Willie Penrose (Longford-Westmeath, Labour)
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Question 6: To ask the Minister for Arts, Sport and Tourism his views on the problems in regard to removing the 21% VAT on fees for non-resident artists performing here for festivals, in particular due to the need to attract non-resident performers and artists; if he has had discussions with the Department of Finance on this issue; and if he will make a statement on the matter. [19252/07]

Séamus Brennan (Dublin South, Fianna Fail)
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The Deputy will appreciate that any change to the tax law in regard to the charging of VAT is a matter for the Minister for Finance, Deputy Brian Cowen. I am, however, aware of the issue regarding the charging of VAT on non-resident performers and artists and have been briefed on the matter recently by my officials. I intend to explore it further, with a view to seeing if there is a way in which it can be addressed and, in the process, will consult the relevant bodies and organisations. I intend to discuss the matter with the Minister for Finance in due course.

Jack Wall (Kildare South, Labour)
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I am delighted the Minister is in favour of investigating the matter and having it rectified. The situation is counterproductive, given what the Arts Council is attempting to achieve. On the one hand, the council gives grants to festivals while, on the other, the 21% VAT rate is applied. This does not help to attract the artists who would make a difference. In many instances, local organising committees must give huge incentives to assist fund-raising. If the 21% rate did not apply, it would be far easier for them to get the best artists and advance their festivals through the addition of workshops and so on but that is not possible due to the huge incentives needed to attract the artists in the first place. The 21% rate is prohibitive. I am pleased to note it is the Minister's intention to deal with the matter and consult the Minister for Finance. We will keep in contact in this regard because the issue has a major effect. Whether a festival is small or large, the VAT rate is a major impediment to its progress. It is welcome the Minister has been briefed and that some action will be taken.

Séamus Brennan (Dublin South, Fianna Fail)
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I will certainly discuss the matter with my colleague. The Deputy will recall that the Revenue Commissioners gave a one-year derogation in 2002 in regard to exemption from this charge on the basis of a request from the Arts Council. However, there has been no progress on the matter since. The difficulty is that the people who attend these gatherings, by and large, do not pay VAT on tickets. Therefore, when the organisation involved comes to recoup VAT, it does not have VAT payments against which to offset the VAT it is required to pay. We thought we were doing the right thing in removing VAT from entrance charges. However, an unintended consequence is that the organisation does not have a claimable mechanism available to it. In a way, we set out to do good work but it had this unintended consequence which I will discuss with the Department of Finance.

Finian McGrath (Dublin North Central, Independent)
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I congratulate the Minister on his appointment and wish him well. I welcome his statement on the 21% VAT rate. Progress in this area is essential to deal with the issue of developing the arts. The Minister must prioritise spending and support for the arts in the next five years, given that artists make a major contribution to the country and the development of communities.

As we are dealing with the issue of sports, will the Minister join me in expressing our deepest sympathy to the family of the late Derek Dougan who played for Wolves and Northern Ireland and made a massive contribution to sport in this country, particularly——

Brendan Howlin (Wexford, Labour)
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I am sure this is very important but we might confine ourselves to the question in the short time we have available.

Finian McGrath (Dublin North Central, Independent)
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I understand. Will the Minister join me in expressing public sympathy to the family of the late Derek Dougan who made a massive contribution to sport on the island?

Jimmy Deenihan (Kerry North, Fine Gael)
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I am sure the Minister will agree that the quality of a festival is very much determined by its participants. Unless a festival committee or organisation is able to attract major international artists, it will not attract as many people. Festivals are becoming very competitive. If one wants an international audience and to encourage tour operators to bring visitors, big names are needed. The VAT rate certainly inhibits organisers in getting major names to perform. The Minister may be aware that as Northern Ireland excludes VAT, we are at a disadvantage as regards festivals there.

Jack Wall (Kildare South, Labour)
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The Minister is wrong to state there is a loss to the Exchequer with regard to VAT on tickets. In fact, the more a festival grows, the more opportunities there will be regarding bed nights, restaurants, petrol and food sales. If the organisers can increase the value of the festival by bringing in more international artists it will bring in more people and the Exchequer will benefit.

Séamus Brennan (Dublin South, Fianna Fail)
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I was not saying that the Exchequer would lose out but that under the mechanism by which VAT is collected one offsets the VAT one pays against that which is charged in. If no VAT is charged in on tickets there is no mechanism for reclaiming it. My point is a technical one but I accept the Deputy's broader point.

I join with Deputy Finian McGrath in expressing my admiration for the wonderful contribution made in the case he mentioned and extend our expressions of sympathy to the family of Derek Dougan.

I plan to make a fuller statement on investment in the arts and the future as I see it, hopefully soon.