“Cultural figures in France are debating a proposed scaling-back of the country’s generous tax incentives for corporate philanthropy.” – reports artnet News
The millions of euros of corporate sponsorship that the Louvre and France’s other leading museums receive each year may be in jeopardy. Politicians are challenging the generous tax breaks, which have led donations to quadruple over the past 15 years, because they fear the incentive to give comes at too high a cost to the taxpayer. The potential ramifications are huge: Sponsors of arts, education, and other causes are now able to deduct €930 million, or more than $1 billion, a year from their tax bills.
Cultural figures in France, meanwhile, are lobbying hard to head off the proposed scaling back of the country’s tax incentives for corporate philanthropy. They fear that donations will plummet if even modest changes are made to the tax system. Now, the battle over sponsorship is taking place not only in the halls of government, but across the pages of French newspapers.
Jean-Jacques Aillagon, the former minister of culture and current director general of the Pinault Foundation, is leading the fight to save the tax law that he helped to introduce 15 years ago. In a recent op-ed in Le Monde, Aillagon warns the state not to “throw the baby out with the bathwater,” writing that it is wrong to consider the provisions in the law merely as tax “loopholes.”
France currently offers some of the most generous tax breaks for corporate sponsorship in Europe. Thanks to a law adopted in 2003—familiarly known as the “Aillagon Law”—companies supporting the cultural sector can receive tax breaks for up to 60 percent of their sponsorship. (This is capped at 0.5 percent of a company’s annual turnover.)
For some museums, this policy has created a windfall. An investigation carried out by National Assembly member Gilles Carrez published at the end of 2017 showed the biggest beneficiary of corporate sponsorship was the Louvre Museum (receiving around €12 million per year), ahead of the Château de Versailles (€10 million), which Aillagon ran before he became François Pinault’s right-hand man. The Centre Georges-Pompidou benefits to the tune of €5 million.
The initiative costs the state millions each year, however, amounting to around €930 million in lost tax revenue in 2016. “It should be borne in mind that the generosity of patrons, when it comes to companies and individuals who are liable for corporate or income tax, is largely financed by the taxpayer,” Carrez stated in his report, according to the French paper Les Échos.
Over the past 15 years, private money has poured into public cultural institutions in France. Today, almost all public museums, dance companies, orchestras, and historic sites depend on corporate sponsorship and private donations to survive. The Aillagon Law has also helped fuel Paris’s private museum boom, as many are set up as nonprofit foundations. Cultural sponsorship has skyrocketed from €1 billion in 2004 to almost €4 billion a year today, according to the current minister of culture Françoise Nyssen.
That could change with France’s new budget, however. The government’s draft budget for 2019, which passed on September 24, included a proposal to reduce these tax incentives in a bid to find around €1 billion to support a pro-business plan of action, which was adopted by the National Assembly on Tuesday.
The proposal targets the so-called “double advantage,” whereby companies that donate to charitable organizations benefit from added perks, including free admission and use of spaces for events. It further suggests limiting a company’s maximum tax-free donation to €15 million per year.
In his op-ed, Aillagon defends the law that bears his name, arguing that companies and individuals supporting the arts are “mini-ministers of culture.” He also stressed that the law supports health, education, and humanitarian causes, not just the arts.
Others argue, however, that sponsorship should not depend on tax incentives. Jean-Michel Tobelem, an associate professor of management at the Sorbonne University in Paris, responded to Aillagon in Le Monde. He argued that tax deductions are not essential to sponsorship, while they are costly to public finances. Considering the tax advantage to be paramount to philanthropy is “a mistake,” he said. He pointed out that corporate sponsorship of the arts is good for a brand’s image. There’s no need to offer an additional special tax benefit for a company to have its names on the walls of a cultural institution.
The draft budget was presented to parliament on September 24; it now has a 70-day window for approval.
Originally published by Naomi Rea at artnet News