The review of the Artist Resale Royalty Scheme : Part IV

Jon Altman is a Professor at the ANU Center for Aboriginal Economic Policy Research.

His submission to the review is long and deeply grounded in long-term, first-hand knowledge of the indigenous art sector and remote area indigenous affairs more generally.  It is a must read. But before I start my ‘precis’, Jon raises something that is very disturbing; “the extra $700,000 allocated in 2012 to ensure the continuity of the scheme for two more years is deemed an Indigenous-specific expenditure even though the scheme applies to all Australian visual artists” Policy: Creative Australia or Creative Accounting’ in The Conversation.

Given that 90% of the total value of all art resales in Australia are not resales of indigenous art, it is outrageous that money earmarked for indigenous Australians has been wasted on this scheme.

The Submission begins with:

I am keen to provide some brief input to the review of the Resale Royalty Scheme. I do so from a number of perspectives: as someone who has had a long-standing research and policy interest in the Indigenous visual sector extending back over 30 years and the visual arts sector more generally; and as someone who has worked closely with a number of Aboriginal art centres mainly in remote Australia. I have also collaborated with a number of renowned Aboriginal artists over the years, especially John Mawurndjul with whom I have worked since 1979; I have tried to understand the workings of the Resale Royalty Scheme by focusing on the secondary sales of his art works this year.

Whilst sympathetic to aspiration behind the ARR, Jon’s evaluation of the on-ground reality of ARR is quite damning.

He addresses 3 issues: Is the conceptual basis of ARR sound? If so, has the administration been effective? And, has there been unintended harm caused by the ARR scheme?

On the conceptual soundness of the scheme he starts by stating that prior to the scheme’s enactment he thought ARR was “a mechanism to extract a fee on the profitable resale of a work of art”.  It was only after its implementation that he discovered that it applies to all resales above $1,000 regardless of profit and loss. He goes on to state:

In short, in my view, the Resale Act represents less of a resale royalty and more of a tax on the secondary sale of a work of art not unlike a goods tax with 90 per cent of revenue refunded to the artist rather than state. To some extent this arbitrary form of taxation reduces the moral argument for the tax and makes it extremely arbitrary: why is the cut-off $1000?; why is the tax rate 5 per cent?; and why is the tax only levied on secondary sales, why is it not also levied like the GST on primary sales?

There have been some cases of indigenous artworks reselling for very big profits – as much as 2000% 1. However, the truth is that the vast majority of artworks (if they re-sell at all) re-sell at a loss, break even or a modest profit. A fair tax on art resales, a tax that took into account even the most basic allowances for costs and losses would not net much.

Jon then goes on to administrative issues raised by the ARR scheme, and it is here that the lack of consultation prior to enacting the scheme becomes most evident:

Most art centres quickly altered their purchasing practices to only take art on consignment sometimes paying the artist a part payment but being careful not to be the outright owner of the work. This created real and potential tensions between art centres as agents and artists in situations where the art held on consignment might deteriorate and lose value and where artists may want to be paid up front (with risk being then borne by their art centre not them). It also meant that if an art centre did purchase a work outright it had strong incentive to pay less than $1000; and then sell the work for less than $1000 so as not to attract the 5 per cent premium and the administrative liability to pass the 5 per cent to CAL to see it returned less a 0.5 per cent administrative fee back to the artist. In situations where art centres were run as member cooperatives or as companies with artists as shareholders this created some interesting potential principal/agent and moral hazard issues. Most importantly though some art centres had to change their mode of operation, at least for art works that were purchased outright and to be retailed or wholesaled for over $1000; and it created potential for a dual operation, over and under $1000. This alongside the additional unremunerated administrative burdens of implementing and operating the Resale Act made it unpopular…. The key problems with the scheme in Australia appear to be the additional administrative and financial burdens that the scheme’s operations impose on industry stakeholders including commercial galleries, auction houses and community-based art centres. The greatest burden from my experience is imposed on remote art centres that already carry heavy administrative burdens.

