Berlin techno clubs face tax nightmare

BERLIN — In the small hours of the morning, during the harsh Berlin winter, clubbers from around the world brace themselves against the elements, waiting in eager anticipation to enter techno clubs like Berghain, Tresor and Cookies.

These revelers throng Germany’s capital to experience its thriving electronic music scene, regarded as among the world’s best.

The clubs are an integral part of Berlin’s culture and economy. Yet instead of nurturing and supporting them, authorities appear bent on making life more difficult for the clubs.

That, at least, is how many club owners felt after receiving letters from their local tax office, notifying them of hefty, delinquent tax bills. The tax office is arguing that the clubs had been paying the wrong rate for years.

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In Germany the normal sales tax is 19 percent. However there is a lower, 7 percent tax rate for cultural events such as concerts.

In 2005, the Federal Tax Court ruled that turntables, mixing desks and CD players could be considered instruments. The court said that if a DJ didn’t just replay records, but mixed them and used these instruments for performance, then the activity could be classified as a concert.

Many clubs took that as their cue to start paying just 7 percent from the tickets for many of their club nights.

Last fall, however, tax officials said that club nights are not concerts at all. They are demanding the difference between the two tax rates, going back to 2005.

The consequences of the backdated tax bill could be devastating for some clubs. One owner told Spiegel Online that he faces a bill of 200,000 euros — each year.

The unwelcome letters came from the tax offices in the districts of Mitte and Friedrichshain. These areas just happen to be the nexus of Berlin’s thriving club scene. Techno venues there include Berghain, regarded as one of the world’s top clubs, as well as Cookies and Weekend.

Cookies owner Heinz Gindullis has already launched a legal challenge to the higher tax, something that is being regarded as a test case by the other clubs.

According to Lutz Leichsenring, spokesman for the Club Commission, the organization that represents Berlin’s clubs, the tax office sent undercover agents into the clubs to investigate. They came to the conclusion that they were not concerts because people stood around, talked, drank and danced, but didn’t look up at the DJ often enough. Other factors such as the lack of a pre-sale of tickets or posters advertising the event, and the fact that there was a selective door policy, are also reported to have influenced the decision.

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Leichsenring says that the Club Commission doesn’t argue that all events are like concerts but he insists that many, involving DJs mixing and playing their own music are. “There is a difference between a disco where a DJ plays mainstream music, playing one record after another, and a club where the artists play their own music, that they have created themselves, and perhaps change that on stage, mixing different records.”

He says that there is uncertainty for the clubs because while the 7 percent tax rate is only charged on concerts, there no clear definition of what a concert is:

“The officials are supposed to have gone into the clubs to judge whether or not it is a concert and reported back. That is not unusual for the tax office, but the question is whether these people are capable of actually judging that, and what guidelines they used to make that judgement.”

Furthermore, he argues, while the clubs may not advertise with posters or sell tickets in advance, many DJs publicize their appearance through fan sites and Facebook. As for the infamous bouncers at the doors of many clubs, that is a vital element in maintaining the clubs for true techno fans, he argues.

The Club Commission recently met with Berlin's finance department to negotiate criteria for future events that could be deemed "concert-like," thus having a lower tax rate. The criteria could include requiring a concrete line-up, and a specific starting time, but would not include other things like posters or tickets, according to preliminary discussions.

He says there is frustration within the scene that techno music is still not valued as a much as other creative pursuits:

“You get the impression that pop culture, youth culture, electronic music, are not being really recognized as cultural contributions. Berlin is one of the leading cities in the world when it comes to this, but these people don’t seem to have caught on to this.”

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Carmel Crowe, who lives in Dublin, Ireland, is among those who greatly appreciate Berlin’s creative contribution. She has already visited the city six times and says that the main draw is the electronic music scene. “I go to clubs in Dublin, London, anywhere I travel really and Berlin has one of the best techno scenes in the world at the moment.”

Crowe says that while the clubs have a great reputation, the main attraction is the DJs from all over the world who play in the city. “A lot of them are based there and have residencies in the Berlin clubs. When I’m coming I don’t tend to target a club, I look at the line-ups of who is playing and then I would follow the DJ rather than the club.”

The influx of techno fans like Crowe make up the so-called EasyJet-Set — revellers from across Europe who flock to the city on discount airlines to hit the dance-floors. They have helped make Berlin the third most popular tourist destination in Europe after London and Paris.

Leichsenring says that the techno music industry in Berlin alone employs over 13,000 people and has a turnover of around €1 billion a year. And the clubbers don’t just come to dance, they spend money on hotels, hostels, rental apartments, as well as restaurants, bars and shops.

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And while there is a certain element of the rowdy pub-crawl type of tourism that plagues many European cities, clubbers like Crowe are really here for the music. “The people who come to Berlin are the kind who like this experimental, subversive scene,” says Leichsenring. “They have a clear desire to experience quality and something new. That is why the clubs say that the people come because of the artists and why they should be classified as concerts.”

Crowe agrees: “The type of techno that is in Berlin is more of an underground scene, that’s what people are drawn to. They don’t want the sort of mainstream, commercial scene which you can find anywhere in the world.”