Tax reduction of 6% may not promote art trade

The Customs Tariff Commission of the State Council issued the “Circular on Implementation Plan for Tariffs for 2012” (Tax Committee [2011] No. 27). From 2012 onwards, the original paintings of oil paintings, pastels, and other hand paintings will be issued; engravings and printings The original lithographic paintings; the import tariff rates on the original sculptures of various materials were reduced from 12% to 6%.

In 2012, the import tariff rate on some art works fell from 12% to 6%. In response, related parties said: “The import tariff rates on paintings, pastels, and other artworks will be reduced from 12% to 6% (provisional one year). After the implementation of the policy, people can feel the goodwill of the government in supporting art imports. The importer of artwork for detailed reporting is an encouragement, but as long as the tax rate is not 'zero', customs will never be able to clearly know the true total value of foreign art imports."

Shanghai's gallerist, Li Yajun, bought a sculpture from the Inoue Jiaming Gallery in Japan during last year’s Hong Kong Art Fair. He paid the domestic import tax of 12% and the value-added tax of 17% and shipped it to Shanghai. He discovered the sculpture after unpacking. After breaking the damage, the sculpture can only be shipped back to Japan. Although the Japanese gallery returned the full sales amount, for the gallery, it assumed the taxes and fees for the sculpture to enter the country and the transportation insurance return to Japan. If this happened in 2012, the loss of Li Yaxi might be reduced a lot.

Recently, the Customs Tariff Commission of the State Council issued the “Notice on Implementation Plan for Tariffs for 2012” (Tax Committee [2011] No. 27), and decided that since 2012, the original paintings of oil paintings, pastels, and other hand paintings; The original printing and lithographic paintings; the import tariff rate for the original sculptures made of various materials decreased from 12% to 6% (tentative 1 year). Relevant persons anticipate that this policy adjustment will reduce the tax cost of China’s introduction of world-class fine art works and help promote the construction of an international art trading center in China. It will have a positive impact on overseas high-end art works in the country. The amount of art trade in 2012 will increase to 3 billion to 5 billion yuan.

However, can only reduce tariffs on imports can really boost the turnover of art operations?

Tax reduction promotes faintly the art trade. “The tax reduction will not increase the transaction amount! If the auction house pays the tax at this tax rate, it is impossible! Because we collect a lot of auction items from abroad, assuming a base price of 10,000 yuan, the tariff is 12% equal to 1,200 yuan. On this basis, plus 17% of the value-added tax is 1,904 yuan, a total of 3104 yuan in total taxes. So the auction house commission is not enough to pay taxes, equal to Baigan." Beijing Wei Shi (microblogging) auction chairman Dong Guoqiang (Weibo In an interview with the Oriental Morning Post (microblogging) and Art Review, it was held that for overseas art collections, auction houses generally require the client to ship back to China, but they can sign contracts overseas because they are reluctant to involve them. Due to legal responsibilities, and the items that the customs involves in personal carrying are not taxable, the auction company does not bear import taxes and only collects commissions. The customs tax has actually received very little, either at a low price or privately.

“I don’t think there is necessarily a link between tax cuts and the substantial increase in the number of artworks.” Ren Yijun, general manager of Shanghai Oriental Huiwen International Cultural Service Trade Co., Ltd. holds the same view. Oriental Huiwen is the national foreign cultural and trade base operator. Ren Yijun believes that "the volume of domestic art market transactions is related to the country's overall macroeconomic environment. Art work is not a daily consumer product, and tax cuts will not greatly affect the transaction price of artworks. Of course, taxation acts as a lever to reduce costs and encourage transactions. The cultural exchange market can be revitalized, but the types of artworks are different, and the tax rates are different. The current policy is only to lower the tax rate on imported art such as oil painting and sculpture, and it will not have a major impact on the market."