Then there are the unintended consequences. One of the deep, justified resentments of the commercial independent art sector about this current government’s policy is that while the rest of Australia got a stimulus package, the commercial art sector got punitive arbitrary punishment for no good reason at all. This is from Jon’s summary of unintended consequences:

Unfortunately, the Resale Act was introduced just as the global art market in general and the Indigenous art market in particular went into deep recession. This was not exactly unforeseen because the Resale Act passed through the Senate in September 2009 well after the initial impacts of the Global Financial Crisis were evident. Clearly a 5 per cent tax is hardly conducive to sales generation or arts business confidence during an arts recession. Furthermore the Resale Act was introduced at a time when changes were mooted and subsequently introduced that limited the potential for self-managed superannuation funds to invest in visual art works. A combination of these two factors further depressed an already depressed art market that actually required pump priming, for example by enhanced purchases by public arts institutions, rather than additional administrative and financial imposts. The Resale Act also introduced inevitable distortions to local and regional Indigenous arts communities where arts income is an important source of cash for livelihood. For example, artists who needed cash urgently might be tempted to sell works for amounts that would retail for less than $1000 so as to gain access to immediate cash. This also enhances the probability of the production of ‘private canvases’ for sale outside the formal art marketing system; or of ‘bakki’ (tobacco) art for the immediate purchase of tobacco where BasicsCard limits access to such ‘prohibited’ goods. ……
My overall impression is that the operations of the Resale Act may have financially benefitted a number of Indigenous artists, the 442 who have received an estimated $780,000 under the scheme to 15 May 2013, an average of $1800 each over the three years since June 2010. But this gain might have been offset or more than offset by loss of income both to these artists and several thousand others from declining primary sales if the Resale Royalty Scheme has deepened the decline in the market or slowed its recovery; this is especially the case for fine art where there is a close relationship between primary and secondary sales, especially for the most successful artists. ….. Arguably community-controlled Aboriginal art centres have been established to mediate on their behalf, but many of these centres have limited, in some cases declining, administrative capacity and choices need to be made as to where resources should be allocated—to meet legal obligations imposed by the Resale Act or to better serve the collection and marketing needs of their member clients, the artists?

Jon also notes that the review is based in Canberra and is seeking written submissions when many of those most affected by the scheme are indigenous and living in remote areas :

Indigenous stakeholders appear underrepresented in written submissions which is rarely a preferred mode of providing input especially for Indigenous artists but also for their under-resourced community-based organisations.

Finally, Jon makes a long thoughtful list of suggestions as to what to do about the ARR. I would summarise them as follows:

  1. raise the collection threshold to $10,000
  2. exempt some classes of resales that are really first sales
  3. not levy it on actual losses
  4. And, do a lot more research into the net cost/benefit equation of ARR: “it is not good enough to assume that the Scheme generates a net benefit because some artists benefit.”

Finally, this strikes me as imperative:

…… transparency about the current fact that it is Indigenous-specific funding that is underwriting the operations of the Resale Royalty Scheme at present. In my view this is unconscionable but let’s be open about this at the very least.

 Like Jon, I would like to acknowledge that CAL’s conduct of the very difficult job of administering ARR has been totally professional and courteous .

2   Prior to about 1990, indigenous art was mostly housed in ethnographic collections.  If you bought a very good indigenous picture back then, you were in a situation akin to buying Apple shares just prior to Steve Jobs return as CEO.  That does not happen very often. In reality, the shift of indigenous art from ethnographic museums to contemporary Australian art was primarily driven by the efforts of enthusiast, commercial representative galleries and individual collectors like Janet Holmes a Court and the Lavertys. The funded institutional sector followed; it was not the initiator.

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About john r walker

Have been exhibiting for 30 years . Utopia Art Sydney is my sole outlet. Apart from painting representations I have had a long interest in deep time , history in general and the representation of representation.
This entry was posted in Art and Architecture, Economics and public policy, Intellectual Property, Law, Politics - national, Race and indigenous, Uncategorized and tagged , , . Bookmark the permalink.
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