London's art dealers fear EC hammering will knock the bottom out of

AN UNHOLY alliance of Brussels bureaucrats, French auctioneers and Greek, Spanish and Italian smugglers is threatening Britain's art market, which has an estimated turnover of pounds 3.5bn.

New EC regulations to counter art smuggling combined with attempts to strip Britain of its zero- rate VAT for art imports could chase the international art trade out of the Community altogether, according to leading London dealers and saleroom experts.

At the next EC finance ministers' meeting, in Brussels on 18 February, Britain will be under strong pressure from the other 11 states to introduce VAT on art imports. This may sound like a small technical adjustment, but Sotheby's, Christie's, the British Antique Dealers' Association and the London Society of Art Dealers are unusually united in urging the Government to stand firm.

'A vendor outside Europe can choose to sell in whatever centre will earn him the best return,' said Andrew Hill, of the Art Trade Working Party. 'A 5 per cent charge on an Impressionist worth pounds 1m, say, or a Stradivarius violin, would cost the vendor pounds 50,000. If he chose to sell in New York or Geneva he would save that much.'

In the immediate post-war years, Paris and London vied to become Europe's leading art- market centre. The elaborate government regulations surrounding the French art trade favoured London. As a result, 50 to 75 per cent of the EC art trade is concentrated in London. Up to the 1980s, it was the art-trading capital of the world.

New York has taken over, but London still has a far greater concentration of scholarly, specialist dealers.

The French auctioneers remain intensely jealous. Most of their business is in Paris, where the 72 under the umbrella of the Hotel Drouot had a turnover last year of Fr2,886m ( pounds 374m) compared with a worldwide total of pounds 674m for Sotheby's and pounds 631m for Christie's. The French auctioneers' union, the Chambre Nationale des Commissaires- Priseurs, claims the Council of Ministers and Britain have infringed the Treaty of Rome: the Council by failing to harmonise VAT on art by the end of last year, and Britain for distorting competition by refusing to levy VAT. It has complained to the Commission and may take the case to the European Court of Justice.

Yannick Guilloux, president of the Chambre Nationale, said last week that 'what we all want, of course, is zero-rating like Britain'. In 1988 that was EC policy, but it was voted down later.

Britain is the only EC country which zero-rates a range of goods - food, children's clothes, books - as well as works of art. No other country is permitted to reduce VAT to zero on any category, so France cannot abolish VAT on art imports to achieve a 'level playing-field' with Britain.

The other EC regulations alarming the London art world are designed to uphold the tough rules by which Italy, Spain and Greece seek to keep their heritage at home - rules which lead to a huge volume of art smuggling. In November, the Heritage minister, Robert Key, signed a regulation pledging Britain to help control the movement of items by introducing new export licences for all 'cultural goods' leaving the EC.

The art world is beside itself with fury at the torrent of paperwork that this will unleash. It is also angry and fearful about a directive, also signed by Mr Key in November, compelling the British authorities to send back works that have been smuggled. It is not that the auction houses condone smuggling, but they think the rules on the export of art from Italy, Spain and Greece are ridiculously over-harsh, making almost any export unlawful. Britain in contrast is relaxed about exporting art, blocking licences only if a domestic museum can offer a fair price.

'The southern states, particularly Italy and Spain, want other countries to enforce laws they can't enforce themselves,' said Sir Nicholas Henderson, Sotheby's expert adviser on EC negotiations.

Before the directive was signed the National Heritage select committee recommended a deferment until the regulations could be redrafted 'to take account of the inconsistencies and unacceptable administrative impact of the proposals'. But the Government went ahead.

Mr Key said at the time that he believed he had negotiated a series of major improvements to the draft directive and regulation. 'I believe we have secured a fair deal,' he said.

Peter Brooke, Heritage Secretary, is resisting Treasury efforts to privatise the multi-million pound government art collection. Paintings from it, including works by Sickert, Hockney, Gainsborough, and Augustus John, hang in the offices of ministers and senior officials, as well as in embassies round the world.

(Photograph omitted)