Droit de suite: a pointless, harmful tax

Apollo, March, 2005 by Michael Hall

On 4 March the world's biggest, most varied and most glamorous exhibition of art opens to the public. Ranging from antiquities and ethnographia through medieval manuscripts and quattrocento panel paintings to Bacon and Polke, it is of course the European Fine Art Fair at Maastricht. (For a small foreaste of the treasures on offer, see Susan Moore's preview on pages 114-117.) A visit to the fair makes an enjoyable holiday, even for those who are content to look rather than to buy. Its location suffers unfairly from a reputation for dullness, yet Maastricht is an attractive town, rich in seventeenth-century brick houses, with a handsome market square, presided over by Pieter Post's Stadhuis, completed in 1664. Most notable of all is the church of St Servatius, the pre-eminent Romanesque monument in the Netherlands. There are also less cerebral pleasures; if your budget does not stretch to Chateau Neercane, where Queen Beatrix entertained the signatories of the Maastricht Treaty in 1991, then we can recommend the outstanding food at 't Pakhoes, a restaurant in a converted explosives magazine near the old Watergate.

The fair is strongly associated with Old Masters and, because of its location, with Dutch and Flemish painting in particular. But its range is far wider, and it includes a very significant section devoted to modern and contemporary art. That market is the subject of a report published by the European Fine Art Foundation to coincide with the fair. The Modern and Contemporary Art Market is the latest in a series of well-researched reports by TEFAF addressing current market issues. This new report is of particular topical interest because of its detailed discussion of the likely impact on the art market of the introduction throughout the European Union in 2006 of droit de suite, or the levy charged for the benefit of an artist or an artist's heirs on the resale of a work of art up to seventy years after the artist's death.

Currently, eleven members of the EU have legislation permitting droit de suite, although it is enforced in only six: Belgium, Denmark, Finland, France, Germany and Sweden. Concerned that there is as a result a trade imbalance bertween its member states, the EU has issued a directive imposing the droit de suite throughout the EU, with effect from 1 January next year. The size of the levy is banded according to the price of the work; it will be imposed only on works sold for 3,000 [euro] or more and there is a ceiling on the levy of 12,500 [euro].

The imposition of droit de suite has led to fears that the market in twentieth-century and contemporary art will shift away from Europe. The new report produces evidence to support such concern. Currently, the USA has not only the largest slice of this market in terms of volume of sales but also, more significantly, in terms of high-priced sales: 31.2 per cent of all sales in this market are in the USA (compared with 11 per cent in the UK and 22.3 per cent in the countries charging droit de suite) but for works of art valued at over 200,000 [euro], the USA Scoops up 61.5 per cent of the market, the UK 26.9 per cent and the droit de suite countries a mere 7.4 per cent. There are many reasons why the USA is SO prominent in this market, notably the fact that it is the home of the largest number of collectors, but there is some evidence that droit de suite is already a factor in deciding where to sell works. The report cites the sale in 2001 of Rene Gaffe's collection of impressionist and contemporary works of art, sold on behalf of UNICEF, which took place in New York rather than Paris in part to avoid droit de suite.

The levy is designed to help artists who sell works for comparatively small sums, only to see them exchanged for millions years later. However, the report reveals that overwhelmingly it is artists' heirs who will benefit. It calculates that all transactions in the EU in 2003 of the sort that will in future attract droit de suite would have benefited a living artist in only 19 per cent of cases. It is hard to see why artists' heirs should enjoy this windfall, not least because they already enjoy the large commercial benefits that accrue from artist's copyrights, notably the fees (often very sizable) charged for reproduction. Moreover, many living artists, including Georg Baselitz and David Hockney, have objected to droit de suite. There is a fear that it will depress prices paid to artists, as purchasers seek a discount to reflect the levy that will be charged when they sell the work. The fact that living artists benefit very little from droit de suite is already recognised by some countries that impose it: in Finland and Sweden, for example, its proceeds are used to support young artists.

With its weak rationale and likely detrimental impact on the art market in Europe, and in particular the UK, droit de suite is simply an unnecessary tax that reduces the competitiveness of Europe-based auction houses and dealers. In the part of the market that it affects, we may already see the results at Maastricht by 2006--another, less cheerful, reason to make the trip next week.