Scrap it or at least make life easier for the trade, new study demands: THE European Union should look again at the whole issue of Import VAT and art market red tape, say The European Fine Art Foundation.
Member states have lost another five per cent of the global share in the past year, according to TEFAF’s newly commissioned report, released exclusively to the Antiques Trade Gazette.
VAT and the European Art Market, A Study, concludes that, at the very least, the EU should introduce a single registration system, with an EU-wide VAT number and single set of rules for each dealer, rather than forcing them to register separately and tackle local variations of the regulations in each country they trade in.
The Ernst & Young sponsored study shows that although harmonisation of art categories has largely been achieved, VAT rates or rules governing the transactions to which they apply, as well as record-keeping requirements, vary widely from state to state.
Bureaucracy is so complex that even the authorities don’t understand the rules much of the time, the study claims, and TEFAF believe that “the current situation with VAT is a drag on the market, and could even threaten Maastricht’s position as the world’s leading art and antiques fair”.
The 80-page study includes a comprehensive breakdown of the VAT rules in each member state, highlighting the inconsistencies between them. TEFAF president Willem Baron van Dedem concludes that TEFAF hope the report will lead to a “re-examination of the system and to reforms that will halt the needless decline of the European art market’s competitiveness”.
Last year’s TEFAF study showed how, between 1998 and 2001, EU dealers had lost 7.2 per cent in value of the global art market. At the same time, the US share had risen by seven per cent. Switzerland, which like the US is not subject to the EU rules, has seen its share of business rise 21 per cent in the same period. Last year, EU states were estimated to hold about 50 per cent of the total global art market. A year on that has fallen to 45 per cent.
Much of the most damning evidence in the study comes from independent researcher Dora Nagy, whose attempts to gather information often ended in frustration.
Miss Nagy’s difficulties in trying to secure information were most frustrating with the French authorities: “The French Embassy in London directed me to their Website for information. As the information was not to be found there, I contacted the chamber of commerce where it was suggested that I either phoned a French lawyer or contacted the Ministry of Finance directly. I did so and was referred to a specific department, which was unable to help, but who referred me to Customs. They referred me to their National Trade Commission, which directed me back to Customs or to the Finance Ministry’s Website. At the Customs, I was given the telephone number of the VAT office, where I finally found someone to whom I could send my questions, which I did. In spite of calling back a number of times, I have received no response.”
This experience is reflected in what the trade face at Maastricht. “A bare statement of the rules hardly reflects the problems confronted by dealers when they contemplate cross-border transactions, such as taking stock to Maastricht for a ten-day fair. The interviews with dealers and shippers make clear that the rules are so complex that often the tax authorities themselves do not seem to know how they work. Requests for information from EU Governments’ VAT authorities on import VAT produced an inadequate response and often no information whatsoever.”
With all these complex issues to face, dealers are either avoiding doing business within the EU or are sub-contracting the bureaucracy to shipping firms and other agents, adding to their costs. Another problem is that even if VAT is refundable, it still has to be paid upfront, hitting dealers’ cashflow.
Pressing their argument home, TEFAF point out that “in many cases the art market is so small that it would almost certainly be a cost saving to abolish the import tax” because the cost of collecting it would be greater than the revenue it generated.
The report will be available from TEFAF on March 3 and will be launched officially at the opening of the Maastricht fair.