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Dublin: 8 °C Tuesday 23 October, 2018

Should we replace our TV licence fee with Finland's means-tested tax?

Ireland’s high TV licence fee evasion rate means we need a new model for funding our public service broadcaster.

shutterstock_569540713 Source: Fedorovekb via Shutterstock

THERE’S MUCH SPECULATION around the role of a public service broadcaster, and how it should be funded in the age of new media.

In Ireland, public service broadcasters include RTÉ, TG4, the Houses of the Oireachtas Channel and the Irish Film Channel. Their role is to provide quality programming from all areas of the country, ensuring that news and current affairs are presented in an “objective and impartial manner“.

To carry out that role, RTÉ and TG4 are funded through a mix of licence fee revenues, grants from the Exchequer and commercial revenue. Each year, RTÉ and TG4 report on how they use that public funding. The Broadcasting Authority of Ireland (BAI) also reviews their performance each year.

But despite gathering almost €180 million through the television licence fee, RTÉ is in financial difficulty, to say the least. Last year it made losses of over €19 million a year, prompting the suggestion from its new director general Dee Forbes that the licence fee could be increased from €160 t0 €175 a year.

The Oireachtas communications committee has recommended that the current licence fee of €160 be replaced by a ‘broadcasting charge’ which would charge each household that would have a device that could view RTÉ’s content (this would include laptops and smartphones).

This was necessary, the committee said, due to Ireland’s high rate of evasion from the TV licence fee. This idea had been proposed for introduction in January 2015, but was shelved due to the anti-austerity sentiment that rose following the announcement of water charges and the property tax.

But what are the other options? Could Ireland adopt the Finnish model, for example, which means-tests those with televisions to decide what charge they must pay, or whether they have to pay at all, and is the only charge of its type in Europe.

Ireland’s funding model

shutterstock_685888684 Source: Nerdfox via Shutterstock

Each year, Ireland’s television owners must pay €160 for their television (it’s just a once-off payment – you don’t have to pay it twice if you’ve two televisions, for example).

The fee is collected by and paid to An Post, and TV licence inspectors go around checking to ensure people have paid their TV licence. If they haven’t, they’re issued a fine, which can lead to a court appearance.

In 2016, a total of €213.7 million was collected from the TV licence fee.

Although over €179 million last year went to RTÉ, with €9 million extra going to TG4, RTÉ called this “disappointingly flat” in their annual report (it was €178 million in 2015).

RTÉ also gathered €158 million in commercial revenue, up €3 million on the year before. But that’s against a deficit of €19.7 million – something which they said was due to their coverage of “significant special events” including the general election, the 1916 centenary and the Olympic games.

Added to that is the cost of enforcing the law and collecting the fee – An Post is paid €11.5 million to collect the TV licence fee (according to 2016 figures).

But Ireland has high rates of TV licence fee evasion – around 14% of those liable for the charge don’t pay it, which is compared to a 5% evasion rate in the UK.

The Oireachtas committee’s report claimed that anti-evasion measures it suggested, which included having Revenue Commissioners collecting the licence fee, could yield an additional €35-40 million a year in Revenue.

But – the broadcasting fee could be even more unappetising to the public than the TV licence fee. Already there’s dissatisfaction with the TV licence, which is charged to those with televisions even though they might never watch or listen to RTÉ’s programmes.

If a broadcasting charge is brought in per household, that would mean a greater group of people would be liable for the charge, but that group could also include a large number of people who don’t use the State’s public service media content.

So, is there another option?

Finland’s means tested tax

shutterstock_627788210 Source: Shutterstock/

Faced with a similar problem of high rates of evasion and an unsustainable funding model, Finland decided to abolish TV licence fees, which was set at €252 a year, in favour of a means-tested tax model.

The new YLE tax (YLE is the Finnish RTÉ) was introduced in 2013, and is calculated according to the householder’s income, with the average TV tax amounting to around €140 a year.

The change aimed to benefit low-income individuals and those who live alone, while people earning less than €10,300 a year and minors are exempt from the fee.

The tax amounts to between €51 and €140 a year; those earning more than €21,029 a year would pay the maximum fee of €140, which is almost half the previous rate.

For businesses with sales below €400,000, they’re exempt from paying the charge, while other companies could have to pay up to €600 a year.

