Art in Germany may be about to get more expensive.
In Brussels on Monday the EU Commission told Germany it was high time to raise its tax on art. For decades, German collectors and gallerists have benefited from a significantly reduced value added tax (VAT) on artworks and collectibles. At seven percent of purchase price, the tax is nearly three times below the conventional VAT of 19 percent for goods and services across the nation. It is also less than half the mandatory 15 percent VAT required by the EU.
Such targeted use of lowered tax rates are sometimes allowed, but only when a specific permit has been granted by the commission. Since there has never been such an agreement, Germany will be brought before the European Court of Justice in Luxembourg should the government not agree to the higher rate, facing possible fines.
German culture minister Bernd Neumann decried the commission’s demands on Tuesday, claiming that the tax hike could put enormous strain on the cultural sector, which is already performing poorly due to the financial crisis. A raised tax, Neumann suggested, would cause further pressure on the welfare system, doubling the adverse effects of the measure.
While photographs, screen prints, and even light art are not included in the current tax break, the German art market would likely still take a blow. Museums, whose acquisition budgets have been drawn down to almost non-existent levels, would be even less able to acquire works through philanthropic gifts, especially from corporate collections, which require the payment of VAT for the work’s market price.
Moreover, Neumann questioned why the commission had singled out Germany’s tax practices now. “Until today, the reduced rate was kept in silent agreement. Apparently, now the EU Commission has singlehandedly ended it.” Still, Neumann is holding out hope that a proper agreement, like the permits held by other countries for lowered taxes on certain sectors, could be reached between Germany and the EU.