Rock Stars, Mansions & Irish Tax

You might not think that the property section of an Irish newspaper is a fertile area for rock and roll stories but you would be mistaken. In the last few months, a number of features have appeared in the residential property sections of a variety of national newspapers dealing in the sale of this rock star's mansion or that movie maker's stately pile. The reason given for the sale is usually that such and such a celebrity finds themselves spending less and less time in Ireland and, anyway, they have properties all over the world that they need to live in from time to time too. What the articles don't suggest is that this sudden departure after years of comfortable living in the Auld Sod may be, at least, partly due to the recent capping of the Artists's Exemption at € 250,000.00 per annum by the Department of Finance, after which said celebrity will have to pay tax on the remainder of their income.

Now, I am not interested here in getting bogged down in the pros and cons of this exemption; briefly I am for it and also I was against it being capped because the vast majority of artists who avail of it earn less than € 50,000.00 per annum and they do that with great difficulty, but one very interesting knock on effect the cap has had is to escalate a decline within a certain section of the Irish property market, namely in the sale of top notch residential homes.

As soon as the cap was introduced, the tax consultants of these wealthy musicians had to very sensibly point out that the sine qua non of living in Ireland tax free had evaporated and perhaps it might be better to look elsewhere for a place to reside, at which point said musician might think, fair enough, and start looking to liquidate their assets, the result being a sudden rush onto the market of fabulous residences. Now, in the past, when one of these piles was sold, its ownership usually changed hands between celebrities with the usually older seller needing to acquire a big bag of cash and the usually younger buyer needing to dispose of a big bag of cash. With the cap in place, this ready market in buyers all keen to find a tax haven for their newly minted loot, has disappeared and it's fair to say that the remaining buyers in the market may not have such a pressing need for a home with state of the art recording studios and cinema screening rooms, particularly when the property in question comes with a price tag of upwards of € 8,000,000.00.

The result is that the Irish residential property market, already in decline, is given a further negative jolt as these top range properties remain unsold or are withdrawn by their owners, the knock on effect being that confidence in the sector is further eroded and confidence, as any self respecting rock star will tell you, is what it's all about.

[Read More...]