WRITTEN QUESTION E-0051/98 by Maren Günther (PPE) to the Commission (29 January 1998)

Subject: Effects on the European art market of the increase in import tax and the introduction of resale right charges in the United Kingdom

As a result of the 7th EU directive the import tax on works of art in the United Kingdom will rise from 2.5 to 5% on 30 July 1999 (before the 7th EU directive imports were tax-free). Together with the United Kingdom's transposition of the directive on resale rights, this will increase the burden on Europe's leading art market, London, and undermine its competitiveness with the New York market.

This will have a dual effect:

1. As resale right costs do not arise in New York, European sellers can expect to make higher profits there (strictly speaking, from the point at which the cost of the resale right charge exceeds the cost of export). Where sellers are concerned, there is thus likely to be an outflow of works of art to the New York market.

2. Where buyers are concerned, a return flow of works of art to Europe will, on the other hand, be impeded by the higher import tax. Besides the economic implications this will have for the London art market - and, consequently, for the whole of the European market - the EU's cultural interests will thus be directly affected.

Has the Commission carried out an evaluation of the effects of its measures on employment in the art sector and its future development?

In its efforts to harmonize the internal market, has the Commission taken account in its decision-making of the special, global competitive situation between the world art markets of London and New York? Is any consideration being given in the Commission to the abolition of the import tax?

Answer given by Mr Monti on behalf of the Commission (9 March 1998)

The Commission can confirm to the Honourable Member that it has no intention of proposing the abolition of VAT on works of art.

One of the driving forces behind the adoption of the VAT provisions for the internal market was to obviate tax-based distortions of competition. The adoption of the 7th VAT Directive (Council Directive 94/5/EC of 14 February 1994 supplementing the common system of value added tax and amending Directive 77/388/EEC - Special arrangements applicable to second-hand goods, works of art, collectors' items and antiques) ((OJ L 60, 3.3.1994. )) was another step in this direction. It must be borne in mind that under the current VAT arrangements, purchases of works of art by Community residents attract VAT whether they are purchased within the single market or outside it. Similarly, no VAT is charged where works of art are sold in the Community for export to third countries.

The purpose of the proposal to harmonise Community artists'resale rights (droit de suite) is to put an end to various kinds of discrimination and inequality of treatment which currently exist across the Community for visual artists and to allow them to achieve parity with other categories of creative artists such as writers and music composers who could expect ongoing copyright royalties.

The Commission is aware of the fears which have been expressed by the British art trade in relation to the possibility that vendors may transfer their sales from London to New York. The Commission has undertaken to examine the impact of the relevant provisions of the 7th Directive on the competitiveness of the Community art market compared to third countries. Preliminary work has already begun on this commitment, and a final report should be available by the end of this year.