My previous post – ‘With friends like this’: Labor policies and the commercial, independent visual arts sector- was kindly posted by Ken Parish, 6 June.
In many ways, artist resale royalties are intrinsically a throwback to the pre-reform days of the 1970s and ’80s.
The royalty is both punitive and market distorting in design. For example: A collector buys a painting for $10,000. After some years the collector re-sells that painting for $11,000 gaining a profit of $1000; the 5% royalty on this resale being $550 or 55% of the profit on that resale. If this painting was instead to resell for $9000, a loss of $1000 on the initial purchase price, there would be an additional loss of $400 in royalty due on that resale, bringing the total loss to $1,400.
The royalty does not apply to non-Australian artists; it does not apply to Australian artists who have died 70 or more years ago and it does not apply to many other forms of art-like collectables such as Ming porcelain and non-art furniture. The artist resale royalty is a serious deterrent to purchasing art by living Australian artists.
In 2008-09, DEWHA was assessed as non-compliant by the Office of Best Practice Regulation for the Resale Royalty Right for Visual Artists Act 2009 and a post-implementation review was required to commence within one to two years of implementation. However, the Act’s compliance with the post-implementation review has been delayed till June 2013. Thus the scheme will have operated for three years without meeting minimum best practice requirements. Best practice involves clear need, clear cost-benefit evidence, avoidance of substitution and unintended market distortions. Given the large costs relative to benefits delivered and the punitive and distorting effects upon the market, it is hard to see how it could ever pass a best-practice test.
The scheme harks back to pre-GST days of non-uniform transaction levies and market-distorting tariffs.
Part III of ‘With friends like this’ Artist resale royalties: a strange loop