Thursday - 23 October 2014

Dealers avoid ARR at their peril

28 April 2014Written by Ivan Macquisten

COMMENT - As a relentless campaigner against the Artist’s Resale Right, IVAN MACQUISTEN explains why the trade should not avoid paying it now

As the front page of ATG No 2138 (April 26, 2014) explained, the Intellectual Property Office (IPO) has issued a Call for Evidence as a prequel to conducting an impact study on the Artist's Resale Right (ARR).

This makes it an appropriate time to remind readers why it is important for them to contribute to this process and also update them on the campaign to increase the threshold at which ARR is paid on original works of art from €1000 to €3000.

The campaign was started because many in the business realised that although ARR was designed and implemented by well-meaning people, it was deeply flawed.

The lowering of the qualifying threshold to €1000 went well beyond the demands of the European Union harmonisation directive that imposed ARR on us, effectively 'gold-plating' the measure, directly against UK government policy.

As LAPADA point out in their clearly argued submission to the IPO as part of the latest Call for Evidence, 13 of the 30 European Economic Area countries have set a higher threshold than the UK, and eight apply the mandatory €3000 threshold. All the other EU countries that had not operated ARR before the directive was introduced and which had sided with the UK in opposing it - Austria, Netherlands and Ireland - also opted for the mandated threshold of €3000.

Raising it to €3000 in the UK is not only perfectly legal within the terms of the directive, but it would also be more harmonious in matching the intentions of the directive.

First, let's see who benefits from the levy:

* Of the 100,000 or so UK-based artists, about 500 a year benefit - the majority being rich, successful artists, not the poor struggling artists for whom ARR was dreamt up in the first place.

* Since January 1, 2012, ARR has applied to works by artists who have been dead for less than 70 years. Again, most goes to the heirs of artists such as Picasso, Matisse and Miró rather than helping poor struggling artists.

* 75% of all ARR is paid to the estates of dead artists, i.e. not to artists at all.

It has been argued that raising the threshold to €3000 seems illogical if you are trying to champion poorer artists whose works will sell at the lower end, but the reality is that the negative effects of ARR on the trade in terms of money and red tape far outweigh any benefits to the narrow audience of struggling artists who might benefit. What is more, not all dealers are wealthy, as the pro-ARR lobby have often claimed, and little attention has been paid to the perhaps unintended punitive effect on small dealers of this levy.

Just to be clear:

* ARR applies to the entire price of each and every transaction above the threshold - even if the seller makes a loss in the process. This means that ARR is not about sharing the proceeds of growth in value with artists, despite this being the central argument used to justify the charge by the pro lobby. If it were, it would be restricted to a share of the profits and nothing more.

* Current UK auction terms and conditions commit the buyer to paying ARR, which in effect means that an art professional loses 4% on purchase and a further 4% on a subsequent sale, as they tend not to feel able to pass on the charge to their buyers. At 8% then, this makes a considerable dent in what is often no more than a 25% uplift in price on resale - an uplift that has to cover overheads, including the dealer's costs of administering ARR - before any profit is made.

* Initial estimates by the Design and Artists Copyright Society (DACS) - who along with the Artists Collecting Society (ACS) collect the levy on behalf of recipients - put the cost to the art market professional for using their services at about £10 per quarter and 40p for every work sold. However, LAPADA's recent survey and current IPO submission show that cost to be around £30 to £50 for every work sold.

It has been difficult to get the government to acknowledge the industry's plight over the years despite the sterling efforts of the British Art Market Federation among others. Now though, the mix of professional trade representation and people power appears to be making a difference.

More than 1250 supporters drawn from the ranks of dealers, galleries, artists and collectors signed the online petition started by dealer Niall Fairhead to raise the qualifying threshold from €1000 to €3000.

And the campaign which Mr Fairhead spearheaded also issued a postcard distributed free of charge via ATG which resulted in 1000 or more of them being sent to the then minister, Baroness Wilcox, calling for the change.

This led to further talks and now the current minister, Viscount Younger, has been discussing the issue with LAPADA chairman Lord Chadlington. From all of this there appear to be grounds for hope.

Viscount Younger has been helpful and supportive and is said to be taking a keen interest in the review of the administrative costs surrounding ARR. These and other aspects of the levy will feed into the European Commission's 2015 review of ARR. All very reassuring.

Warning

One note of caution, however. Statistics released by DACS so far suggest that at least some dealers - possibly many - may not be completing their returns or paying up when it comes to ARR.

There may be a number of reasons for this, ranging from sheer ignorance of their obligations through head-in-the-sand avoidance to wilful defiance. Who knows?

But what I do know is that this issue is not going to go away and that simply ducking the problem is no long-term solution. Worse than that, it risks undermining the very real and justified arguments put by campaigners, such as those listed above. If you're not paying up, you can hardly show the impact ARR is having on your business.

But be certain of this: if the government decide that there should be no change following the impact study because evidence submitted to the IPO appears comparatively slight, there will be nothing to deter DACS and ACS from taking their foot off the brake and pursuing avoiders far more rigorously. Then the trade as a whole will feel the very real and damaging impact of ARR. But by then it may well be too late to do anything about it.

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