A law enacted in 1957 allows artists in Mexico to pay their income taxes with pieces of their work. David Alfaro Siqueiros, a Mexican artist, is fabled to be the father of the tax haven law for artists. In 1957, Siqueiros approached a senior government finance official on behalf of his friend who was in a bit of tax trouble. The government decided to allow the artist to pay his tax debt by donating pieces of his work to the government.
Over 700 sculptors, painters, and graphic designers take part in Pago en Especie, or payment-in-kind program. The Mexican government currently holds in its possession over 7000 pieces of art that are placed in museums throughout the country.
The way the system works is by the artist’s reported sales. If the artist sells one to five pieces, then he donates one. If the artist sells six to eight pieces, he donates two works. Mexico has an annual cap of six pieces of work with which artists can pay their taxes.
Mexico, where about 50 percent of the population lives below the poverty line, currently has one of the lowest rates of tax revenue in all of Latin America. It’s estimated that all tax revenue is collected from only 20 percent of the population, which accounts for only 8.5 percent of the gross domestic product.
In a country filled with corruption and multi-million dollar grossing drug cartels, the Tax Administration Service (SAT) of Mexico estimates that it has lost $872 billion to tax evasion or money laundering. President Enrique Pena Nieto, who took office in 2012, vowed to reform the botched tax system in place, closing loopholes used by corporations skimping on their tax debts. SAT has targeted 270 companies that are suspected for evading taxes.
Mexico is not the only country that offers kickbacks to their cultural contributors. In Ireland, the government allows €40,000 limit that can be exempt from income tax if the artistic work shows sufficient cultural or artistic merit. The works eligible for exemption can be books or other written work, a play, musical composition, painting, or sculpture. Recently, however, it has become near impossible for artists to qualify for the exemptions. In 2010, only three of ten artists that applied received approval.
India offers an exemption of 75 percent from income acquired from foreign assignments. Approved artistic merit includes authors, playwrights, musicians, actors, or athletes. Currently, fashion designers in India are fighting to be classified as artists so that they may collect on the tax breaks.
The United States has many deductions available to artists but not directly from attained income. Self-employed artists can claim deductions for everything from studio space rental, supplies, classes, legal services, and promotional expenses.
Recently, the UK implemented a Cultural Gifts Scheme that allows artists and companies to donate artwork in return for income tax deductions. In 2012-2013, tax reductions through the program totaled over half a million dollars.
Mexico currently is sharing 13 pieces submitted through Pago en Especie with galleries all around the world.
While Mexico is only one of several countries that support the arts through tax incentives, they are the only country in which artists can completely pay their income taxes by donating their work.
By Cody Long