I’ve been watching over the past year or so as ultra-wealthy Asian consumers flex their muscles and the markets for “trophy” jewelry, antiques and art shift eastward away from their traditional centers of London and New York.
A certain portion of this interest is in Asian art and artifacts sold, or otherwise transferred, into western hands over the past couple of hundred years. For Americans, this is somewhat akin to the Japanese search during their boom of the late Eighties for samurai swords that had been taken in battle by American soldiers during WWII. Today’s movement is much deeper in intensity and is centered in Europe, especially the UK, however.
The interest of the twenty-first century Asian collector of art and gems is much wider in scope as well, extending over a larger range and including items of western as well as Asian provenance. In April, for example, according to the Financial Times, Sotheby’s had its most successful spring sale in Hong Kong ever, totaling US$256 million. In addition, items that don’t appeal specifically to Chinese buyers, but which could just as easily be sold in New York or London, are increasingly making their way to Hong Kong because the SAR is starting to draw worldwide interest.
…which brings me to the topic of today’s post.
EU art tax
I hadn’t realized until I read today’s paper (the column starts with Samsung’s smartphone efforts, but scroll down a little), but in 2006 the EU imposed a special royalty tax on the revenues from resale of art works. It’s on a sliding scale, starting at 4% and descending to .25% on the portion of a sale over €500,000. The maximum tax on a single work is €12,500. The levy applies to any transaction during the artist’s life and for seventy years after his death. Proceeds go to the artist or to his heirs.
The UK managed to negotiate an exemption, until 2012, from the EU directive to collect this tax. With one eye on Hong Kong and one on the upcoming deadline for imposing the tax, the UK art trade association, the British Art Market Federation has just published an interesting white paper arguing, naturally, that the exemption should be extended.
In a nutshell, the BAMF says that 40% of its business, which employs 60,000+, would be subject to the tax. With a ready market in New York and with Hong Kong growing like a weed and itself already a seventh of the world art market, there’s no need for anyone to travel to London to buy art. So a large proportion of that 40% will presumably move elsewhere.
The idea of this tax, called the droit de suite, is to put artists on the same economic footing as writers, whose works are entitled to copyright fees even after their deaths. If the idea was to help struggling artists, the tax hasn’t worked. Most of the money so far has gone to the most famous art names. The median annual payment to an artist is less than $500. In fact, the art establishment in France, where the idea originated, is now lobbying for the tax to be restricted to resales during an artist’s lifetime.
a curious case
Two things strike me as interesting about the tax issue. The fact of the debate underlines how quickly the center of the global economy is shifting toward Asia. Tax or no tax, Hong Kong is going to continue to take market share from New York and London.
The microeconomic issue is less clear. On the one hand, instituting the tax may give the typical UK-based artist a shot at making an extra $500 a year–a good thing. On the other, he may need to have representation in Hong Kong as well as in London–an added expense, and maybe not that easy.