Art market threatened by EU 'tax' on sales

The British art market warned yesterday that it will lose business to other parts of the world, after the European Parliamentvoted to give artists a share of the resale price of their works sold in the EU.

The British Government has vigorously opposed the law because it fears it will make London auction houses such as Sotheby's and Christie's less competitive than those outside the EU in countries such as the United States and Switzerland.

The measure, criticised as a "tax" by opponents, has been watered down several times. It now applies to original artworks worth more than 3,000 euros (about £2,000), instead of 1,000 euros, as originally proposed. The total amount of royalties which can be paid at any one time has been capped at 12,500 euros. Under the new rules, artists will receive royalties of 4 per cent of the sale price up to 50,000 euros and on a declining scale above that figure. Britain and other EU countries which do not already have royalties systems for artists will have until 2012 to comply.

Neil Smith, of the British Art Market Federation, said the new rules would mean a loss for British dealers. "It is inevitable that this will encourage a shift. Big business will be attracted to New York," he said.

But he added that he hoped the watering down of the directive would give the London market some protection.

Mr Smith said the new law would apply to most art. "Very little serious work is sold below £2,000," he said. "The biggest problem for smaller dealers will be bureaucracy."

A British spokesman said: "While the outcome is an improvement on the original proposal, the Government would have preferred a better result." Arlene McCarthy, the legal affairs spokeswoman for Labour MEPs, who represents the North West, said: "We have stopped an extremely damaging proposal for the British art market. It is a good deal."

But, the pressure group Artists Against Droit de Suite, which includes David Hockney, Karel Appel and Emma Sergeant, was critical of the deal. It said it would do nothing to help most artists because the law only applied to sales made in galleries and auction houses and not those involving private transactions and museums.

"The directive was designed to benefit artists, but instead creates a shameful inequality between famous artists on the one hand and struggling artists on the other," it said in a statement.