This is the first of two articles discussing the challenges that Dubai can overcome to become a global leader in the creative arts.
It is now incontrovertible that Dubai ranks near the top of those metropolises fortunate enough to carry the label of "Global City", with its ascent being almost meteoric. Whatever the measure of its import – business activity, human capital, information exchange, cultural experience, political engagement, or even its "buzz" – Dubai is rapidly rising in its worldwide stature.
Given this, Dubai should have a fine art scene befitting its status of a leading Global City. While anyone familiar with Alserkal Avenue and the DIFC can attest to the existence of quality art galleries in Dubai, certainly there is room for an increase in the scope of local art collections, both public and private.
There are several reasons why the Dubai art scene has lagged in comparison to Dubai's rise in other areas by which cosmopolitism is measured. These include the fact that, given Dubai's ascent within two generations from a small village to major city, the organic cultural development that naturally occurs over many years has not had the opportunity to fully blossom. Secondly, the somewhat overriding commercial focus of Dubai in general has not fostered some of the bohemian impulses which have historically led to spurts of development in the creative arts. For both factors, consider by way of example Paris of the Belle Epoque and how expressions of art developed during that period and continued in various forms thereafter.
While deeper analysis of these sociological and historical comparisons may fuel an evening of lively debate, at least among those so inclined, a more prosaic and easily identifiable factor is inhibiting the development of the fine arts in Dubai, at least with respect to the collection of paintings and such other physical artwork.
This impediment is the duties upon import. The UAE charges a duty upon import of fine art of 5%. Often, VAT of an additional 5% is charged, even where the art is imported solely for personal use or public exposition and there is no intent to resell. This means that there is a 10% premium based upon the value of the art upon its entry, which on pieces of high value can run into very high numbers.
Duty can be avoided in cases where an ATA Carnet – that being a temporary transit permit - is obtained, but this only applies for art intended for exposition for a limited period and may require leaving a deposit representing a percentage of the art's value in the country where the art "resides", so that its return is guaranteed, and the Carnet is not misused to circumvent import duties.
The recent enactment of VAT in 2018 has complicated the importation of art as well. For example, the DIFC as a free zone used to have free passage, but now VAT is chargeable, often without respect to whether the art is imported on consignment, for exposition, or otherwise.
Calculation of import duty on art which has not recently been sold is also a challenge, as fine art has valuation often only ascertainable once the art is brough to market, and then often not disclosed for various factors. Thus, the private importer of already owned art into the UAE may be quite reluctant to expose the art to a variable valuation risk.
And while certain free zones do have art storage facilities where duty is not charged, this does not benefit the collector, as these facilities do not offer display but merely serve as a closed depository, albeit with some limited viewing and inspection capacity.
In summary, the import cost often does not justify the benefit. This is particularly true in cases where the intent is for exhibition only, the availability of a Carnet notwithstanding, and creates a disincentive against promoting the cultural benefits of public education and immersion into fine arts.
Not all nations charge duty for imported artwork. For example, the US does not charge import duty for original works of art, although they may require documentation to prove that the piece is in fact an original work and the rules are subject to other conditions. Likewise, it is true that other nations do charge import duty for artwork; the UK charges 5% duty for such import, while the EU nations generally charge duty.
However, the differing circumstances between a UAE resident compared to that of many other nations changes the calculus of whether a Dubai resident is otherwise willing to import fine artwork and would find that to be a prudent decision. Most expats are in Dubai for reasons related to – and with their visa status dependent upon - their employment, meaning that when their jobs end, likely so will their time in Dubai. Additionally, a somewhat unique nature of the Dubai expat population relative to that of other Global Cities is that the proportion of expat residents to citizens is extremely high: around 9 to 1.
Given these factors, the expat population, even those who are at the wealthy end of the spectrum and thus those most likely to collect artwork, is transient and thus may not want to pay the additional fees incurred in duty to import either new or already owned artwork into the UAE. And while the UAE authorities have recently liberalized visa and residency rules to encourage more immigration and to reward certain classes of residents with long term residency status, this will not necessarily result in longer term residency for the holders of fine art and will thus not mitigate the economic downside to importation thereof.
In other words, the long-term resident of New York, London, or Paris may want to import art into these cities, while if these same persons were to reside in Dubai, they may be more reluctant to import here. There have even been instances where persons have wanted to exhibit fine art in the UAE for cultural purposes and for the public benefit but have been dissuaded from this by the high cost of import or the difficulty in obtaining a Carnet.
It thus behooves the Dubai and UAE authorities to consider eliminating duty for fine artwork, so as to increase the amount of fine artwork that enters into the country. While the government coffers will be somewhat lighter because of the elimination of this income stream, such might be made up for in the increase of economic activity related to the import, transport, sales, and storage of art in this lucrative sector.
Additionally, not everything is directly measurable on a financial balance sheet. Cultural relevance for one is much harder to gauge; however, it is certain that a thriving fine arts scene is a marker of a city's nature and Dubai owes it to itself to achieve preeminence in this area as well. Any steps taken in furtherance of that goal would only help cement Dubai's label as a leading Global City.
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