Tuesday, 17 April 2007

Royalties, paintings and peasants

The first time National's Liberal Blue Chris Finlayson has to stand up and be counted and he's left instead standing around scratching his bollocks in indecision: Minister for the Arts Helen Clark and Minister for Helen Clark's Hand Bag Judith Tizard between them cook up a bizarre scheme in which a 5 percent royalty is imposed on on paintings resold within seventy years, and "National's arts spokesman, Chris Finlayson, said he was aware of the copyright debate, but [um, ah, well] had yet to decide which approach he favoured." "Christ Chris," says Lindsay Mitchell, "Being Liberal means promoting choice over government compulsion. No?" No?

Finlayson's leader's flaccidness is obviously catching.


  1. This looks to me like a government that is out of ideas. It still feels a pressure to do something and look relevant but all the stuff it set out to do at the start has been done. All the big boxes have been ticked, and what is left are the rats and mice policies that nobody thinks is sensible.

    Presumably artists could write into their agreement with the original purchaser an obligation to pay a fee for the next sale and to write into the agreement with a subsequent purchaser an obligation to pay a fee and to pass on this obligation themselves. One obvious reason this doesn't happen is that it is very expensive to enforce. That is also a good reason for why it bad government policy.

    A second issue that this is a tax on original but not print art, which is a substitute. It is a spotty tax, which creates well-known efficiency problems. It is conceivable that the combined effect of a) the monetary cost of the original art tax and b) finding the artist and paying them will push punters away from original art towards substitutes, and that this reduced demand will outweigh the revenue from each subsequent sale. Obviously artists who support this idea disagree, so perhaps the case for a net loss to artists this is not strong.

    FInally, a tax levied only when something changes hands is not sensible because it unnecessarily interferes with the painting find its highest value use. A more sensible tax mechanism would be an annual royalties system, in which a tax is paid each year regardless of how many times it changes hands. The tax could be collected by a single agency and distributed to artists, as with music royalties. This also has the benefit of lowering collection costs.

    That's my 2 cents.

  2. I have actually read the article - should have done that first - and note the following:

    # Many artists in fact do not like the idea because the tax will make it harder to sell

    # Artists, or at least those will some the market power to set terms, already have purchasers sign contracts for royalties on resale

    # A collection agency has been sensibly proposed

    # The lawyer likes the idea - what a surprise, since this is will certainly increase demand for their services.

    # Collection costs are likely to be a headache even with an agency, for example on overseas sales, and many artists see little returns anyway.

  3. I've lectured a bit on this topic in one of my classes. Basically, we expect that this kind of program will help already-established artists, whose prior work was sold at prices not discounted for the imposition of the new royalty regime, and hurt new artists selling their work at low prices trying to get their work known.

    I gave my Econ 224 students excerpts from the British version of the legislation on their final exam and asked them to give me an economic analysis of the likely effects.

    Matt B: Note that the British version of this legislation specifically forbids people from contracting around the provision. Any such contract is deemed invalid and the artist remains entitled to royalties.

  4. Hello Dr Crampton

    The article quoted a young artist who opposed the idea and a successful artist all for it, which is consistent with what you say.

    What I can't figure out is why the tax is not neutral wrt reputation - why does it favour established artists when it is on a percentage basis - are the works of young artists sold more often?

  5. Robert Winefield18 Apr 2007, 03:16:00

    It makes you wonder if Judith & Helen don't hold part shares in a Black Market Art Dealership.

    It'd be a hell of a successful way to drum up business for them if they did.

    Making the job of buying a painting harder is only going to screw over galleries, who must now hire accountants and lawyers and art-experts and PIs so that they can identify 2nd hand art and track down the artist without getting sued or done for fraud.

    Much easier to do the deal in a back alley and avoid all the government bullshit altogether.

    If this goes through I might consider dropping science and going into forging the 'art-registration' documents that would be required by both seller & buyer to show that the painting has been sold pursuant to the law. I think I'd make a fortune. It'd sure beat working for a living.


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