FACT SHEET FEAGA ARTISTS RESALE LEVY

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1 FACT SHEET FEAGA ARTISTS RESALE LEVY ABOUT FEAGA The Federation of European Art Gallery Associations (FEAGA) represents the political interests of over 2000 modern and contemporary art galleries in Europe. Therefore FEAGA is active in the European policy in Brussels, lobbying for issues such as the reduced cultural VAT rate. FEAGA also started an initiative to broaden public interest in the profession of galleries and created the first European Gallery Award. Please read more on this webpage. FEAGA wants to inform about the profession of galleries, especially their support of artist in building an art market. Galleries are the only professional market makers for young artist. FEAGA issued an Artist-Gallery Guide. No artist or group of artists has reached prominence without being accompanied, represented or supported by a gallery and no major museum or other public art event would be possible without the often unnoticed work, over many years, that galleries put into their artists rise to eminence. If you ask yourself questions about where to find reliable information, where to have a guarantee on quality and provenance, where to find permanent exhibitions of known and unkown artists alike, where is dedication to and expertise on the arts and where is the will to defend artistic integrity and specialisation the answer is always the galleries. FEAGA moved its headquarters from Paris to Brussel in 2005 to increase its lobbying for the galleries in Brussels. Concerning droit de suite FEAGA published several press releases, two of them are included in this sheet.

2 REMARKS OF GALLERIES ON THE DIRECTIVE general The European Union s unilateral decision to introduce the droit de suite on sales of modern and contemporary art risks damaging Europe s position in the global art market and threatens many of the jobs that it supports. As art is mobile and tends to be sold wherever the conditions are the most favourable, the higher transaction charges and administrative costs associated with droit de suite inevitably now make the EU a less attractive place to sell contemporary and modern art by comparison with the United States, China and Switzerland, none of which currently recognize droit de suite. unfair competition Gallery owners face unfair competition from Galleries from outside Europe. For example if our members organise art fairs in EU countries it will become increasingly hard to attract dealers from outside the EU to participate as they would then have to charge droit de suite on sales at those fairs. Whereas dealers' fairs in Switzerland (eg Basel, Zurich) and the US will become more attractive. There is an obvious incentive for FEAGA members to conclude sales in locations such as art fairs outside the EU where droit de suite is not payable. This encourages the market to move outside the EU and discourages the domestic EU market by giving gallery owners here an incentive to relocate sales if they wish to remain competitive. financing a gallery Gallery owners are able to finance the costs of maintaining a suitable exhibition space to show the new work of artists (often space in expensive city centre locations) because they are able to make profits from dealing in the secondary market. While droit de suite for living artists may have some justification (although not all artists are in favour of it), extending it into the more plentiful resales of the work of dead artists brings no benefit for artists but will greatly increase the competitive unfairness: FEAGA gallery owners will have to compete with foreign dealers to buy works which the foreign dealer would be able to sell more profitably because they are free from droit de suite.

3 the cascade effect of droit de suite Because the droit de suite is charged on the full price each time an object is sold through a dealer or auction, connected sales pay up to 5% repeatedly. It is very often the case that a dealer buys something at auction (where droit de suite is payable on the auction price) and he resells it to his client, on which sale droit de suite is payable again. Sometimes there could also be another dealer to dealer sale before it reaches the collector. Unlike Value Added Tax which enables the dealer to offset the tax paid on purchase against the VAT charged on the resale, droit de suite does not allow such deductions. Therefore, related transactions can result in droit de suite payments of 10% or 15% on the value of a painting. droit de suite on profit In the current situation droit de suite bears no relation to profit as it is charged whether the painting is sold for more or for less than the original price. Droit de suite is also levied as a work of art is sold at a loss. According to the statistics, in at least 95% of all cases, artworks decline in value after the first sale. Consequently, the droit de suite regulations do not work as intended by the Directive. An artist should benefit (only) from the profit, which is hardly ever the case. administration The advent of droit de suite has created a significant increase in administrative expenses. In some countries the modus operandi of the collecting agencies is particularly bureaucratic. Several of our members have the experience that amounts of resale rights that they pay are not received by the artist. There is moreover certainly the impression that from the collected amounts a large percentage is withheld at the agencies.

