LONDON-- Aftershocks are rippling through the continental gallery world after a decision last month by the European Commission to classify light installations by Dan Flavin and video works by Bill Viola as light fixtures rather than art, subjecting them to the full valued-added tax in European Union countries. The December decision overturned a 2008 British VAT and Duties Tribunal ruling in which Haunch of Venison successfully challenged the designation of a Flavin light sculpture as hardware instead of art, thereby greatly reducing its $66,000 VAT bill.
The commission's reversal has significant financial ramifications for dealers and exhibitors hoping to show the artists' work in Europe. Carrying a European-wide minimum rate of 15 percent, the VAT is 20 percent in Britain -- though works classified as art are taxed at a special lower rate of 5 percent -- while Germany has a VAT of 19 percent, though artworks are taxed at 7 percent. The European Union is planning to harmonize VAT rates and exceptions but has so far only taken partial steps to do so.
Many observers of the case have pointed out the contradiction inherent in categorizing artworks as hardware to obtain a higher tax rate and then taxing them on the high value they fetch on the market because they are art, not light fixtures -- an absurdity that makes the decision look like a blatant money grab on the part of the European Union. "The logic does not hold up," Sandy Nairne, director of the National Portrait Gallery, who served as an expert witness in the case, told the Art Newspaper.
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