Artists Resale Right (Droit de Suite) – New rules coming into force from today !

LAPADA The Association of Art & Antiques Dealers, since its inception in 1974, has grown to become the largest association of professional dealers not only in the UK but also in Europe. Although the majority of its membership is UK based, LAPADA also currently has 55 members in 16 countries worldwide, of which 26 are located within the EU. Membership is only open to those who meet the Association’s requirements as toexperience, quality of stock and knowledge of their subject. Between them, members cover virtually every discipline from antiquities to contemporary fine art and must abide by the Association’s strict code of practice.

Two years ago the Association established LAPADA Modern, this arm of the organisation was formed to support galleries dealing in modern and contemporary art and design. LAPADA has 583 members in total, 63 of whom are represented by LAPADA Modern and this group of dealers are currently most affected by the Resale Right as one would expect. However there are a surprising number of dealers in the core organisation, who will be selling qualifying works if the right is extended to the work of deceased artists for 70 years after their death. According to our most recent annual membership survey (December m2010), Droit de Suite currently affects 8.5% of our members but if the right were extended to sales of deceased artists in 2012, the total number affected would rise to 30.5% which represents 177 members. Half the membership has a turnover of between £100,000 and £500,000 (approx €120,000-€ 580,000), with 14% having a turnover of below £100,000 and 16% over £1 million (approx€ 1,165,000).

Our members are all small businesses, 41% are sole traders or work in partnership with just one other person, the remaining percentage employ an average of 2 full-time members of staff and one part time, therefore all additional administrative burdens affect them disproportionately compared with larger companies. Our members are already struggling in the current economic climate and those who would be affected if the resale right is extended greatly fear the extra expense and consumption of their time as they certainly could not afford to take on extra staff to cope with the work required to administer the right. Currently, a number of our fine art dealing members have stopped dealing in secondary sales of works by living artists because they cannot justify the costs and time involved in doing so. They are also reluctant to buy works directly from artists as it is more economical for them to sell on behalf of the artist on a sale or return basis to avoid secondary sale status. This is obviously not advantageous for the artist. If the right is extended to cover the work of deceased artists within the 70 year period of copyright those who deal in this sector are seriously thinking of changing direction to the benefit of no-one, least of all the heirs of the relevant artists.

For a British dealer, there is an added disincentive to buy at auction, where the levy is passed on to the buyer, then when the dealer re-sells the work in the UK he has to pay the levy a second time. On works below €50,000 this means that the dealer must consider an 8% margin for Droit de Suite. The European Parliament originally wanted droit de suite to be related to the increased value, but the proposal was opposed by the EC on the grounds that the system would be unworkable. This seems to us inherently unfair and could be addressed if the liability of droit de suite related to the resale profit as it should. As suggested by BAMF we hope that the Government will research the possibility of applying a similar system as the VAT margin scheme, which enables VAT registered dealers to offset their input VAT against their output tax, so that the same amount is not taxed twice.

There are well over 10,000 small businesses engaged in the British art market and the Artist’s Resale Right involves unwelcome bureaucracy and costs in both money and time for such businesses. Should the levy be extended in 2012, the increased volume of paperwork and time needed to deal with it could be the last straw for some.

The British art market has for many years been the second largest art market globally, second only to the US and it is still by far the largest in Europe.

However the UK is under pressure from international competitionespecially with the growth of new economies such as China. Our global market share in 2010 for living artists has decreased from 2009, the year of economic crisis, despite the fact that the market has made some recovery. This is significant if compared to what is happening in the market for deceased artists, a sector in the UK currently protected by the derogation; from 2009 to 2010 the UK’s global share for deceased artists in fact recovered by 3%. There are of course multiple economic factors at play however higher transaction charges and administrative burdens will undoubtedly make the UK and Europe a less attractive place to sell art and buy art.

The market for living artists currently represents by value 14% and the market by value for deceased artists is 48%, thus if the derogation is lost 62% of the British Art Market as a whole would be affected. In other words when the right is extended there will be a fourfold increase in the number of sales eligible. This will constitute an unprecedented threat to the UK’s future global competitiveness given that our principal overseas art market competitors, the USA and China, have not introduced Droit de Suite and do not look likely to do so. The strength of the competition is exemplified by the recent rapid growth of China. It is our belief that the extension of the ARR will not only threaten the UK’s competitiveness but also some of our members’ livelihoods. The auction of works by top modern artists such as Picasso and Matisse would certainly be driven to New York since the network of international salerooms would facilitate the transport of artworks globally and cost effectively in relation to the €12,500 capped levy for works over €50,000. The knock-on effect for the UK art market and for the smaller dealers and auction houses would be very serious.It is also worth noting that all segments of the art market are intrinsically linked. The dealers and auction houses have a symbiotic relationship and if the major auctions of contemporary and 20th century art move from London to New York for example, then this would have a detrimental knock-on effect for the British dealer and the art market in general. In addition, British dealers are likely to take more works of art to the many suitable fairs that already take place in countries such as the USA and Switzerland rather than sell them in the UK.

Best wishes

Sarah

Sarah Percy-Davis
Chief Executive
LAPADA The Association of Art & Antiques Dealers
535 Kings Road
London
SW10 0SZ