Federal Arts Minister Peter Garrett’s proposed resale royalty for visual artworks has been labeled a “disaster for Australian artists” by the body that administers visual arts copyright and licences.

As Crikey reported two weeks ago, many on the Aboriginal arts side of the visual arts industry considered his resale royalty proposal a dud.

Now Viscopy, which represents more than 7,000 Australian artists, has commissioned research that it says shows that the modeling used to support Garrett’s proposal was based on “flawed and uninformed assumptions”.

Viscopy’s report “Implications of the Australian Government’s Proposed Resale Royalty Scheme” concludes that the Garrett scheme as currently proposed: “…will not deliver significant income to the current generation of Australian artists, will not be recognised by other countries’ resale schemes and will be extremely complex and costly to administer.”

In March this year Garrett’s Department of the Environment, Water, Heritage and the Arts (DEWHA) spent $66,000 on a report from Access Economics for “Economic Modeling of a Resale Royalty Scheme”.

Crikey has obtained a copy of the Access Economics report. It is a fine example of an excellent piece of economic analysis that was asked the wrong questions and operates on the wrong assumptions. It also reveals a fundamental failure by DEWHA to understand how the Australian art market operates.

As Viscopy’s chairperson Michael Keighery told Crikey:

“DEWHA asked Access Economics to model 2, 5 & 10 years average turn around times for an artwork. On top of this Access Economics then chose to model resales as if art was a commodity such as electronic goods or cars … anyone with knowledge of the art market can tell you that this is not the case and that the average resale time is much longer.

“The Government then uses the report to develop their resale model in the false belief that the proposed scheme will capture all or nearly all resales after 20 years; i.e. all works owned prior to the legislation coming in will have been resold once.

“This is simply not the case.”

Other flaws that Viscopy identifies with the Garrett proposal include that the scheme will not link with similar schemes in other countries and as a result will deny Australian artists royalties from overseas sales. This is because, unlike most other similar schemes, Garrett’s scheme will fail to capture all works in copyright as they pass through the market.

Viscopy and others have told Crikey that this is because DEWHA considered that to do so would offend Australian laws on the acquisition of property and retrospectivity.

Crikey has seen Viscopy’s legal advice from senior counsel on these issues. In relation to whether a scheme that caught all works in the market would constitute a retrospective acquisition of property contrary to the Australian Constitution, Viscopy’s legal advice states:

“…this is to misunderstand the nature of retrospective laws … there is an important distinction between a statute which provides that as at a past date the law shall be taken to have been that which it was not, and the creation by statute of further particular rights or liabilities with respect to past matters or transactions…In my view the proposed law would not be retrospective but would do no more than create a fresh right or “further particular rights or liabilities” with respect to the artist’s copyright.”

DEWHA received the Access Economics report in April this year and sat on until just over a week ago, when it finally released the report to Viscopy.

The Access Economics report to DEWHA provides clear warnings to DEWHA that the Garrett scheme was fundamentally flawed in that it would provide poor returns to artists, would be clumsy and expensive to administer, and would be unnecessarily complex and may encourage avoidance:

“The amount of royalties collected in early years of a prospectively applied Scheme may be very small, possibly too small to cover administrative costs of the scheme.

“Furthermore, the costs of administering a prospective Scheme are likely to be greater than administering an equivalent retrospective Scheme as greater information systems would be needed to confirm an artwork’s eligibility. As only a proportion of sales would be subject to the royalty under a prospectively applied Scheme (at least in the short to medium term), prospective application may also increase scope for royalty avoidance. That is, a less comprehensive royalty scheme, like a less comprehensive tax, is generally be harder to enforce.” (at page 7)

A spokesman told Crikey that Minister Garrett wants to introduce the Bill for the resale royalty scheme in the eight sittings days left of the current parliamentary session and to have it up and running by the end of this financial year.

No draft of the Bill has been circulated for comment or consideration by the arts industry, though Minister Garrett’s spokesman told Crikey that: “The Minister has provided an assurance to the Shadow Arts Minister that he will have an opportunity to see the draft Bill before it is introduced to Parliament.”

Crikey asked Robyn Ayres, the Executive Director of the Arts Law, the arts community legal centre, to comment on the legislative process: “Arts Law hopes that we get to see the legislation very soon if the Government proposes introducing it this year. It certainly does not leave much time for reflection and correction.”

Crikey put a number of questions to Minister Garrett, including one that sought a response to concerns that the current proposal will fail to meet the industry-preferred criteria of providing significant benefits to artists, be straightforward and cost effective to administer and be consistent with international standards.

A spokesman for the minister provided this response, in part, to a question asked of Mr Garrett at a press conference early last week:

“I am happy to have a strong debate about what this scheme ultimately should look like, but I do think that where we have set the level [5% resale royalty] but I do think that where we have set the level will work most effectively for all visual artists, including indigenous artists.”

And Viscopy’s Michael Keighery urged Minister Garrett to:

“…proceed cautiously rather than rush ahead and put in place a model that is flawed and is not going to work in the best interests of the whole of the arts industry … it is trying to deliver on an election promise that Minister Garrett made. There is an opportunity for [DEWHA and Minister Garrett] to say our own modeling is not right.”

“I really have grave reservations and doubts about whether [the Garrett scheme] is viable or it will be possible to put the Government’s model in place before 1 July 2009,” he said.

“I’m hoping that we will throw a bit of cold water on a hasty move by Minister Garrett.”

Peter Fray

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Peter Fray
Editor-in-chief of Crikey