The Australian Innovation Community

From the Fin Column of 19th August.
There were so many issues in the last election that you might not have noticed Labor’s 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 government’s 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 Australia’s 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.