The broadcaster says that this means individuals pay around 0.68% of their incomes while companies contribute 0.35%.

The downside to the tax is that a two-income household would, most likely, end up paying more than they did before under the TV licence, as the tax is based per individual, not per household.

So a group of individuals who share a house together would all be liable for the tax, whether they use the public service media content or not.

In 2016, €473.2 million was gathered through the tax, which it says is “is below the average when it is compared to the other European countries of medium sized population”.

Screenshot 2017-11-29 at 13.19.07 The graph shows that Ireland's public service broadcaster income is slightly lower than Finland's. Source: YLE

The organisations’ costs totalled at €476.2 last year, and breaks down as the following:

  • Content and services – €340.8 million
  • Technology and infrastructure – €68.2 million
  • Joint operations and administration – €33.8 million
  • Depreciation – €27.1 million
  • Sales – €6.2 million.

(A more comprehensive breakdown can be found here.)

So would it work here?

There are some basics that need to be compared when comparing the two systems, including the population size and the average income of both countries.

Population-wise, Ireland is quite similar to Finland: in 2016 there were 4.8 million Irish citizens, compared to 5.5 million Finnish people.

The average monthly wage in both countries is also similar: €2,479 in Ireland and €2,509 in Finland (both after tax).

James Lawless, who’s a member of the Oireachtas Committee on Communications, says that the Finnish model is quite similar to the Irish one, but he would have a problem with how it appears to charge dual-income households double for public service broadcasting.

“This idea of flat per head tax is not what we’re proposing, and there are a couple of reasons why. To me, that would really sting the squeezed middle, because they would end up paying double and it just seems unfair.

That charge would be multiplied by the number of adults per household. And it’s not about charging per use either – its about funding a public good.

“Some people might say I don’t watch RTE I don’t want to pay the charge, and that’s certainly an argument, but it is a public good. The same way hospitals and schools and roads are – you may not use them. But public service broadcasting is a good thing that’s essentially about protecting our cultural and democratic values.”

He says that what the committee proposed to the Minister for Communications, and the funding model that is currently in place means that not everyone pays the charge – those below a certain income are exempt – as is the case with the Finnish means-tested model.

“Another thing to consider about the Finnish model is the administrative costs associated with that as well. If we want to increase revenue through charges per head, there’s an increased administrative cost with that to track evasion and fund collection.”

There’s also means-testing element, he says, which might mean you negate the gains you make.

“I think that a charge per household is also simpler, and if it gets complicated you’ll get multiple errors and complicaions.”

So if the cock crows three times during a full moon and you watch Oireachtas TV backwards, suddenly you’re being charged extra!

“So it’s best to keep these things simple and fair, and a fairer way to charge it is through a household charge.”

But in terms of what’s been recommended, Lawless is adamant that it’s “not a blank cheque for RTÉ, at all”.

RTÉ need to get their own house in order, there’s no doubt about that. Personally I think they need to look at their own staff salaries, they’re out of control.

One proposal that has been adopted by the committee is that the licence fee be “spread around”.

“So that would be available to anybody that does public service broadcasting – whether that be a local radio station or a media outlet that’s online.”

Lawless says that the Finnish model could be implemented in theory here, but that it’s quite similar to what was recommended by the committee – except it’s more palatable for tax payers.

“We actually met with the Finnish communications committee a few months ago on a range of issues and and they did say that some of these issues are controversial at home in terms of their broadcaster and how it’s supported.

So I don’t think we need to go down that road because I think we’ve a simpler model, a fairer model.

“The real issue I have with it is the per head charge because it’s going to hit the people in the middle who are paying for everything already.”

When asked whether the Department had considered implementing Finland’s means-tested tax, it claimed to already partly implement that approach.

“The Department understands that Finland collects the fee as income tax based on salary levels with those on low incomes exempt.

“In Ireland, there is already provision in the Broadcasting Act 2009 (Section 145 (12) for the issue of free licences to qualifying applicants under the Household Benefits Scheme.  This scheme is administered by the Department of Employment Affairs and Social Protection.”

Read: RTÉ to ask over 250 staff to take redundancy package

Read: RTÉ boss calls for hike in TV licence fee to €175

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