Lowering the tax rate is an encouragement for art trade. It is certainly a good thing in terms of policy. However, Dong Guoqiang's doubts are: “This policy does not mention how ancient art works are dealt with. It only refers to oil painting sculptures. The vast majority of overseas collections are ancient and modern works, and the country has no specific standards. In the past, these works entered the customs in general. There is no need to pay taxes, but there are restrictions on the number of individuals to carry, but the principle of customs at different localities is not the same, the scale is not the same, and the number of restrictions is not the same. Generally, there are only 10 or 8 items for each person, and Beijing controls 8 In Taiwan and Hong Kong, there are people who help with things and we receive goods in the country.” Dong Guoqiang believes that “the relevant state departments should consider the special nature of the auction company’s operations and formulate relevant policies to be appropriate. Now it’s tantamount to treating the auction company’s operations in accordance with trade. Actually, as an auction house, only commissions are paid, and we still have to pay for air tickets during transportation, so the cost will increase. Although the legal risk is reduced, the actual cost is actually increased. We are in the process of solicitation and Sotheby’s. Weibo, Christie's competition is obviously one point more disadvantaged, because Hong Kong has zero tariffs, free entry and exit, and free trading."

After seeing this policy, Li Yaxi can feel the goodwill of the government in supporting the import of artworks. He believes that importers of artwork for detailed reports are an encouragement. “But as long as the tax rate is not zero, customs will never be able to clearly know the true total value of foreign art imports.”

Tax avoidance has its own unique advantages, leading to lengthy and lengthy transactions in the country. The original art trades such as oil paintings and sculptures were subject to 12% import duty rates and 17% VAT. For example, if an oil painting worth 10,000 yuan is to be imported, it must first pay 12% (1200 yuan) of customs duty, then press 11,200 yuan, and pay 17% (1,904 yuan) of VAT; the combined tax is 3,104 yuan; if Later, the painting was sold for 40,000 yuan, and then the tax still needs to be paid 5% of the business tax after the cost of 40,000 yuan in sales. Even if the 6% tariff is lowered according to the new policy, the oil painting with an import value of 10,000 yuan is also used as an example. First, pay a 6% (600 yuan) tariff, and then pay 170% (1,802 yuan) of VAT at 10,600 yuan. The tax is 2,402 yuan, which is only 702 yuan less than the previous 3104 yuan.

Art works in the territory to do marketing exhibitions, according to the value of the Customs and VAT rates approved by the customs to pay the corresponding tax, or pay a certain amount of security, but there is a time limit, in principle, 15 days, up to no more than six months, to the time must The original number is returned. The return of application funds also needs a cycle, and the financial pressure on the company's operations will increase.

There are also some auction houses that do not pay Customs security deposits. After the auction is over, they will be re-exported according to the similar thematic works of the declaration when they are submitted. "As long as the shipment is the same size and size as the declaration, the Customs does not normally check every single item." This has a loophole. An insider who did not want to be named told reporters that "will be a work of the same size." You can avoid the tax." Only 3% of the probability will be checked. Margins are also well-known, from the 3% of the valuation. -8%. Differently, “Customs Evaluation Department is difficult to determine a specific valuation system. When customs declaration, it can fill in 'temporary import and export' to the customs declaration company, stating that it is to be shipped back, so that the security deposit can be returned to the account within 120 working days. ”

What is even more peculiar is to move in the name of the individual. "According to the baggage, the transportation cost is twice as high as foreign trade!" If the value is high, it is cost-effective, otherwise it is not worthwhile. The insider is very familiar with the process and the market. "And not all artefacts should be handled. There must be personal clothes and other daily necessities, otherwise it will cause suspicions from the customs."

"Low declaration is also a common practice. It is OK to report $10,000 or 8,000 dollars. You have to say that there is a problem with $1,000. Customs valuation is impossible to check every ticket. More than $10,000, the computer's red light will shine! Then it's random." Random checks, 650 yuan a trip, the box opened to see if there is a problem to be explained, it will be very cumbersome." Pay attention to the receipt of the goods out of the box, it is best to have eyewitnesses and photos on the spot, because if there is damage, also Should be involved in full insurance. Artwork is prone to problems during inspection and transportation. Such on-site inspection and transportation can easily damage the art. "Finally, whether it is transport damage or handling damage directly affects transaction and insurance compensation."

