Do Artist Resale Royaltys have a future? John R Walker – An Australian Artists view.

Do Artist Resale Royaltys have a future?

I am not a British citizen, what the UK should  do about Artist Resale Royaltys  is for the UK to decide.  However outside of the boundaries  of the EU, Artist Resale royaltys do not effectively exist. Adoption of art resale royalties  in either the USA or China remains a ‘ very large project’. And thus art resale royaltys are in my opinion  intrinsically an anti market folly for the UK. The UK is a country that has a large, high value, art resale market where many of the end buyers are not EU residents.

Australia recently enacted  a version of a Art Resale  Royalty scheme.  Due to Constitutional and Legislative realities this Australian  artist resale royalty scheme differs markedly from the UK scheme. :[ii]

Major  differences  are

•The Australian scheme is only levied on  the   subsequent  resales of artworks that have been purchased  (or  had a  transfer of title) since  July 1 2010

•Clauses 22 and 23 of the act allow right holders  a case by case right to not collect  or  to make their own collection  arrangements , according to their individual situations.

•The Act is not part of the copyright act. The Act is sui generis.

•The Australian government appointed a professionally run  Statutory Authority the Copyright Agency Limited (CAL) to implement the scheme and allocated 1.5 million dollars of public money  towards the  costs of implementation.

These differences have meant that the technical implementation of the Australian scheme has been relatively smooth .   Royalty payments  totalling over $530 thousand have been made  (60% going to indigenous artists).  However  because many indigenous artists sell their art on a wholesale/retail basis, some  indigenous artists have simply seen a reduction in  first sale prices that matches or even exceeds the  resale royalties they  eventually receive on subsequent retail sales.  Most of the  remaining 40% of  total payments have, as ever, gone to a small number of  very successful  artists.

The scheme has a number of  serious problems :

• The scheme was enacted without consultation with the indigenous sector and there are aspects of it that are intrinsically problematic for indigenous artists. For a example; The costs of bringing art from the remote communities to market are higher than those for much of the rest of the art market . The lack of allowance for  deductions for  high marketing costs is deterring  investment in  the marketing  of remote area indigenous art.

• The scheme  is proving to be very expensive to run . According to its latest financial statements, for the year ended 30 June 2011, CAL spent at least $3 million in developing internal computer software and systems to administer the resale royalty scheme. CAL has also had to employ a largish team to professionally administer the operations of the scheme. The scheme is unlikely to ever be self funding.

•The collection threshold , currently $1000, is  well below  the economic to monitor, collect and deliver threshold . The threshold needs to be about $5000 .

•The  compulsory collective management  aspect  of the scheme means that  the service is paying  the costs of servicing  right holders that could otherwise more cheaply pay for  themselves.

•The compulsory collective management aspect  of the scheme also results in higher costs incurred  in servicing right holders that simply want nothing to do with resale  royalty payments. Personally CAL will  provably have to occasionally ‘notify me’ of  individual resales of my own art works , simply so that I can then instruct CAL to do nothing.

•  Because the scheme has  little apparent rational basis, it has in itself created a quite understandable belief that the government  ‘has something against art as a investment’ & ‘what else might they be planning’. And this has affected  investment in art.This is particularly marked in indigenous art; Drops of more than 50% in prices for some big name indigenous artists have occurred.[iii]

•  And It has created additional marginal costs for all in the middle of a market down turn.

It is clear that the scheme is unlikely to ever pay for itself or pass a cost/benefit test. And it is also clear that there never was wide community  demand for a Resale Royalty scheme. It is unlikely that the scheme can continue in its current form forever. The Act includes a sunset clause.

The constitutional , legislative and cultural realities that prevent Australia from adopting  EU style  hybrids of  a royalty right and a hypothecated tax are very real. Therefore it is likely that the scheme will be either be wound back or possibly a better purpose for it might be found; From a government perspective Art as an approved investment category  suffers from a lack of a proper title registry.  CAL has spent many millions on developing commuter systems and procedures that could be adapted to the operation of a Public Registerof art sales by Title. Obviously under such a alternative  purpose the fairly pointless  and very non-cost effective collection and delivery of ‘ resale royalties’ (to artists who are mostly dead) would be  unnecessary baggage  for  a Art Titles Registry