Spain to consider reduction on culture tax
Following comments from the president of Extremadura, the country’s culture minister says he is open to reviewing unusually high VAT rate
By Laurie Rojas. Web only
Published online: 19 June 2013
Last week, Spain's Minister of Education, Culture and Sport, Jose Ignacio Wert, said he and the finance minister Cristóbal Montoro are “completely open” to reviewing the country’s VAT rate on culture—the highest in Europe—provided it is compatible with the “objectives of fiscal consolidation”. This follows a proposal from the president of the Spanish autonomous region of Extremadura, José Antonio Monago, to reduce VAT on cultural goods and services, including the sale and import of works of art, private museum entrance fees, and cinema and theatre tickets, from 21% to 13%.
The higher rate has been in force across the whole of Spain since September 2012, when it jumped from 8% to 21%. Public museums and non-profit organisations are exempt. At the time, the Madrid art dealer Helga de Alvear called the VAT hike “tragic”. Wert said last week that “no culture or even finance minister likes to raise taxes”, adding that he is aware of the complications sparked by the rise and how it has affected attendance at exhibitions.
In a speech in Barcelona in May, Monago said: “Spain should have a cultural VAT in accordance with the rest of Europe.” At 21%, Spain has the highest rate on the continent, followed by Portugal at 13%. The majority of other countries have a rate of less than 10%. Apart from Spain, most European countries have a separate, reduced rate for the sale of works of art, which range from 7% to 13%.
Javier Martin Fernandez, the managing partner of the law firm, J&M, which advises the Consorcio de Galerías Españolas (consortium of Spanish galleries), was not, however, too optimistic about Monago's proposal. He said only the central government has the power to reduce the VAT rate, and that will only happen with sufficient social pressure.
Fernandez believes the best course of action is to follow other European countries and have a reduced VAT rate for selling and importing art that is separate from the general cultural VAT. Otherwise, Fernandez warns: “The Spanish government will lose out collecting VAT from Spanish galleries because sales will inevitably go to foreign galleries with considerably lower VAT.”
Carlos Urroz, the director of Arco Madrid, attempted to establish a reduced VAT rate at this year's fair, but was unsuccessful. “The rise in taxes in the Spanish art market will negatively affect the government's income. Due to the mobility within the European Union, collectors might prefer to buy from galleries with lower taxes,” he said. Nonetheless, the press officer for Arco, Daniela Goodman, said that despite the high VAT, sales at the fair were “surprisingly high” to both foreign and Spanish collectors.
Alberto de Juan, the president of the gallery consortium and the director of Galería Max Estrella, argues that although sales might have been high at the fair, the Spanish galleries where undoubtedly affected. “A number of measures were taken to counter the consequences of an erroneous decision by the government”, he said. “[These included] inviting many foreign collectors to the fair, upgrading the quality of the works on sale and galleries generously absorbing the VAT increase so that their clients were not harmed by the sale.”
The consortium has been meeting with the relevant ministries to push for a reduced VAT. Their main strategy is to demonstrate that the higher VAT rate of 21% will not benefit the Spanish government if the country’s galleries cannot compete with their international colleagues. De Juan concludes: “The best measure, unfortunately, is to demonstrate a decline in income for galleries. The problem with that is that, once a gallery is shown to be doing very badly, it might be too late for recovery. We have full faith that the government will reduce VAT; the problem is when.”
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