Artists resale rights . . . a bad idea whose time has come

From the Fin Column of 19th August.

There were so many issues in the last election that you might not have noticed Labors promise to introduce a resale royalty scheme – to provide artists with a share of profits when their art is resold. This is a promise that will soon haunt the government: it can be criticised for committing to a program without knowing how to make it work, but it can also be condemned for a promise which had no justification.

Artists should have some entitlement (which they can retain or sell) when their work is replicated for sale. But it is difficult to determine why artists should be compensated because a profit has been obtained from the resale of their work. It is true that new artists do not know the future value of their works, but buyers are in the same position: some new art will appreciate significantly, but most will not. Experienced artists can easily find out the value of their past works. And while values change over time as art become more or less fashionable, this risk is equally borne by buyers and sellers. If the Rudd government respects the role of the market, as it says it does, it should explain what is unfair about transactions between buyers and creators of visual art.

Even if there are flaws, the government has to show that its intervention will not produce greater problems. In other words, the government has to design a workable scheme. For example, it has to decide whether its resale royalty will benefit only living artists or their estates as well. It is bad enough that Australia does not have death duties; using the tax law to enhance estates in this way would compound our deficient taxation system. But if the scheme does not extend to estates, would-be sellers will read obituaries with more than a passing interest.

The government also has to decide which works will fall within its scheme. To avoid utter chaos, a piece would have to have a high sale price – over several thousand dollars – before it is eligible. There would also have to be a high minimum profit figure before royalty is applied to a resale, otherwise the government would be expending considerable money collecting and disbursing small dollar amounts. Whatever the characteristics of the scheme, the costs of tracking the works of visual artists over a considerable period would be tedious and expensive. But without this tracking, the royalty tax would be easily evaded.

The Rudd government would also have to decide what to do with Australian art which is exported. Presumably, its tax reach does not extend to art taken home by tourists. And what will the government do with Australians who wish to export art? Will that be monitored to ensure that a royalty tax is not evaded? And the government will have to reflect on the preference which its royalty scheme will create for imported art for which no royalty would be payable over Australian art. It would be ironic if the governments scheme lead to a reduction in sales of local art.

Collecting the royalty is only one part of the problem. The government must also find the artist. Artists might have to register with the scheme so that royalty distributions can be effected at reduced costs. You can see why, in some countries, the costs of these schemes approach 40 per cent of the royalties collected.

And what is visual art? Perhaps Garrett could visit the Art Deco display at the National Gallery of Victoria to see what one of Australias premier galleries calls artistic media. Within a lifetime, a range of products, some entirely functional have been classed as art. The display is not limited to paintings and sculpture. It includes photography, fashion, architecture, furniture, pottery, jewellery, fabric and motor vehicles. The government will have to minimise the scope of visual art to be covered by its royalty.

Finally the government should explain what happens to art resold at a loss? Why must the opportunity for artists to share in changes to the value of their work be limited to art which appreciates?

Just because other countries adopted a bad idea does not mean Australia has to.

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Mark Heydon
Mark Heydon
13 years ago

I could not agree more.

A solution that presents itself to me, which does not require government intervention and is entirely within the hands of the artist, is to lease their works rather than sell them outright. Why don’t these creatives think a bit more creatively rather than running to the government?

A NON FARMER
13 years ago

In a country where anything of value created by Australians is annexed by a system that almost has the creator paying the priveleged ‘acquisitive’ to take the object off the creator’s hands – Phooooo – I’ve blown it!

Start again.
We live in a greedy age. It is difficult enough just finding a job and working for wages these days.
Artists, creators, designers, innovators, – all sorts of people who actually value add from whatever ‘pot’ of raw materials they utilise – are all too busy doing the creating.
They all need an environment where some of the paperwork can be taken off their hands.

The artists issues aren’t too different from others in original disciplines whose work has for far too long been vulnerable to any moneyed predator who takes a fancy to their hard work.

I strongly suggest that statutes need to be emplaced protecting Immediate Intellectual Property on behalf of the creator – above and beyond copyright and patent.

Stephen Bounds
13 years ago

Tony,

The Resale Royalties scheme is aimed fair and square at redressing the decades of exploitation of indigenous artists, who often sold their works for a pittance and now see their work re-sold for hundreds of thousands of dollars without a cent returning to the indigenous communities who originated the art.

As for the administration of the scheme:

(a) Collect royalties from registered art dealers, art exporters (yes, even for tourists), and artworks sold at Australian public auction houses such as Bonham and Goodman.

