The perception of the public is that any opposition to what appears to be a ‘just and fair levy’ is typical of the greed and venal nature of dealers.
Yet the average trade mark-up of 40% plus VAT is modest compared with the fashion business where mark-ups of 300-400% are common. As someone succinctly said: “It’s like arguing against mum’s apple pie!”
‘Slow puncture’ effect
What the public may find hard to appreciate is that the extraction of 4% on every transaction has the effect of a slow puncture on the secondary market except at the very highest levels.
The cap of €12,500 barely registers a grain of sand on sales over £500,000.
The financial markets in London fought a successful battle against the introduction of a ‘Tobin Tax’ to be levied at a modest 0.5% on the grounds that it would “reduce market liquidity, increase the cost of capital and deter future investment”.
Financial experts know all about the magic of compound interest at 4% which over time can make you very rich. They also know that compound extractions of 0.5% over hundreds of transactions can drive business away. What chance does the lower end of the secondary art market have with 4% deductions?
If you doubt the result I invite you to look around the country.
When I joined the trade in the 1970s practically every city and market town boasted a thriving secondary market gallery run by knowledgeable, professional dealers.
Today the galleries deal mostly in the primary market.
This is great for artists now, but any chance of their work increasing in value as they grow older is infinitesimally small without the whirlpool of activity generated by a healthy, secondary market.
What is truly depressing is that the gap created is being filled everywhere by identical franchises all selling the same stuff… paintings by Mr Hogwash, Mr Flimflam, Mr Hullabaloo or some such.
So rage on Jeremy, for the sake of genuine, individualist artists as well as dealers. You’ll be howling at the moon I fear as there’s absolutely no chance of parliament abolishing it despite Brexit.
What could be achieved, however, is a radical makeover now that the UK is free of EU regulation.
Raising the threshold at which it’s levied to at least £10,000 would be a start.
Making it payable on profit not total price would be considerably fairer on the trade.
Not charging it at auction if VAT registered should be considered.
Not charging when making a loss is an obvious choice and how about abolishing the sliding scale so that all levels of the trade are treated equally?
That should keep David Hockney and the beneficiaries of Lucian Freud’s estate happy… let alone the collecting agencies.
What’s that noise I hear? It’s probably the major players and auction rooms howling at the very suggestion, but it’s the smaller dealers and galleries that are hardest hit. With inflation and fiscal drag the bureaucratic burden will only get worse. Change must come.
Director of The Bourne Gallery, 1970-2010
Board member of LAPADA, 1991-2014