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Europe Prepares For New Charges On Art and Photography Sales, as Droit De Suite Directive Goes Into Effect January 1, 2006

Leave it to politicians to screw up a market they do not understand. In what is known ironically as a "harmonizing" effort, the European Union in its eminent wisdom has directed all of its members to begin collecting "Droit de Suite" charges from photography and art galleries, auctions and dealers beginning this January. The charges are fees on the resale of any artwork, including photography, which serve as a commission that is supposed to eventually go to the artist or their estate--although, in fact, very little will actually reach that source, especially for new artists.

While the final details are still being polished, including how this will be implemented in the U.K. where the Blair government is fighting for a postponement until next June, it is expected that this fee will need to be added to all European sales above 3000 euros, or to sales where the seller has acquired the work directly from the artist and resells within three years for less than 10,000 euros. These fees will initially be charged only on works by living artists. Between 2010 and 2012, the Droit de Suite is scheduled to be charged on works by both living artists, as well as those who died within the last 70 years, with payments made to the artist's estate on the latter. Like the copyright laws that this new law is tied to, you can probably expect that 70-year period to expand as time goes by. But you can also expect the British government to postpone this expansion until the latter date of 2012.

According to the EU preferred definition, the Droit de Suite covers 'original work of art', identified as "works of graphic or plastic art such as pictures, collages, paintings, drawings, engravings, prints, lithographs, sculptures, tapestries, ceramics, glassware and photographs, provided they are made by the artist himself or are copies considered to be original works of art."

The proposed schedule of levies is as follows: between 3,000-50,000 euros, 4%; between 50,000-200,000, 3%; between 200,000-350,000, 1%; between 350,000-500,000, 0.5%; and above 500,000, .25%. There will be a maximum charge of 12,500 euros per transaction, so effectively the charge stops at two million euros--not that it matters to the photography market, which has not yet seen an individual photograph sell at that level.

My thanks to Sotheby's (London) Juliet Hacking for much of this information. The editorial comments and/or any possible mistakes, however, are all my own.

Clearly though auction houses, dealers, galleries, and art and photography show managements are concerned about how this will impact their marketplace. This is basically another tax that makes European sources that much more expensive compared to other countries, such as the U.S. or Canada. Will it also make American and European buyers more reluctant to buy and sell there, preferring the American market? Will buyers be more reluctant to buy European artists because of this double (and more) dipping by artists and their extended families? Will it affect buyer's perceptions of those artists? If the artist has left no estate, do these funds go into the national treasuries? Will these charges drive the market even more underground than it currently is in Europe, avoiding not only the droit but other taxes as well? Will this hurt the European job market, as galleries, auctions and dealers there begin to lay off people as their business drops off? There are lots of interesting but unanswered questions here. This doesn't seem to help anyone--buyer, seller or even artist.

Interestingly enough, most sources of information on the droit de suite indicate that the pressure to introduce the resale levy came primarily from the agencies that exist to collect and manage it. No conflict of interest there! And it is those agencies and only the top well established artists and their estates that this will benefit. Younger or up-and-coming artists will most likely be hurt by the higher prices imposed on their work and will likely never see much, if anything, of the moneys collected.

In addition, the costs of collecting the droit in Europe appear to vary between 10% and 40% of the royalties collected. France reportedly deducts administration costs of 20%. But then we all know how efficient governments are.

Could pressure on the Bush administration lead to such tax on the art business in the U.S.? Maybe, although the Republicans have enough problems on their hands now. There already is a form of droit de suite in California, but it does not yet affect photography. It has affected the art market there, according to several sources--all negatively.

But it would not be out of line for art and photography dealer organizations to start to educate federal legislators now, if we don't want to see this implemented in the U.S.