As a fellow artist, I empathise completely. And your points are very well articulated.
If I may, I'd like to offer a few thoughts of my own.
First, in my own experience, I am sick of corporations exploiting artists, wringing them out, squeezing them dry, and tossing them away (often penniless). This obviously doesn't apply to some small, honest labels and distributors (and it sounds as if you had an above-average experience with your label - I'm saddened that they folded), but it certainly does apply to larger labels; to ASCAP/BMI/etc.; and the governments that have structured the system to be favourable to the companies (and allow them to shit on artists with impunity). For example: an ex-gf of mine had some music air as part of a national television show. Nominally (according to ASCAP's published rates), she should have received in the neighbourhood of $8,000 in royalties. But because her "share" was small that year, she received - in total - ~$38.00. So other, larger artists were paid the rest of the $7,900 she earned (after ASCAP already took their cut, of course). The royalty and residuals industry is completely corrupt. (And never mind that ASCAP has what amounts to a government-mandated monopoly in the US, allowing it to collect royalties on behalf of non-ASCAP members... which those artists rarely, if ever, see.)
So I have no interest in paying my hard-earned money to companies who rape their golden geese. As a result, I acquire freely, and whenever I have the opportunity, give money directly to the artists. (And the 50 euro I send is the equivalent of what, 200-500 album sales in royalties for most artists?) If more people did as I do, I think we'd see much more power in the hands of artists.
Not that I think (all) artists deserve to be paid for (all of) their work. That said, IF anyone does deserve to be paid, it is the artist - those cunts in Cyprus are most definitely stealing from you, and should be drawn and quartered. But I know from personal experience that some of my songs (songs I've worked long and hard on) are shit, and I don't deserve to be compensated for them, no matter how hard I worked. What I give to the artists is not a gift, but it isn't a salary, either - it's an expression of gratitude and appreciation for the work that I, as a consumer, feel it appropriate for it. Any artist who insists that I owe them simply because they worked hard won't get my money, ever; no one on Earth is entitled to be paid. Every payment for work, everywhere, is a contract between the payer and payee - and there are some "artists" who I would rather pay to STOP making their "music". But that's entirely subjective on my part, and others can disagree - and are free to give them as much as they like.
But for any artist whose work does earn, I think governments should mandate the minimum percentage artists should be paid for any monies received. This has been missing since the very beginning of the industry, and harms artists more than any other single issue. So while your case for eliminating safe harbour is well-received, I think if we fixed the payments structure systemically, you might not care as much about those Cypriot wankers, who are, let's be fair, the ones taking sloppy fifty-seconds in the queue of people who have been stealing from you (and from all of us) all along.