4 PROPOSALS FOR IMPROVEMENT The derogation for works by deceased artists should be extended both in time and to other Member States who do not currently benefit from this right. This derogation should be extended for at least as long as there is no international agreement in place on this issue in order that sales of art do not shift outside of the European union to competing markets such as the US or Switzerland, where resale rights are not recognized. This would ensure fair competition within the EU for sales of contemporary art (living artists) without endangering the art market as a whole. Droit de suite shouldn t apply twice for a gallery. The actual situation is that if a gallery buys art at an auction, it has to pay droit de suite. If the gallery sells this object, it has to pay droit de suite again. Droit de suite should only apply when there is a profit. At this moment droit de suite has to be paid even if an object is sold for a lower price than it was bought. This is not fair and it wasn t a goal in the Directive (the artists should share in the profit). Uniform the way collecting agencies work. Oblige these organizations to publish their results.

5 17 juni 2010 Gallery Associations call on EU to act to save the market for modern and contemporary art PRESS STATEMENT by the Federation of European Art Gallery Associations At the annual meeting of the Federation of European Art Gallery Associations in Basel 17 June 2010, discussions focused on the serious threat posed to Europe s art markets by the implementation of the EU s Droit de Suite Directive (Artists Resale Right). The Directive requires gallery owners involved in the sale of contemporary art works, to pay a levy each time such a work is sold. This levy, which is not applied in other jurisdictions around the world, risks seriously damaging the art market in Europe and driving this important cultural sector out of the continent. Several countries, including the UK, Ireland, the Netherlands, Austria and Malta, are allowed to exempt works by deceased artists from this levy, which has limited the negative effect in these countries. However, with the derogation set to expire on 1 January 2012, concern is growing about the impact on art sales in Europe. The EU was required by the law to undertake a study on the impacts of the Directive by 1 January 2009 and to revise the Directive if it was not found to be functioning correctly, however even in 2010 no study has yet been produced. Unless the EU acts now, Europe will continue to lose out to countries such as the US, Switzerland and China as a centre for the sale of 20th century art. And once this important market is lost, it will take many decades to recover. FEAGA is therefore calling on the European Commission to: Begin work on the study, as legally required by the Directive Extend the derogation for works by deceased artists in time and to other Members States to ensure that Europe can remain competitive

6 P R E S S S T AT E M E N T by the Federation of European Art Gallery Associations Ernst Hilger, President of European Gallery Federation, Brussels, appeals to the European Governments to stop the further deterioration of the European Art Market Competitiveness. European Galleries F.E.A.G.A. - Federation of European Art Gallery Associations Austria, Belgium, Denmark, Finland, France, Germany, Greece, Hungary, Italy, Slovakia, Spain, Sweden, Switzerland, The Netherlands, Turkey, United Kingdom Mindful of the damage that may be done to the competitive position of the European art market by the introduction of droit de suite in all EU countries from the beginning of this year, and the risk that their competitive position will be damaged still further when the derogation for certain EU countries limiting droit de suite to the work of living artists comes to an end in January 2010, particularly if, as seems likely, the USA, and Switzerland and other important art markets outside the EU refuse to adopt droit de suite, FEAGA calls on all EU governments to agree: a) that the derogation allowing the relevant EU directive to apply only to the work of living artists should be open to all member states to use, if they wish. b) the derogation should be extended indefinitely. Unless we act together now, any hope of changing this directive will disappear and we will collectively face the prospect of Europe becoming a backwater for the sale of the masterpieces of 20 th century art after Office Hoogstraat B Antwerpen Tel : Fax: galerie@ dezwartepanter.be President: Ernst Hilger, Vienna Vice-President: Aurel Scheibler, Berlin Emmo Grofsmid, Rotterdam Treasurer Adriaan Raemdonck Antwerpen General Secretary Bernd Fesel Dexia Bank n.v IBAN : BE BIC : GKCCBEBB