The answer to the question “what is art?” has evolved over time to reflect the reality that art takes a multitude of forms. The law can be slow to adjust to that reality; legal disputes over the definition of art have arisen in the context of the tax treatment of art. In many countries, including the UK, import tax is significantly reduced and customs duties are not levied on objects classified as works of art.[1] The dispute over Constantin Brancusi’s Bird in Space (1925) is well-known. In 1926, when the work was imported from France to the US, US customs classified the famous abstract bronze sculpture as “kitchen utensils and hospital supplies”. This meant a levy of 40% on the work’s value, thus depriving the importer of the significantly lower and more favourable rate applicable to art. In 1928, the U.S. Customs Court ruled in favour of the work’s classification as a work of art.[2] Whilst this type of debate may appear dated, the battle is far from over. Over eighty years after the Brancusi landmark trial, a similar question faced the English courts over light and video art installations, the background to which we relay in this blog. Brexit now provides the opportunity to repeal the inadequate regulation adopted by the European Commission, reversing the English Court’s decision, and we strongly encourage the UK government to seize it.
In 2006, HMRC fervently opposed the classification of light and video art installations as works of art when imported in the UK from outside the EU. At issue was the importation by the gallery Haunch of Venison of six video installations by the artist Bill Viola (Catherine’s Dream, (2002); Man of Sorrows and Witness, (2001); two editions of Catherine’s Vow, (2002); and Mater, (2001)) and a neon light sculpture by Dan Flavin (Six Alternating Cool White/Warm White Fluorescent Lights, Vertical and Centred, (1973)) from the US to the UK. Each installation was shipped disassembled and accompanied by detailed instructions regarding its installation and a certificate of authenticity from the artist, clearly evidencing its artistic nature. The works’ component parts included sophisticated video equipment specifically designed to form part of Bill Viola’s video installation, and neon lights specifically selected by Dan Flavin to assemble as an artwork. HMRC took the view that, whilst when assembled, they were works of art, at the time of import, as they were disassembled in a box, they were not works of art but qualified instead as ‘electrical devices’ (such as ‘image projectors’ and ‘lamps and light fittings’), making them subject to customs duty and import VAT at the standard rate, then 17.5%, instead of 5% on works of art with no customs duty. Further, HMRC argued that they were entitled to apply import VAT at the standard rate, and customs duty, on the value declared by the gallery (as works of art by Viola and Flavin), not on the much lower value of the ‘electrical devices’ in the box. In 2008, the gallery appealed HMRC rulings before the VAT and Duties Tribunal (London) in 2008. [3] HMRC argued that the works only took their artistic form as sculptures once installed, but not when presented in transit in their constituent parts, and that video installations could not constitute “sculptures” because of their lack of three-dimensionality. Haunch of Venison exposed the flaws in HMRC’s stance, highlighting its formalistic nature. In doing so, it had the support of renowned experts and strong legal precedents such as the aforementioned Brancusi v. United States and the classification by the European Court of Justice of a work by artist Claes Oldenburg as a work of sculpture.[4] The Tribunal ruled in favour of Haunch of Venison. It found that the installations did constitute works of sculpture, the difference in their formal presentation at the point of importation and display being irrelevant, and could be classified under Chapter 97 (as ‘original sculptures and statuary, in any material’) as argued by the gallery.[5] Importantly, the Tribunal accepted that sculpture as a medium had expanded considerably during the 20th and 21st centuries to encompass novel art forms, and pointed out that that it would be “absurd to classify any of these works as components ignoring the fact that the components make a work of art.”[6]. This important precedent, which was welcomed by the trade, was unfortunately short-lived.
