International Touring

Moderator: Dick Molenaar, All Arts Tax Advisers
Carlos Fleischmann, Deutsche Entertainment AG
Stuart Galbraith, Clear Channel Ent. U.K.
Pete Wilson, 3A Entertainment

The ability of foreign artists to deduct expenses from taxes levied by the countries in which they perform is not a romantic issue, but it has far-reaching consequences for acts touring across Europe. Incidentally, it’s an issue that All Arts Advisers’ Dick Molenaar knows well.

He and Harald Grams, both Dutch tax attorneys, have spent years arguing to bring countries like Germany into regulation with European Union tax codes, and have been preaching its importance to anyone in the industry who will listen.

Their involvement with the issue stems from a court case involving Dutch jazz drummer Arnoud Gerritse, who performed in Germany on a few dates in 1996. As per German tax law, he was not allowed to deduct his trip’s expenses from the country’s 25 percent withholding tax, nor was he allowed to file a normal German tax return at the end of the year.

Under European tax code, foreign performers and sportsmen are allowed to file for a tax credit from their home country upon return, but those credits are based on net foreign income, after expenses have been deducted, rendering the credits from German performances insufficient.

In June, the European Court of Justice ruled that Germany and a few other European countries unfairly tax non-residents by not allowing them to deduct expenses, which residents are allowed to do. The court ruled that Germany must comply with the European standard, which is followed by countries like the United Kingdom and Holland.

That’s the good news for touring performers. The bad news, according to Molenaar, is that Germany is dragging its heels in implementing the ruling.

“We expect that in the coming years, European countries will change their legislation and will accept the deduction of expenses,” Molenaar told the panel. “And this is important because of the 10 new European countries that are entering the European Union this year, all had the same artist tax system that Germany has on allowing the deduction of expenses, so they have to (comply with the ruling).”

Molenaar’s choice of an intro-ductory topic was met with little response, which is hardly surprising given the tedious and complex nature of tax law. But it should be noted the ECJ ruling means that Germany, one of the largest live entertainment markets in the world, will soon become far more financially welcoming to touring acts.
The moderator’s next topic was sure to elicit fervent response from the panel: The goings-on of a conglomerate by the name of Clear Channel Entertainment.

Molenaar asked CCE’s Stuart Galbraith if the promoter bothers with developing acts from the United States starting at the club level.

“We have an office full of bookers who work on anything from a 200-capacity club show through to a 125,000 stadium show,” Galbraith said. “The fact of the matter is booking new talent is our business. If we don’t continue to book that through on a selective basis – we don’t book every-thing that moves – in five years, we’ll have a very small number of artists.”

Clear Channel last year launched it’s inaugural festival, Download, in London’s Donington Park. It was by all accounts a success and has already branched out to a twin site at Glasgow Green for this year. The events will share bills, similar to the Reading – Leeds Weekend and Rock am Ring / Rock im Park, Galbraith said.

Notably, the audience and non-CCE panelists were decidedly ambivalent about Clear Channel’s growth, unlike in years past when the mere mention of the name would bring shrieks of “monopoly.”

One of the U.K.’s other large promoters, the now-defunct Triple A, was represented by Pete Wilson, who is now with 3A Entertainment – the company created when Jack Utsick partnered with the remains of the bankrupt company.

Like CCE, 3A is now with a pan-European and global reach, thanks to Utsick’s involvement.

“We found that we needed strengths on a global basis, but didn’t want to lose the personal touch that we had,” Wilson said. “Jack came along and basically gave us that opportunity. We still have a personal feel for the artists, there’s still face value, but we (now have a global reach)” and can develop and tour non-musical attractions worldwide.

“I think we’re basically doing the same thing,” Galbraith said. “We’re basically striving to gain ourselves a market advantage by growing, whether that be with Jack Utsick or Clear Channel trying to amalgamate touring properties.”

Galbraith summed up the surprising lack of anti-CCE acrimony that has become a standard part of any such discussion.

“It’s kind of nice to actually sit here after seven years and not get bashed over the head because I work for Clear Channel,” he said.

Not even a contentious issue like ticket prices, and the assumption that the corporatization of the industry has led to rising prices, could draw a disagreement.

“The bigger acts demand more money,” Wilson said. “It’s very simple. Buying a ticket to a show is not like a football match. You get one opportunity to see it. Some theatrical shows you can see 400 times a year. And the value of a concert ticket compared to a U.K. football ticket is very low.”

Galbraith agreed.

“It’s driven by … demand and customers’ willingness to pay. Ticket prices in the U.K. in the last three years have escalated dramatically,” he said. “That’s fine. We’re sell-ing more tickets and people are prepared to pay for them.”

Many of the standard five-year contracts CCE signed with promoters during the acquisition phase are nearing expiration. Given the recent moves by former CCE promoters in the U.S. (Gregg Perloff, Louis Messina) to reestablish their independent companies, Molenaar pressed Galbraith for an opinion on whether European staffers would follow suit.

“They’re all still here. We’re the same people we’ve been for 20 years. In the U.S., they were entrepreneurial characters and the process that SFX and Clear Channel used in Europe for some people (matches well), and some people do not. The people who do not (fit well) have already left. It’s just the process of natural selection,” Galbraith said.

“I think it’s important to note what hasn’t been said,” Galbraith said in closing. “The fact of the matter is that the industry is in very good shape. Business outside the U.S. is very, very good. We have promoters in here today and agents in here today and nobody is complaining about anything. We’re all just doing great business and I think that’s an important message to deliver to the U.S. market.”

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