Lack of knowledge by government regulators and legislators

Foremost is the failure of the European Commission and many European governments to recognize the art economy as a significant source of employment and export earnings, which generates learning and does not require public subsidy.

The European Commission has not implemented a basic economic principle: When considering the application of taxation and regulatory strictures on a global trading sector, analysis should be made of the implications of those taxes and restrictions on the international flow of business.

The failure to gather comprehensive economic data and provide timely analysis based on consistent nomenclature is a key indicator of the Commission's lack of interest in the European art market.

In general, European taxes and regulatory structures have led to a widely held perception that Europe is a complicated, costly place to do business. Even without the special taxes now being levied on the trade in art and antiques at the EU level, the marginal tax rates on earned income and capital gains tax rates in a number of EU countries appear to be in danger of stifling the formation of capital and the creation of wealth.

During depth interviews and in polling results, dealers in Europe often report the ways they feel they have been pushed into avoiding what they see as the strangulation of initiative by regulations and taxation brought about for no apparent greater good, and often at odds with sound public policy and common sense.

Dealers in different countries describe a common European plight: that the totality of taxation and regulatory strictures makes it unlikely if not impossible for newer dealers to create sufficient economic mass for their heirs to be able to continue in the business, preserving knowledge, trading patterns, and an element of social continuity.

Any additional restrictions on the movement of art across national boundaries, in response to taxation or heritage concerns, would further add to the costs and regulatory burdens borne by the European art market.

Lack of Technology Investment

In many other sectors, industry leaders have been able to establish effective communication networks. These have served to inform members very rapidly of pending legislative peril, or to expedite the rapid diffusion of market intelligence. In many instances, it has been possible to link pools of critical inventory so that both commodity items and high priced specialty supplies could be accessed by all key market makers in a highly efficient manner.

The art trade has lacked this sort of infrastructure and, despite its global reach, still relies on inefficient communication and reporting of critical information within the sector. Much of this situation could be corrected by a higher level of technology investment by dealers, especially, but also by trade associations that could serve an enhanced role. Across the trade, dealers spend about 1% of total sales on technology for hardware, software and consultants combined. When compared with other knowledge businesses, the art sector invests too little.

Lack of Institutional Business Infrastructure and Capital Formation

Although about 30% of all trade in the sector is between commercial entities - dealers buying and selling among themselves and through the auction houses - there is virtually no specialized distribution channel or infrastructure dedicated to serve the sizable institutional trade. Neither technology platforms nor banking facilities exist on a suitable scale to facilitate such intra-trade commerce.

Because of very high levels of taxation that discourage entrepreneurship and the accumulation of wealth in Europe, younger art dealers cannot grow their businesses competitively. In a knowledge business such as the art trade, economic forces that harm the continuity of an orderly succession of rising leaders effectively disrupt the flow of its very life blood.

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