Minister Crean also announced that Australia's successful resale royalty scheme, which provides a five per cent payment to artists from the resale of their artwork, will be funded for two more years.
"As a key election commitment of the Australian Government, the resale royalty scheme has already generated over $650,000 in royalties from over 3500 resales of art by more than 390 artists," he said.
"The Australian Government will provide $700,000 over two years for the collection and payment of royalties to visual artists as well as for a post-implementation review of the scheme. As the income from resales increases, it is anticipated the scheme will become self-sustaining.One commentator - less than enthused by the droit - stated that -
The scheme was premised on a market size and turnover that was, even at the height of the boom, wildly overestimated by a factor of at least 2 or more. Even a fully retrospective and compulsory scheme such as enacted in the UK, would not be self-funding in Australia; the long term market here is simply not large enough.
This government's policies have had a devastating effect on the art market: the resale scheme has undermined confidence resulting in reduced demand and, at the same time the ruling on SMSF (Self-managed super funds) will result in a massive over-supply of indigenous art for resale on to a reduced market. In this situation, the very idea that a scheme premised on levying on the value of art resales ever becoming even vaguely self-funding is ludicrous.
The paradox is that the Australian government has done the resale royalty, at a secondly instrumentation level, as professionally as it could be done and the Act itself reflects the constraints of a constitution that set out very consciously to embody the principles of responsible representative government: therefore, the Australian scheme is a lawful scheme. However, the messy reality is clear proof that resale royalties, at the level of principle, if done lawfully and properly, are bad policy".An observer might be forgiven for wondering whether the scheme has "had a devastating effect on the art market" and "undermined confidence resulting in reduced demand", given that Australia continues to experience the aftermath of the Global Financial Crisis. The droit may indeed be "bad policy" but the messy reality is that we lack "clear proof". (Collective rights schemes also, of course, take time to bed down.)
The lament that the droit will damage the Australian art market was heard when the scheme was first proposed, while it was being introduced (with a simplification in December last year noted here) and since it was introduced. Presumably the same lament will be made in future.
It would be fascinating to see substantive data that differentiates between the effect of the droit and the impact of the GFC. In practice such data isn't likely to be obtainable, in contrast to anecdotes from dealers (most of whom, like some overseas peers, have been opposed to the scheme from the beginning and prophesied imminent ruination).
In practice the Australian scheme is probably neither as pernicious nor as wonderful as claimed by opponents and proponents.
From the perspective of 2012 I'm reminded of the 2004 IPRIA paper 'Droit De Suite Down Under: Should Australia Introduce a Resale Royalties Scheme for Visual Artists?' [PDF] by Emily Hudson & Sophie Waller that concluded -
Evidence of the effect of introducing resale royalties on the Australian art market is inconclusive. As can be seen from the discussion above, there has been much debate in the literature about the benefits and costs of introducing a resale royalty scheme. As stated in the Myer Report:
it can probably be concluded that, ‘given the state of the empirical evidence in hand, intelligent, well meaning persons, equally well informed about economic theory, may well disagree about the efficiency of artists’ resale rights.’
The statistics cited in this article show that artists generally have a low income compared with the rest of the workforce. There is also evidence that Indigenous artists often receive less than market value for their works. However, resale royalties will not address either of these issues. A resale right will be in name only for most artists; only a select group of artists, many of whom are deceased, white and male, will ever receive any benefit. This benefit must also be viewed in light of the uncertain effect that resale royalties will have on the art market, and thus on the livelihood of the majority of artists. Although evidence from overseas suggests that resale royalties may cause art sales to move to jurisdictions that do not impose a royalty, it is unclear what effect implementing resale royalties would have on the Australian art market. It may be helpful to undertake a comprehensive empirical study in relation to possible effects of resale royalties on the Australian market.
Other justifications for the introduction of a resale royalty right in Australia include the ‘unjust enrichment’ of dealers and investors at the expense of artists and the benefit from harmonisation with other laws, particularly if the growth in the market for Indigenous works spreads overseas. However, there are strong countervailing arguments that royalties rarely accrue and only tend to benefit established artists and their heirs, who may already have a handsome income stream from new sales and commissioned works. Resale royalties have not been shown to increase artistic output or the dissemination of works.
To the extent that it wishes to improve the financial situation of struggling artists, Australia could consider introducing a similar scheme to that in Germany, where, in addition to the payment of a royalty to individual artists, money is paid into a central fund that is used to benefit all artists. The use of targeted funding and support is particularly important for Indigenous artists, whose living conditions and income are at deplorable levels. Exploitation of Indigenous artists should also be addressed directly by the government, for instance through existing trade practices legislation.
If Australia does pass a droit de suite, it is clear that a central collecting society will be essential to administer the scheme. Funding of such a society will be a crucial question. Analysis of overseas schemes suggests that the collecting society generally deducts an administrative fee out of the royalty collected; an important question in Australia would therefore be the level at which this fee will be set. A final question is whether the collecting society should receive additional government funding to assist with investigation and enforcement measures. If government support is required, an obvious criticism is that money could be better spent directly on artists.
Whether Australia decides to implement a resale royalty scheme or not, further research and public discussion should occur. The discussion that has resulted from the release of the Resale Royalty Bill and the Discussion Paper is a good start. However, there has been limited empirical research undertaken in regard to resale royalties in Australia, and if a decision is made to introduce resale royalties now, it will be based on speculation rather than solid data as to its possible benefits and costs.There is still speculation. Unfortunately the national Government is unlikely to fund the research that will provide the authoritative data needed to quell the alarums and huzzahs.