Should I Stay or Should I Go?

‘There are no votes in the arts. Nobody’s interested.’ This was the instinctive response of re-election obsessed Jim Hacker when bridling at Sir Humphrey’s insistence that his PM should speak at a broadcast awards ceremony, even though it was scheduled for the same day that his Government was to announce funding cuts to the arts (Yes Prime Minister, 1988). This political maxim concerns votes for a candidate and a party, however, whereas votes in a referendum are cast for or against the question, answers to which may involve consideration of the arts.

On 23 June the referendum question for UK voters is blunt: ‘Should the United Kingdom remain a member of the European Union or leave the European Union?’ There are two official campaign groups, Vote Leave and Britain Stronger in Europe. Leavers essentially argue that the UK would be set free from EU constraints to prosper. Remainers contend that EU membership boosts UK prosperity and world status. Neither camp has a crystal ball, which leaves them fighting over political and economic forecasts. However, there are known facts about the UK’s EU membership that are relevant to art and law.

The UK/EU relationship is fundamentally legal. Just as citizens enter into a ‘social contract’ with their country, by undertaking to obey the law and pay taxes in exchange for the state providing a law-abiding and ordered society, so governments agree contracts (treaties) with other countries exchanging mutual obligations and benefits. The EU started in 1950 with six countries that had recently been ravaged by the Second World War – France, Germany, Netherlands, Belgium, Luxembourg and Italy – signing a coal and steel community agreement aimed at preventing any future such war involving them. In 1957 the six signed the Treaty of Rome to create the European Economic Community (EEC), which expanded in 1973 to add Denmark, Ireland, and the UK (which by referendum – the UK’s first – in 1975 voted to remain). In 1993, EEC members signed the Maastricht Treaty to create the EU, now comprising 28 member states covering 500 million citizens with a combined GDP of €14tr.

The EU’s basic legal framework is governed by its treaties, which established four key institutions. The Brussels-based European Commission is the civil service administering EU expenditure, and is led by 28 commissioners (ministers), each appointed by a member state; it develops new laws for consideration by its parliament. The European Parliament, based in Brussels and Strasbourg, votes on laws proposed by the commission and comprises 751 MEPs directly elected by voters in each member state. The European Council in Brussels develops and sets policy and strategy, and comprises representatives of governments of each member state. The European Court, based in Luxembourg, ensures the uniform application and interpretation of EU law, decides legal disputes (between member states, EU institutions and EU-based businesses and individuals) and comprises 28 judges, each appointed by a member state. Within this legal framework, provisions have been made in relation to art, some or all of which may discontinue if the UK left the EU.

The EU Commission provides substantial financial support to the arts in the UK. For example, Creative Europe is a programme funding the culture, audiovisual and film sectors, which awarded the UK €39m in 2015. The European Regional Development Fund is a programme aimed at strengthening economic and social cohesion, which has funded many UK cultural regeneration projects in recent years. The Erasmus (European Region Action Scheme for the Mobility of University Students) student exchange programme combines all the EU’s current schemes for education, training, youth and sport. Significant UK financial beneficiaries have included the Imperial War Museum North at Salford, the new Richard III heritage centre and tomb at Leicester and Antony Gormley’s landmark 1998 sculpture Angel of the North. Outside the EU, such funding would be a matter for the UK alone.

Until 1998, UK law did not require import tax to be paid when art was brought into the UK. In 1999 EU law required import VAT to be paid when art is brought from outside the EU into any member state, which is required to tax the importer at least 5% of its market value. Each member state has discretion to raise its own import VAT level above 5% (and many have: France 5.5%, Germany 7%, Croatia 10%, Denmark 25%). The UK currently enjoys a competitive advantage over the rest of the EU art market because it has the EU’s lowest art import tax rate of 5%. This low rate significantly contributes to the UK’s being favoured as the first EU port of entry and transit hub for art destined for all EU countries; when such art arrives in the UK from outside the EU and is taxed at 5%, no further import VAT is payable if the work is re-transported to any of the other 27 EU countries. In other words, it is import tax-efficient to ship a work from New York to London before onward transmission to any or all other EU countries.

It is speculated that if UK remained, the EU might in future change its art import VAT law to require all member states to charge the same rate, thereby depriving the UK of its competitive advantage as a favoured EU first port of entry and transit hub for art. If outside the EU, UK law could then abolish art import VAT (but would lose its art import tax income). If outside the EU, any new art trade agreement with the EU is likely to require the UK to accept the EU’s import VAT rules (though not necessarily at the current lowest rate), but without having EU membership rights to influence the making of those rules.

Since 2006, £52m has been received by around 5,000 UK-based artists (or their estates) in royalties from resales of their works. This Artist’s Resale Right was enacted into UK law because EU law required its implementation throughout the EU from 2006. ARR gives EU-citizen creators of original artworks an automatic legal right to receive a royalty payment each time one of their works is resold (in the UK and throughout the EU) in a sale involving an art-market professional, and this right lasts for 70 years after death to benefit artists’ heirs. The UK’s ARR applies to resales of €1,000 or more and is calculated on a sliding scale (0.5% to 4% of the resale price), with €12,500 as the maximum royalty payable on any single resale. Throughout the second half of the last century, art-market professionals based in the UK successfully lobbied UK governments against enacting ARR, principally because they contended that it would push modern and contemporary art trade away from the UK to non-ARR market locations such as New York or Switzerland. Since 2006, such lobbyists have continued to criticise and brief against ARR and, if the UK leaves the EU, are likely to press the UK government to abolish ARR. It is equally likely that artists, their estates and representative bodies will lobby for ARR’s retention.

Neither official campaigning group offers comments on the arts, so perhaps they do indeed consider there to be no votes in the arts. But some voters may be influenced by consideration of the well-being of the arts in a UK that is either within or outside EU membership.



© Henry Lydiate 2016

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This article is from the Artlaw Archive of Henry Lydiate's columns published in Art Monthly since 1976, and may contain out of date material. The article is for information only, and not for the purpose of providing legal advice. Readers should consult a solicitor for legal advice on specific matters. Artists can get free online legal information from Artquest.