§ Lord Morris of Manchester
asked Her Majesty's Government:
What estimate they have made of the effect, in terms of diverting sales of international art from the United Kingdom to unregulated markets outside the European Union, of the European Commission's proposal to enforce VAT at 5 per cent. and to introduce droit de suite. [HL1950]
§ Lord McIntosh of Haringey
Goods imported into the UK normally bear VAT at the standard rate 11WA (17.5 per cent.). Under the terms of EC law implemented in the UK in 1995 certain works of art, antiques and collectors' pieces are eligible until 30 June 1999 for an effective rate of VAT at importation of 2.5 per cent. After that date the UK should increase the VAT rate to at least the normal minimum reduced rate of 5 per cent.
No official estimates have been made of the effect on the UK art market of increasing the rate of VAT on fine art imports to 5 per cent. The annual values of UK imports of works of art and antiques from non-EC countries show considerable quarterly fluctuations and have no discernible pattern. This hampers considerably the ability to identify trends or make forecasts.
The EC Commission, however, is committed to re-examining this year the effect of VAT on imported works of art, and other factors which may affect the competitiveness of the Community art markets. The UK will be actively involved in that review, and will ensure that the special position of the British art market is properly represented.
It is also impossible to be certain about the effects of introducing droit de suite into the UK. However, a study made by the Department of Trade and Industry estimates that if the sales of all works eligible for the right transferred abroad were lost to foreign markets. British dealers and auctioneers could lose fees of up to £68 million per annum and up to 5,000 jobs. If only non-EU originated trade was lost, the losses could amount to £17 million and 1,300 jobs.