European tax policies force fine art centre from old world to new

Lanto Synge, chief executive of the London antique furniture and fine art dealer Mallett, is clear about his decision to open a showroom on New York's Upper East Side: it is where the clients are.

Mr Synge is not alone. Eager to take advantage of the booming US art market, galleries and outposts of established businesses have been opening across the city.

With a nod to the top prices being paid there, global concerns, such as Christie's and Sotheby's, are sending their finest selections to New York. Both houses have enjoyed strong results from the sales that began the May season.

"New York has become emphatically the central axis of the art world," said Mr Michael Goedhuis, who moved the headquarters of his gallery, which specialises in contemporary Chinese artists, from London to New York in January.

As Mr Goedhuis and others are quick to point out, the balance of power in the art world has been shifting away from Europe for decades.

But several factors have helped quicken the pace recently, and 2001 marked the first time the US had a larger share of the market than Europe.

The US - dominated by New York - had $11.4 billion (€12.5 billion) in art sales last year, accounting for 47 per cent of the global market, according to a recent study by the European Fine Art Foundation. Europe held 45 per cent of the global market, led by Britain, with 25 per cent, and France, with nearly 8 per cent.

"What we're looking at is a long-term systemic change in the way business is done in the entire global sector," said Mr David Kusin, founder and chief executive of Kusin & Company, the Dallas art research firm that prepared the study.

He said the global art sector had responded to a European business environment "that is not healthy for the art trade". The main culprit? European Union tax policies. A value added tax on the import of art and antiques was introduced by the EU in 1995, putting the market at a disadvantage. And in 2006, the EU will harmonise the droit de suite, a royalty paid to an artist or his heirs for up to 70 years after death. It is payable on each sale of a work, and ranges up to 5 per cent with a ceiling of €12,500.

German dealers of contemporary and modern fine art report that at least 20 per cent of their German clients do their buying in the US, he said.

Mr Goedhuis complained about the "irritating increase in taxes" and the "burden of bureaucracy" in Europe, and said buying power was much stronger in America, with more active collectors and acquisitive museums.

Based on the market conditions in Europe and the demand for art in the US, Mr Kusin expects the others to follow Mr Synge to New York. "It's not just a temporary thing."