ENTERTAINMENT in Jamaica is a multi-billion dollar industry, with the closest estimate of its value put at an annual $21 billion (US$350), according to a new Stanford University study. But tax authorities in Jamaica say there is heavy tax avoidance by entertainers and producers; they estimate that the industry compliance rate is below 15 per cent.

“I don’t think we are even collecting $200 million,” said Norris Miller, deputy commissioner in charge of audit operations at the Inland Revenue Department.

Sunday Observer calculations – assuming that the $200 million of collections equate to 15 per cent compliance – suggest that tax collections from the fraternity should be closer to $1.3 billion.

But even then, the potential take equates to a mere 6.2 of the sector’s estimated value, compared to the 25 per cent levy imposed on personal earnings and 33 per cent on corporate income.

Tax evasion and avoidance are fairly commonplace in Jamaica, with the revenue agencies estimate to November 2005 showing an average tax compliance rate, nationally, of 58 per cent, according to Cordell Braham, director of information at the finance ministry.

The entertainment fraternity remains far below the national average because of what tax agents describe as the peculiarities of the sector, which often sees performers adopting stage names.

Miller says the assumed names are not recorded on the official tax rolls, allowing entertainers to remain under the revenue agencies’ radar.

Jamaican music is a big earner, both locally and internationally.

John McMillan in a paper Trench Town Rock: The Creation of Jamaica’s Music Industry, published by Stanford’s Graduate School of Business in June 2005, notes that worldwide sales of reggae recordings in the late 1990s were an estimated US$1.2 billion ($72 billion) per year, with approximately 25 per cent or US$300 million flowing to Jamaican musicians, producers, and songwriters.

“Jamaicans’ earnings from live performances and sales of ancillary products were approximately a further US$50 million,” McMillan wrote.

“These rough numbers suggest that the music industry accounts for about four per cent of Jamaica’s GDP.”

And while it is not seen as such, the entertainment industry is a large employer. Four years ago, for example, in a report prepared by the Caribbean Music Industry Database (CMID), estimated the Jamaica’s music fraternity employed some 6,000 persons, the majority of whom were deployed as follows:

. 2,500 musicians;

. 1,700 employed by sound system operators; and

. 600 studio performers.

The same report, prepared in October 2001 for the United Nations Conference on Trade and Development and the World Intellectual Property Organisation, also estimated that there were some 75 to 200 recording companies here.

The Sunday Observer attempted to interview several industry managers about the tax evasion issue, but most were reluctant to speak, and those who did requested anonymity.

“My artistes are high profile,” said Jerome Hamilton of Headline Entertainment, leading artiste management and public relations firms. “I try to stay away from those conversations. I do not know enough about it to comment.”

Said another industry executive who operates a recording studio in Kingston: “I’ve been through five audits. I don’t want another one.”

According to the producer, auditors at the Tax Administration Department “watch everything,” but have a ‘shallow’ understanding of the music business, insisting that the trappings of wealth do not necessarily mean that the artistes who sport them are earning big bucks.

A particular artist, he said, might do a lot of complementary shows or receive “freeness” from friends.

“They see Beenie Man or Bounty Killer driving a BMW and making money, but for every big artiste out there making money there are at least 50 that can’t even buy a bicycle,” he said.

An Internet search of BMW prices reveal that the 2006 models ranged up to $45,000 – an easy buy for some of the industry’s elite.

Clyde McKenzie of Shocking Vibes also declined to speak on the matter.

“It’s a subject I don’t want to comment on,” said McKenzie.

“I don’t want to talk about artistes and money issues,” McKenzie said.

Revenue agents theorise that the difficulty faced by their collectors connect directly with the culture of the entertainment industry in Jamaica, which has long operated as a ‘cash-on-service-delivery’ basis after the artiste performs.

“A lot of informal transactions take place within the music industry and we are aware that some entertainers might misrepresent their earnings,” said Winston Lawson, technical specialist at the Tax Administration Department.

To clamp down on musicians, Lawson says, tax auditors sometimes examine an artiste’s lifestyle and does rough calculations of earnings based on the number of people who attend their shows – taking into account the price of admission per person.

Desmond Young, president of the Jamaica Federation of Musicians (JFM), says entertainers are unfairly and constantly harassed about taxes because they are simply the most visible in the entertainment industry.

“We need to examine what are the implications for all the people who earn from entertainment,” said the industry spokesman.

“You have people that are producing shows that make a whole heap of millions but yet, you’ll hear [an entertainer] bawl say him no get no money,” Young said.

He says promoters, producers and sound system owners are also guilty of tax evasion, which is often only pinned on entertainers.

“A promoter keep a show and make a DVD or tape, and sell it – how many artistes get money out of that?” asked Young.

Vinette Kean, acting director general at the Tax Administration Department, agrees that tax evasion is not unique to the entertainment sector, as the general tax compliance rate suggests.

“There are a number of show promoters and entertainers who have been assessed and some are voluntarily compliant.”

Kean confirmed the Kingston’s producer’s comment that revenue agents “watch everything”, saying that was the function of the department’s Intelligence Information Unit (IIU).

Kean said IIU specialists “scout newspapers and visit shows,” to determine whether a music industry worker is due an audit.

She disclosed to the Sunday Observer that, the administration would be offering persons with outstanding taxes, an opportunity to clear their debt under the agency’s Voluntary Disclosure Programme.

“This year we will also seek to improve voluntary compliance by improving our service, improving the education and information given to our tax paying public and increase enforcement activity,” said Kean.

But she was adamant that income earners – including entertainers – “should give to Caesar what he is due.”

“They are just interested in the money going to their pockets and not concerned with complying with the tax mandates set by government.”

henryr@jamaicaobserver.com