WRITTEN QUESTION E-1151/02

by Erik Meijer (GUE/NGL) to the Commission

(22 April 2002)

Subject: EU-US competition for the trade in works of art and alternative methods of maintaining the European share

1. Can the Commission confirm the findings of a study by The European Fine Art Foundation (TEFAF) that in 1999 EU countries imported works of art worth EUR 1,53 billion and exported works of art worth EUR 1,81 billion and that the European share of the international art market has fallen by 7 % over the past four years while the American share has risen by 7 %?

2. Do these figures imply only that dealers are moving their activities outside Europe because of higher profit margins, or does it also imply that increasing numbers of works of art produced in Europe are leaving this continent to be purchased by wealthy people, in particular Americans, elsewhere?

3. Have the figures given in (1) above been used by TEFAF in its contacts with the Commission to oppose the maintenance or introduction of legislative and administrative provisions to regulate the market within the EU, such as import duties on art and resale rights?

4. How does the Commission view TEFAF's argument that it is more favourable for dealers to export their art holdings to America and to sell them in that country as there is no taxation and royalty obligations do not apply for 70 years, thus making the seller's profit margin higher while the works of art are still cheaper for the purchasers?

5. Does the Commission consider that there are opportunities to alter the figures in a completely different way from that requested by TEFAF, for example by introducing or extending export duties which make it less attractive to sell works of art from EU Member States outside EU territory?

6. What other steps might the Commission consider taking to deal with this problem in the years ahead?

Source: de Volkskrant newspaper, 8 March 2002

Answer given by Mr Bolkestein on behalf of the Commission

(12 June 2002)

The Honourable Member is concerned about the competition between the Community and the United States for the trade in works of art. All of the six questions arise from the findings of a recent study, published by the European Fine Art Foundation (TEFAF), the organiser of the annual Maastricht International Fine Art and Antiques Fair. The Commission recently answered another Written Question concerning the same study, P-0861/02 from Lord Inglewood(1). On top of that previous reply, the Commission would like to make the following comments.

The Commission observes that the above report was commissioned by TEFAF, a Dutch foundation, with the support of other organisations representing art dealers. Some of these organisations were active in producing and submitting to the Parliament, the Council and the Commission several contributions alleging that the Community harmonisation would lead to negative consequences for the Community art market. This was particularly the case at the time of the negotiations of Directive 2001/84/EC of the Parliament and of the Council of 27 September 2001 on the resale right for the benefit of the author of an original work of art(2) (Droit de suite). Likewise, the economic and regulatory analysis carried out in the TEFAF report reflects to a large extent exclusively the views of certain art trade organisations.

Targets of TEFAF's criticisms are, in particular, the VAT regime for works of art introduced by 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(3) and the harmonisation of the resale right at Community level (Directive 2001/84/EC). Indeed, many factors influence the evolution of the art market, such as its global nature, exchange rate fluctuations, the tendency of vendors to choose the market where they can get the best selling price, the likely effect of the 1999 stock market boom in the United States on consumption expenditure, and this particularly on luxury goods, the effective duopoly in relation to auction sales (cf. the recent Commission's(4) statement of objections sent to Christie's and Sotheby's about their colluding to fix fees during the 1990s). Therefore, it seems at the least temerarious to affirm that the decline of the Community art market in the past four years should be attributed only to taxation and regulations introduced at Community level since 1995.

The argument that it is more favourable for dealers to export their art holdings to the United States and to sell them there because of the lack of taxation and resale right in that country is contradicted by the fact that the introduction, in 1995, of the special VAT regime for works of art because of Community harmonisation has not had an adverse effect on the competitiveness of the Community's art market compared to the art markets of non-Community countries (cf. the 1999 Commission's report(5) on the impact of Directive 94/5/EC). Furthermore, the resale right has not yet brought about any change in the Member States, since Directive 2001/84/EC is to be implemented only by 1 January 2006. No Member State has yet initiated implementing legislation.

Furthermore, it is necessary to recall that, generally speaking, VAT applies to all sales of goods and services in the Community. Transactions in works of art are like any other transactions and are subject to the same rules. Accordingly, if works of art are sold by artists resident in the Community to Community residents, VAT at the appropriate rate is chargeable. If works of art are sold to non-Community residents, and the works are exported from the Community, no VAT arises. If works of art are imported into the Community and purchased by Community residents, or if works of art are purchased outside of the Community and imported, then VAT is payable in the Community. If, on the other hand, works of art imported for re-sale are simply purchased for export, no VAT arises. The VAT treatment of works of art could not therefore, be a determining factor regarding the seller's decision as to whether a work of art is put up for sale in the Community or the United States market. It is clear that vendors of works of art will generally sell where they perceive that they will get the best price. While there is little variance between the fees charged by auctioneers, the cost of carriage, insurance and freight arising when works of art move between locations can be significant. A vendor will generally take these additional costs into consideration when deciding where he will sell. However, more often than not, the choice is determined by the strength of the market itself. If it is perceived that a better price would be obtained in one location than another, for whatever reason, then a vendor will take the appropriate business decision.

The Honourable Member asks what measures the Commission intends to adopt in order to maintain the competitiveness of the Community art market. In accordance with its commitments, the Commission is considering to take the necessary actions to extend the application of the resale right at international level. Moreover, before 1 January 2009 the Commission will carry out an economic study on the competitiveness of the market in modern and contemporary art in the Community. The Commission will pay due attention to the reliability of the figures therein.

(1) See page 21.

(2) OJ L 272, 13.10.2001.

(3) OJ L 60, 3.3.1994.

(4) IP/02/595, 19.4.2002.

(5) COM(1999) 185 final.