Artist Resale Royalty and the FTA

The trade deal with the UK requires NZ to implement an artist resale royalty scheme.

I'm no fan of these things.

And so I'm pretty sceptical about Droit de Suite - policies that seek to redistribute portions of realized capital appreciation in artworks back to the originating artist. At the margin, they reduce incentives for gallery owners, curators, and collectors to make complementary investments in new artists. What are the distributional effects?

• A windfall gain in the current period to established artists at the expense of those who made complementary investments in their success;
• A transfer to those artists who become successful from those who never do;
• For a successful artist, a transfer of income from when he's young and poor to when he's old and established.

None of these seem particularly desirable. The first has efficiency consequences as well as distributional effects. The latter two turn art into more of a winner-take-all market. Think of a work from a new artist as a lotto ticket that might or might not pay off if an investor makes a pile of ancillary investments. The value of that lotto ticket is lower if the winning tickets are taxed. So the initial price a new artist's works can attract is lower than it otherwise would be. So all new artists earn less on their early works while those who eventually become successful are paid back with interest. But that's when they're already well off and can supplement their income by doodling on folks' napkins at restaurants.

The RIS on the proposed scheme is now up. It says:

Impacts of proposal 

Benefits would include royalties paid to artists. Modelling suggests a net average of $702,858 per annum would have been distributed to artists and estates between 2018 and 2020 . A substantive part of the royalties would go to well-established artists (or estates) whose work commands a higher price at auction. Less well-known and emerging artists would still receive modest remuneration.

I really don't think they've thought this all the way through. But since the annual amount at stake is less than the value of a single modest house in Auckland, it may not be worth the cost of thinking all the way through.