in Czechia either. The effect of unfavourable taxation is likely to be greater than the lack of good grants.

10.6 Indicators to Measure Progress & Keep Direction in Regulation

10.6.1 Strategic indicators

  • Legislative proposals adopted by the Czech legislation

  • Number of municipalities following local regulatory guidelines

10.6.2 Impact indicators

  • Number of small venues re-plugged to the live music infrastructure [indicator could be created from the OSA licensing database]

  • Less (double) tax paid on foreign tours

  • Less effective tax burden on music industry enterprises

  • An empirically sound, ‘shadow claim’ is calculated for media platforms such as YouTube, and it is effectively advocated during the transposition of the DSM directive

10.6.3 Effect indicators

  • Creation of a unified position on the VAT directive

  • Creation of a detailed legislative proposal on the Live Music Act

  • Creation a working program for small venues

References

Commission, European. 2018. “More Flexibility on VAT Rates for Member States.” European Commission. https://ec.europa.eu/commission/news/more-flexibility-vat-rates-member-states-2018-jan-18_en.

“Directive (EU) 2019/790 of the European Parliament and the Council of 17 April 2019 on Copyright and Related Rights in the Digital Single Market and Amending Directives 96/9/EC and 2001/29/EC.” 2019. Official Journal of the European Union. https://eur-lex.europa.eu/legal-content/EN/TXT/HTML/?uri=CELEX:32019L0790&from=EN.

European Commission. 2017. “VAT Rates Applied in the Member States of the European Union. Situation at 1st January 2017. Taxud.C.1(2017) - EN.” European Commission. http://ec.europa.eu/taxation_customs/sites/taxation/files/resources/documents/taxation/vat/how_vat_works/rates/vat_rates_en.pdf.

Larney, John. 2015. “The Changing State of Music Venues in Australia.” Music Industry Inside Out. https://musicindustryinsideout.com.au/changing-state-music-venues-australia/.

Music Venues Trust. 2015. “Understanding Small Music Venues.” Music Venues Trust. https://www.musicvenuetrust.com/wp-content/uploads/2015/03/music_venue_trust_Report_V5-1.pdf.