Li Yaxi also heard that in the past, some overseas galleries sold their works to domestic buyers and used low-cost customs declarations. However, customs officers have great authority to agree or disagree. In case of disagreement, the Customs will impose a tax on the value of the mandatory declarer. The process is very complicated and painful, and it may cause damage to the artwork. "I don't think that tax adjustment will lead to a substantial increase in the volume of art transactions." Before the Longmen Gallery, it was rarely imported. Because Li Yalu calculated, there are other taxes and fees in addition to the import tax, "together for more than 30%! We have all chosen overseas legitimate transactions, things are not coming in."

Hong Kong is a financial center where investment banks are the main gathering place. Art trade is tax-free. Since buyers in the Hong Kong market are mainly Asian buyers and they are close to the mainland of China, many overseas transactions are selected in Hong Kong. Some experts even suggested that you could consider buying art in Hong Kong at a 0% sales tax rate and then depositing it in the United States at a 0% import tax rate, which is more than half of the 20% value-added tax in London (about half of which is when you leave the UK). It is recoverable, plus the 29% tax rate for imports to China is much lower.

Art dealers are eager to lower their tax rates. For companies such as the Linda Art Center who import large amounts of art, the new policy of lowering the tax rate is still very welcome. “This year, we have only 15 import shows (not sales)! Each import is a 20-square-foot container.” Zhang Lizheng, director of MOCA Art Gallery in Singapore and gallery manager of Linda Art Center in Beijing, told Art Review "According to the new policy, the total cost will drop a lot in one year next year."

The Linda Art Center has galleries in Beijing, Singapore and Indonesia. There are also art galleries in Singapore. Art works involved in transportation and transactions are frequent. Under normal circumstances, artists will use the way of exhibitions to do propaganda and display. Domestically, 12% of business tax and 17% of value-added tax were previously used. Even if they did not get domestic transactions, the tax has already been paid. In contrast, "Indonesian taxes are more erratic than China, and they are still uncertain. It depends on the status of the works. For example, the subject matter may be limited and then be estimated according to the declared value. Singapore, as Asia's largest private wealth management center, works of art. The transaction has a 7% product and service tax, and the operating procedures are very convenient.” Zhang Lizhen also praised Hong Kong equally. “The tariff on the cultural part of the United States is zero, and it only requires approval. The UK, like China’s Taiwan, has only 5% of the Tariffs, Hong Kong, China are all zero, the most convenient!"

Ironically, at the end of last year, an interesting law was introduced in Europe. They defined the installation artwork containing light fixtures as “luminaires” rather than works of art. In the UK, importing artwork containing light bulbs or household utensils was In addition, a full 20% value-added tax is payable. Normally, art works require only a 5% tariff.

Although the operating costs have been reduced after the tax reduction, Zhang Lijun’s pressure is still very great, because although the way of exhibitions can not be subject to VAT, “but the time limit is unreasonable to us, because the foreign tour exhibition has returned all within half a year. The difficulty is very difficult to operate. It is impossible for the time to tour the three countries to return within the prescribed time limit, because the museum will be exhibiting for at least 2 months. This is a test for us and the operating cost will be enormous."

Zhang Zikang, the director of the Today Art Museum, also feels that after the adjustment of the new policy, the tax pressure faced by auction houses and galleries remains large, which will still result in the transfer of transactions. This has an overall impact on the entire art industry. “Even if galleries are public welfare institutions, if galleries and auction houses all go to Hong Kong to trade and the public welfare institutions are further developed, they will also be affected indirectly by the underdevelopment of the entire culture and art industry. So I think the current policy environment is far Far from meeting the conditions for promoting development, I hope that the government will continue to increase its support, learn from the practices of overseas developed countries and regions, and complement the cultural policy environment and ecological environment so that China’s cultural undertakings have greater hopes.”