Wasn't the sky supposed to fall? The United Kingdom's six year-old artist resale royalty law, which requires that a percentage of the profit of a secondary market sale of art to be paid to the creative artist or, since the law was expanded in the beginning of this year, to a deceased artist's estate, was supposed to have a "corrosive effect" on the British art market, according to Anthony Browne, executive director of the British Art Market Federation. Buyers would stop buying contemporary artists, because they will refuse to pay the royalty at some point in the future; British sellers of this art would look to sell in Switzerland or the United States, where there is no royalty to be paid. "Over the long haul, it will be very damaging to the art market here, and to artists."
Tell that to the dealers of contemporary art in the UK and to the auction houses, which have racked up strong prices for Modern and contemporary artworks back in January and in the recent June sales in London. "We've had two very successful seasons," and the resale royalty law has been "pretty irrelevant," according to a spokesman for Christie's. The auction house's June 20th sale of Impressionist and Modern art earned £92,583,550 (or $145,541,341), within the £86,525,000-126,740,000 presale estimate, with 56 (or 80 percent) of the 70 lots finding buyers, while its June 26th sale of post-war and contemporary art brought £132,819,400 (or $207,331,083), within its £102-139 million presale estimate, and 87 percent of the lots in the sale were sold. Sotheby's June 26th contemporary art sale earned £69,307,050 (or $108,028,899), within its £57-82 presale estimate, with 69 (or 87 percent) of the 79 lots finding buyers.
The amount of the resale royalty is set on a sliding scale, based on the sale price of the artwork. Pieces up to 50,000 euros are assessed four percent, from 50,000 to 200,000 euros three percent, from 200,000 euros to 350,000 euros one percent, half of one percent for items from 350,000 to 500,000 and one quarter of one percent for objects in excess of 500,000 Euros. The maximum amount of resale royalties payable, however, is 12,500 euros, or $15,532.
The Christie's spokesman noted that for the person who bought Yves Klein's 1960 "Le Rose du Bleu" at the June 26th sale for £23,561,250 (or $36,779,111), the highest auction price every paid for a work by the artist, "the £12,500 cap really wouldn't have any effect."
Similarly, many UK dealers have not found the resale royalty law a hindrance on their trade. "Sales have been as healthy as before the law came into effect," said Glenn Scott-Wright, director of London's Victoria Moro Gallery. "Clients haven't indicated that they were unwilling to buy because of the royalty. In fact, there hasn't really been much discussion of the law."
Worries about the law's effect have struck many in the trade as theoretical rather than actual. "The resale royalty hasn't contributed to the destruction of the British art market," said Tania Spriggens, spokesperson for the Design and Copyright Society, one of the main collecting societies in the UK for the royalty. Since 2006, she stated, DACS has collected approximately £15 million, which has been paid to more than 2,200 artists. "We can't see prices having dropped, because of the law, or that people have gone elsewhere to buy or sell art, and we can't see it having this kind of impact in the future. It would seem as though all the fears have been overblown."
Browne noted that the most adverse effects of the law have been felt more by dealers than by auction houses, since the auction houses have passed along the price of the resale royalty onto the amount that buyers pay, in order to attract consignors, while secondary market dealers -- who tend to obtain their inventory through purchases at auction -- often have to pay the tax twice, once when they purchase at auction and the second time when they sell from their galleries. Those dealers could pass the price of the royalty onto their buyers, which they are fearful of doing, or "as is more often the case, they absorb the cost of the royalty, which lessens their profits."
He stated that the European Commission will examine the impact of artist resale royalties in 2014, in order to evaluate its effect. If it finds a cause for concern, it will recommend changes in the law.