Euro tax threat to UK art market

MINISTERS are drawing up urgent measures to try to protect Britain's pounds 2.5bn art market amid claims that business may be driven abroad.

They have been warned that the impact of European Union taxes - and harmonisation of value added tax on arts, antiques and jewellery - will weaken the European market.

Although Britain opposes the harmonisation plan, other EU members, led by the German presidency, are expected to go ahead with the levy at a meeting in Brussels on 25 February.

The measure would raise VAT on the items from 2.5 per cent to 5 per cent in Britain by June this year. Even with the introduction in 1995 of a reduced rate of VAT, sales have fallen by nearly 30 per cent.

A second blow will come with the introduction in this country of the droit de suite levy, which for 70 years after an artist's death is charged at between 2 per cent and 4 per cent of every resale of the art work, other than sales between individuals. The money, after administration costs, is given to the artist's family.

While the change will benefit artists, it could drive dealers out of the EU altogether and build up rival centres such as New York and Geneva where no such taxes apply.

The British Art Foundation has warned that London's pivotal position in the global art scene, where it holds about 40 per cent of all art sales and employs 40,000 people, will be destroyed at a stroke.

Kim Howells, the Trade and Industry minister, admitted that he saw "no possibility" that the European Commission might change its mind on the matter. "We have searched for allies as the previous government searched for allies," he said.

But while the Government was determined to fight the measures, Britain had no automatic right to block them.

The Tory MP Virginia Bottomley, a former secretary of state for national heritage, said the British art market was "formidably successful" and it was vital ministers fought its cause.

The market was not only an "enormous cultural asset" but also a "great commercial contributor".

David Heathcoat-Amory, the shadow chief secretary to the Treasury, said anticipation of the droit de suite was already damaging the London and UK markets. "Objects for sale will simply be transferred away from this country, out of the UK and out of the EU. I have to conclude that there is some resentment or jealousy that the British art market in London is not fully European," he said.

"The Council of Ministers in two weeks' time are engaging in an act of quite unnecessary vandalism."

Peter Brooke, the president of the British Art Market and Tory MP for the Cities of London and Westminster, added: "These moves will not enlarge the EU market, they will simply export trade and jobs to competitors who could be forgiven for scarcely believing their good fortune."