In 2010, the European Commission overturned the Tribunal’s decision. The Commission decided that light installations do not qualify as works of art on the ground that the result of its operation (the light effect) constitutes the work of art, not the installation itself. In other words, an installation by Dan Flavin is a work of art only when the light is switched on. Further, according to the Commission, “it has the characteristics of lighting fittings and the product is therefore to be classified as wall lighting fitting”. In relation to Viola’s work, the Regulation states: “classification as a sculpture is excluded, as none of the individual components or the whole installation, when assembled, can be considered as a sculpture … It is the content recorded on the DVD which, together with the components of the installation, provides for the “modern art” … Consequently, the components of the installation are to be classified separately … the video reproducing apparatus … the loudspeakers…. the projectors … and the DVDs.” Extraordinarily, the Commission went on to endorse the absurd argument previously made by HMRC that even though the installations did not qualify as art, the higher rate of tax and customs duty should be applied not on the low retail value of the electrical or video equipment, but on the significantly higher value declared by the gallery for the artworks upon importation[7]. In June 2010, a Customs Information Paper,[8] announced the forthcoming European Commission Regulation (EU) No 731/2010 which would prescribe the classification (and subsequent taxation) of video and light installations. The Regulation provides, in effect, that light and video installation works, described in its Annex, must be taxed upon importation as electrical or video equipment. The descriptions in the Annex are precise and clearly point to Flavin’s “Six alternative cool white/warm white fluorescent lights. Whilst Six alternative cool white/warm white fluorescent lights” and Viola’s Hall of Whispers.
The policy arguments for this tax treatment, first deployed by HMRC, then by the European Commission, are in our opinion, unjustified. In its dispute with Haunch of Venison, HMRC had argued that, but for its proposed interpretation of the law, “importers might declare just anything as works of art” and thereby pay tax at a lower rate. The Tribunal characterised this argument as being “grossly exaggerated”.[9] Firstly, as the Tribunal pointed out, if “an importer declares something under Chapter 97 which is not obviously an artwork, then he can be challenged to prove that it is and will of course fail.”[10] In other words, potential abuse is easily prevented by placing the burden of proof on the importer that the item qualifies as a work of art. Secondly, HMRC’s argument was based on the assumption that customs officials are unequipped to distinguish between works of art and commonplace goods, an assumption flawed for obvious reasons. As the Tribunal pointed out, “legislation cannot be interpreted on the basis that it should be made as easy as possible for the authorities to apply it.”[11] Finally, the distinction between a work in its assembled or disassembled state is highly formalistic and, according to the Tribunal, “it stretches the objective characteristics principle too far to say that a work of art is no longer a work of art if it is dismantled for transportation”.
The UK leads by example on the world’s stage on art and culture as a hub for innovation and creativity, a catalyst for its attractive art market. Brexit has suppressed the obligation for the UK to follow the Commission Regulation. It is our view that this instrument, which was drafted to overturn the common sense and widely supported position taken by the English courts in Haunch of Venison Partners Ltd v HMRC, is ripe for deletion from the statute book.
By Pierre Valentin & Mona Yapova
[1] Tariff heading 9703 under Chapter 97 of the Combined Nomenclature (Works of Art, Collectors’ Pieces and Antiques) in Council Regulation 2658/87/EEC
[2] Brancusi v United States [1928] TD 43063
[3] Haunch of Venison Partners Ltd v Revenue and Customs Commissioners [2008] 12 WLUK 359
[4] Reinhard Onnasch –v- Hauptzollamt Berlin-Packhof Case 155/84
[5] Paragraph 53, reference to tariff heading 9703 under Chapter 97 of the Combined Nomenclature (Works of Art, Collectors’ Pieces and Antiques) in Council Regulation 2658/87/EEC
[6]Paragraph 49, Haunch of Venison Partners Ltd v Revenue and Customs Commissioners [2008] 12 WLUK 359
[7] Commission Regulation (EU) No 731/2010 of 11 August 2010 concerning the classification of certain goods in the Combined Nomenclature
[8] Customs Information Paper (Ref: (10) 44 effective 18 June 2010
[9] Paragraph 50, Haunch of Venison Partners Ltd v Revenue and Customs Commissioners [2008] 12 WLUK 359
[10] Paragraph 50, Haunch of Venison Partners Ltd v Revenue and Customs Commissioners [2008] 12 WLUK 359
[11] Paragraph 49, Haunch of Venison Partners Ltd v Revenue and Customs Commissioners [2008] 12 WLUK 359