§ Mr. Fauldsasked the Chancellor of the Duchy of Lancaster (1) whether he will seek advice from the Standing Commission on Museums and Galleries as to the effects on the export of works of art in the light of the increase in value added tax;
(2) what is his policy with regard to the retention of works of art in the United Kingdom, in the light of increased incentives to export them resulting from the Budget.
§ Mr. St. John-StevasIn practice the incidence of VAT on the price of works of art of museum quality is generally quite small. If works of art are purchased from a dealer under the special secondhand scheme tax is levied only on the dealer's margin. If they are bought at auction tax is chargeable only on the auctioneer's commission, provided that the seller is not a registered VAT trader.
If the items are bought direct from a private owner there is no VAT charge and there may well be an incentive under the capital tax arrangements for private owners to sell direct to public collections in this country.
In any case, the general argument that VAT constitutes an incentive to export is not valid when the tax can be passed on to the domestic purchaser, and ignores the fact that foreign buyers are liable to extra transport costs and often to comparable taxes on importation into their own country.
This has been explained to the standing commission, following the comments made in its Tenth Report, and I understand that it accepts the position.