Yes, this will discourage some art from being sold through these channels, but an extra 1% royalty on top of a 8-12% commission doesn’t seem extortionate. It also ensures that only those works with reasonable value attract the royalty.

(b) As for distribution of the royalties, that’s easy too. Artists and beneficiaries can register with the Tax Office using an ABN or TFN, with monies distributed back via annual Individual or Business tax returns.

Unclaimed royalties would be kept in a trust fund, and any interest generated used to support programs developing the arts in Australia.

There, that wasn’t so hard, was it?

Greg
13 years ago

I can’t say as I have a problem with resale royalties per se. It’s not unlike the practice of residuals, whereby an actor gets a piece of the action when a television show goes into syndication or a movie goes on to cable, DVD, television repeats, and so forth. Similarly, when a musician crafts a piece of music, they get royalties for re-performances, resales, etc. Why should painting, sculpture, and the like be exempt? I doubt there’d be any worse effect on (re)sales than, perhaps, to make old art more reasonable than the market has presented it for the last twenty to thirty years, while inclining those who buy art as an investment to treat it as such, rather than as something to be turned over every few years. It might make art auctions less favourable than direct (re)sales, but that’s not necessarily a bad thing either. Any benefit to indigenous artists, immediately, or in the future, seems worthwhile to me. I’d be more than happy if the three pieces I own continue to benefit their authors beyond the time I own them, even as they have benefited me by hanging on a wall where I enjoy them every day. Art has long been an international marketplace, just as literature and every other creative enterprise have been, and they have royalty schemes in place. This simply puts a set of art traditionally treated as separate, for no good reason, unless you think you’ve got one, onto the same footing. For that matter, while fashions come and go, and interest in one style or another may fade or grow over time, that isn’t to say that resale values, following the same trend, would result in a work being resold for less than its original sale value. Rather more likely is that it simply wouldn’t sell. Fair enough, as I see it. Do you think this scheme would entail artists having to repay the difference? Nonsense. Sorry, but I just don’t think the problems you’ve outlined have any basis in reality.

JM
JM
13 years ago

Greg “when a musician crafts a piece of music, they get royalties for re-performances, resales,”

Already works this way – performance royalties are collected for every performance and every new copy in a new media …. but only on the first sale.

Otherwise you’d be collecting royalties on second hand CD’s. Garth Brooks actually proposed that a few years ago, but thankfully common sense prevailed.

But if this scheme gets off the ground I have absolutely no doubt at all that the music labels will be in the queue so fast …

derrida derider
derrida derider
13 years ago

But there’s no way this will benefit the artist even if it works, for the obvious reason that anyone buying a work of art is gonna factor in the future sales costs when they bid***. It means the artist gets a lower price, on average, at first sale in return for some unknown payment in some indefinite future (minus, of course, that 40%).

A really, really dumb idea. Artists are not known for their numeracy.

*** Important note for non-economists: Just because not all buyers will consciously make this calculation doesn’t mean that it won’t work this way – a lot of markets that have “going rates” have their going rate set indirectly by such factors.

wilful
wilful
13 years ago

It’s impressive that Tony could craft such a strong piece without actually bothering mentioning the intent behind the scheme – ripped off indigenous artists.

Yeah i think it’s a dumb scheme and there are better ways of fixing the problem, but you can’t criticise a policy without acknowledging what it’s trying to fix.

tony harris
tony harris
13 years ago

While the initial idea centred on indigenous art, I think the resale royalty is now intended to be for all visual art created in Australia. And while the idea was once described as a sharing of the increased value in art, th eroyalty might be extended to a percentage of the whole of the resale value, not just the profit on resale.

john r walker
john r walker(@annesanders)
8 years ago

Tony Harris your piece was on the money:

To avoid utter chaos, a piece would have to have a high sale price – over several thousand dollars – before it is eligible. There would also have to be a high minimum profit figure before royalty is applied to a resale, otherwise the government would be expending considerable money collecting and disbursing small dollar amounts. Whatever the characteristics of the scheme, the costs of tracking the works of visual artists over a considerable period would be tedious and expensive. But without this tracking, the royalty tax would be easily evaded.

The government recently released some details about the operations of ARR in answer to questions on notice by Senator Gary Humphries . The long and short is that of the aprox 5,000 individual royalty payments to dec 2012 the median is fairly close to the minimum payment ($50) the collection fee on $50 is $5 and the stated Average transaction cost is $30 , 6 X the minimum collection fee. And all but the top 600 royalty payments have been at best breakeven.