The Assemblée Nationale Rejects Including Art Works in the French Wealth Tax


19/10/12 - Cultural policy - French Wealth Tax - As expected since the government expressed its opposition and the Socialist Party its decision to vote it down, the amendment to article 9 of the 2013 Finance Law bill which provided for the inclusion of art works in the ISF or French wealth tax was rejected last night by the National Assembly of Deputies.

This marks therefore the end of a short but violent battle which shook the art world in France, from collectors to dealers, but also museums (see article in French). We had explained elsewhere (see article in French) the dramatic consequences resulting from such a measure if passed, not only for cultural heritage but for the economy as well. All of this is in fact acknowledged by those promoting the provision, for only a few million euros more and the "principle" itself, that is out of pure ideological motives.

The debates at the National Assembly reflected the atmosphere of the last few days. Deputy Le Fur, UMP [rightist party], demonstrated an incredible level of demagogical abuse. For example, he exposed an argument we had shown here was false. Hervé Mariton, also UMP, would like the National Assembly to undertake a mission studying tax policy for art works, a position close to that of Gilles Garrez, still again UMP, which was not adopted by those present since Christian Eckert stated that he would no longer pronounce himself on the subject. We should point out that this task force already took place in 1999 at the National Assembly (the report can be seen here, in French) and concluded by saying with considerable common sense, in a chapter entitled "L’ISF, l’éternelle menace", that including it in the wealth tax would be catastrophic. It is high time to put a permanent stop to this discussion. Everyone agrees that the art market needs a stable environment to grow.

According to observers, sales at the FIAC are excellent and the relief was palpable everywhere once it became obvious that the measure would not be voted in. Yet further proof, if needed, of the very negative effects exerted by brandishing the threat of taxing art works in France.

Version française


Didier Rykner, dimanche 21 octobre 2012


P.-S.

During the debate some deputies, even among those opposed to including art works in the ISF, evoked the need to subject capital gains on art sales to the same criteria as those generally outlined in the tax law. This measure would be just as lethal as including them in the ISF for several reasons, easily demonstrated below :

- The 5% flat-rate, as we have already said, applies to a great number of works which should not be taxed, when it is impossible to prove they have been owned for more than twelve years (and tomorrow thirty) ; for instance, not many people know that the tax authorities do not consider a simple invoice as proof of purchase on a certain date because there is no picture of the object in question.

- This 5% applies to the total price of the object and not on the real capital gain as this is a flat rate ; in most cases, the actual capital gain is very low and this 5% rate on the total sale price is in fact a much higher tax. To take a very simple example : an object acquired at 100 thirty years ago which should not be taxed but for which there is no proof of purchase and which is resold at 120, will be taxed 6, when it should not have been taxed at all and in any case only 5% of 20, that is 1 !

- The losses would not be accounted for or deducted from the capital gains.

- When a collector sells an art work, he often does so to buy another one which he likes more or because it fits in better with his collection (something which those attacking art collectors cannot understand). However, an overly high tax on the capital gain would make it practically impossible to improve his collection as it would be confiscatory at time of sale, not allowing the collector to repurchase an object at reasonable conditions.



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