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
[i] As a practicing artist I believe that resale royaltys are in principle harmful and/or useless for most artists. This post on The 1709 Blog outlines our views on Resale Royaltys at the level of principle.
[ii] For Details of the Act : http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id:legislation/billhome/R4010
[iii] Indigenous art was due for a ‘correction’ , the resale scheme has had a force multiplying adverse affect on buyer behaviour .
This piece by Megan Anasastasios-wilson provides a well researched insight into deeper structural problems in the indigenous art sector.
Images courtesy of Utopia Arts Sydney . www.utopiaartsydney.com.au