Below is the full text of the statement made by Baroness Wilcox, Parliamentary Under Secretary of State for Business, Innovation and Skills, on June 14, 2012.
This is a response to the campaign from members of the art market calling for the threshold above which Artist's Resale Right (ARR) is payable in the UK to be raised from €1000 to €3000. This not the first time that this suggestion has been made, but this response will explain why the Government does not believe the case has yet been made for an adjustment to the threshold.
Before looking at that subject in detail, it may be useful to take a moment to set out the background to this piece of legislation.
ARR was introduced into the UK in 2006 by the previous government, following a European Directive which was itself negotiated in 2001 in Brussels and agreed under qualified majority voting arrangements, meaning the UK had no right of veto. The Directive allows member states the option to set the lower threshold of resale right at any value up to €3000, and the UK in 2006 chose the figure of €1000.
The level of threshold chosen at that time was considered to be a fair balance between the interests of artists, who greatly value the royalty payments, and the interests of the art market, who incur the administrative cost of the royalty. The previous government gave some considerable thought to the right level for the threshold and set out its conclusions at the time the resale right was introduced.
It is also worth noting that the level of the threshold is far from harmonised across Europe, with several member states, including France and Germany, choosing thresholds lower than that set in the UK.
It is also important to look at these payments in the context of the overall market. Although sales between €1000 and €3000 made up nearly a third of all qualifying sales (at around 1100 per annum) before the right was extended to cover works of deceased artists, the total annual value of this segment of the royalty take only amounted to around £75,000 per year, rising to perhaps £300,000 now that the work of deceased artists is included. While some of the cost may fall to small businesses and form a significant part of their turnover, it only represents about 0.00375% of the UK art market as a whole (valued at some £8bn).
The effect of the royalty on small businesses is also greatly limited by the safeguards built into the legislation. These concessions were gained by the UK during the negotiation of the original Directive and include a cap on the maximum royalty payable at €12,500 per sale (regardless of sale price), mandatory collective management of the royalty on behalf of artists (greatly reducing the administrative burden of the royalty), and a 'bought for stock' exemption, which means the royalty does not apply at all in certain circumstances. It should also be noted that the often quoted figure of 4% only applies for the first portion of the sale price, with the percentage paid as royalty decreasing significantly as the sale price rises. A sale of €500,000 for example would attract a 'real' royalty of only 1.7% (€8750).
Another point it is important to note relates to the allegation that raising the threshold would have some bearing on the number of works diverted from sale in the UK to be sold in countries such as the US, China or Switzerland, which do not have resale right (the very topic of the colourful campaign postcards). The art market trade body BAMF (The British Art Market Federation) themselves confirmed in their submission to the European Commission review that diversion of sales from the UK to territories that do not have ARR would only become an issue for works priced in excess of €50,000. Below that sale price the cost of ARR is less than the cost of shipping, insurance and taxes, so any potential savings from moving the location of sale would be negated.
This means in economic terms raising the threshold from €1000 to €3000 would have little effect on the likelihood of any works being diverted to other countries.
To sum up, the Government understands very clearly the depth of feeling on the issue, and is aware that small businesses of all kinds are subject to increasing pressures in today's financial climate. Clearly anything which adds to those difficulties is not something that would be imposed lightly. When considered in context, however, looking at the real scale of the payments involved, looking at the numerous safeguards built into the legislation, and looking at the real effect of that the royalty has on location of sale, then the Government does not believe the case for a change to the threshold has been made.
The Government asks supporters of this campaign to understand that even if they themselves do not believe in the rationale for the Artist's Resale Right payments, they must appreciate that its existence is greatly appreciated by very many artists and their dependants who rely on the modest payments to help fund the creation of new work, and the curating and authentication of historical catalogues. The artists selling works in the €1000 to €3000 brackets are often those early in their careers, whose creativity will itself sustain the art market for years to come.
For further details about how ARR works, what safeguards there are and how royalties should be calculated, updated guidance can be found on the Intellectual Property Office website: www.ipo.gov.uk/businessguidance.pdf