Good afternoon, ladies and gentlemen.
With your permission, I'll present in English,
but I'll be happy to answer you in the official language of your choice.
My name is Mark London, and I'm the owner of Galerie Elca London in Montreal, which was founded by my late parents in 1960. My gallery specializes in the sale of Inuit art from the 1950s to the present.
I am here today speaking as a member of the board of directors of the Art Dealers Association of Canada. At present, the association is comprised of 76 commercial art galleries, and collectively we represent several hundred artists from coast to coast.
While many try to paint the relationship between artist and dealer as an adversarial one, the truth is that we're partners. I like to say that when the sun shines, it shines for everyone. However, I'm here to tell you that there are storm clouds on the horizon. Many ministers from across our great country have received pro forma letters from constituents demanding that Canada enact an artist resale royalty.
While this noble concept is indeed law in many countries, it exists more to level the playing field between trading partners than to benefit artists. What is seldom mentioned is that the ARR simply does not benefit those whom it was designed to help. In most cases, the sole beneficiaries of significant ARR monies are the estates of a handful of wealthy artists.
For commercial galleries, the administrative costs of the ARR represent a significant financial burden. Indeed, the greatest beneficiary of the ARR, regardless of country, is the organization tasked with collecting and distributing the funds. One could easily argue that any organization arguing to become the administrator of the ARR is doing so because this represents a lucrative revenue stream.
In 2013, the Honourable Scott Simms introduced private member's Bill C-516, an act to amend the Copyright Act. While Mr. Simms might have put some thought into drafting the bill, it is obvious that he did not consult with anyone who sells art for a living, or for that matter anyone who buys it. Ladies and gentlemen, it would be impossible in the allotted time to detail exactly why this bill, particularly as written, would be a nightmare, but I can give you some highlights.
The first bombshell is advocating an ARR of 5% on any resale greater than $500. Can you imagine the administrative costs to both art gallery and collective agencies to catalogue, research, and disburse a cheque for $25? In the United Kingdom, for example, the threshold for an ARR is any sale over a more reasonable 1,000 euros, which is currently approximately $1,500 Canadian. I should also point out that most countries with an ARR impose a maximum payout, which Bill C-516 does not.
Another bombshell is proposing an ARR on any sale of a work for $500 or more that is subsequent to the first transfer of ownership by the author. This presupposes that all works find their way onto the market in an identical manner. In most cases, an artist brings his or her works to a retail gallery on a consignment basis, and they are paid when and if the work is sold. In theory, the ARR would apply only when, years down the road, a collector decides to sell.
I'm here to inform you that the art world isn't that simple. There are numerous ways in which art works find their way onto the primary market that are in direct conflict with the ARRs proposed. For example, printmakers often work with print publishers, who sell the prints to retail galleries outright. In this scenario, the first sale to an art collector effectively becomes the second resale. When a collector sells what is intended to be the first resale, it's actually the third.
As mentioned, I deal exclusively in Inuit art. When an artist in Cape Dorset brings his or her work into the local co-operative, it is purchased outright. I then purchase the piece from the co-operative. When a collector purchases a piece from my gallery, that would be the first retail sale, but technically the third resale. When the collector decides to part with the piece, that would be the fourth resale, not what would ordinarily be the first.
Lest any of you think this would actually be beneficial to artists, it is important to point out that all of these additional costs would have to be passed along to the consumer in the same manner as freight, insurance, framing or any of the other myriad expenses required to bring art works to market. Repeated ARR expenses calculated on goods that have yet to reach the retail market would have a compound effect that would only be detrimental to the artist's ability to sell in a competitive market.
When the Mulroney conservatives enacted the GST in 1991, they assured Canadians that replacing the 13.5% manufacturers' sales tax would lower prices for the consumer. While this might have been the case for microwaves or toaster ovens, it had a devastating effect on the art market. Overnight, prices went up by 9%. Our sales for 1991 were slightly less than one third of our sales for 1990. While artists' groups take great pains to assert that the ARR is not a tax, I can assure you that semantics will matter little to those who will come up against it.
Since we are arguing semantics, I would suggest that the beneficiary of any tax should be the public purse. In other words, all Canadians benefit when taxes are paid. You would know better than I do that the higher the tax rate, the greater the likelihood that people will try to avoid or evade taxation.
Indeed, should an ARR come into effect, there would be an immediate reaction on the part of art collectors. At the very least, in the immediate aftermath of an ARR, sales would tumble, putting at risk the thousands of Canadians whose livelihood depends on the art business. We might conceivably see a future in which most of the major sales of Canadian art would be transacted in a jurisdiction that does not have an ARR. Since most of us live but a short drive from our American neighbours, it's not too hard to guess where these sales would happen.
Additionally, since private sales are generally not subject to ARR, traditional galleries and auction houses will surely be circumvented by sellers and buyers working directly to avoid the ARR.
One also wonders what the detrimental effect to the public purse would be when neither GST nor PST is collected. This is particularly worrisome since, historically, when a government needs to sharpen its pencil and cut some budgets, the axe falls first on arts and culture.
Our position is that the ARR is a utopian concept. The research is clear that ARR does not work as intended and that its benefits are greatly offset by its detrimental effects on the marketplace. The Canadian art market is simply in too precarious a situation to risk something that has proven to be so ineffective.
In case I haven't been clear, we think the ARR is a terrible idea. Given that the Copyright Act is subject to review only every five years, we urge you to treat the ARR as a stand-alone issue rather than a component of a larger copyright act.
In that seemingly no art world professionals were consulted in the drafting of Bill C-516, we look forward to the opportunity to sit down with you and other stakeholders in order to give this matter the serious consideration it deserves.
Thank you very much.