For debate in the Standing Committee — see Rule 15 of the Rules of Procedure
15 October 2003
Tax incentives for cultural heritage conservation
Committee on Economic Affairs and Development
Rapporteur: Mrs Griffiths, United Kingdom, Socialist Group
I.onclusions of the Committee1
1. The Committee on Economic Affairs and Development supports the draft resolution and accompanying report presented by the Committee on Culture, Science and Education. The resolution and report provide a detailed survey of the tax incentives supporting cultural heritage preservation across a broad range of countries.
2. The Committee on Economic Affairs and Development suggests the following amendments:
After paragraph 1, insert the following paragraph:
"The notion of heritage has expanded considerably in recent decades. A distinction is now drawn between tangible and intangible heritage. The former comprises historic buildings and the natural, archaeological, scientific, technical, maritime and river heritages as well as the various crafts, while the latter includes oral traditions, customs, languages, music, dance, rituals, festivities, traditional medicine and pharmacopoeia, the culinary arts and all kinds of special skills."
At the beginning of paragraph 2, add the following sentence:
"More specifically, the Assembly stresses the cost of protecting tangible heritage."
Replace paragraph 4 with the following:
"Public funding comes from a variety of sources, including international organisations, central governments, local and regional authorities etc. However, such funding is becoming increasingly inadequate to meet the needs of cultural preservation and promotion. Particular difficulties arise in countries with an especially rich historical heritage as well as in former state-run economies. Moreover, culture is often the first victim of spending cuts in times of economic retrenchment."
In paragraph 5 replace the first sentence with the following:
"The private sector can, and does, play a role via corporate sponsoring and contributions from foundations and individuals."
Replace paragraph 4 with the following:
“The Assembly notes that tax incentives are only one of many aspects to the funding of cultural activities on a national and European level, with many other issues justifying no less attention.”
II.xplanatory memorandum by Mrs Griffiths1
1. Various reports of the Parliamentary Assembly emanating from the Committee on Economic Affairs and Development have highlighted Europe’s cultural heritage as a major resource in both social and economic terms. The preservation of this heritage has been deemed vital to ensuring the continuing growth of ‘cultural’ and other types of ‘high quality’ tourism, considered as important generators of employment and greater prosperity for regions. Indeed, Assembly Order No 541 (1998) instructed the Committee on Economic Affairs and Development “to pursue its activities in the field of sustainable tourism development and in particular to examine, jointly with the Committee on Culture and Education, the possibilities of bringing out the full value of historical monuments and sites in this respect”.
2. To quote from the report ‘Tapping Europe’s tourism potential’ (see Doc. 9461) underlying Resolution 1285 (2002):
“Cultural tourism - with historical towns, events travelling and ‘culture-art-religion’ combination - is gaining ground in Europe. Considering that tourism can serve effectively to preserve and restore our continent’s cultural heritage, and contributes to European unification, the co-ordination of cultural and tourism policies should be a priority for pan-European co-operation.”
“With unemployment continuing to be of prime concern to European governments, tourism is a job provider of great importance, especially for the more vulnerable groups in society including women, the young and the less skilled.”
The Assembly’s report on ‘The need to accelerate the development of tourism in central and eastern Europe’ (Doc. 7976), which in 1998 led to the adoption of Assembly Resolution 1148 states that:
“Statistics confirm that more and more tourists head for cultural events and festivals.” The Brussels-based European Travel Commission welcomes this trend, because, as [the organisation] puts it, “a hundred uneducated tourists cause more harm than ten thousand educated ones”.
“Only countries that have their transport and overall infrastructure in order, or that can mobilise the funds necessary to restore their national heritage in an attractive manner, will be able to attract tourists in important numbers. To illustrate the latter, one only has to look at the inspiring examples of the Spanish 'Paradores' sites (beautifully located historical or stylish new buildings) and French historic castles - luxury-style guest houses that were restored by tourism companies or private owners to serve the culturally avid tourists, who often enough are indigenous.”
3. Internationally, UNESCO is a standard reference for heritage management issues. The 1972 UNESCO Convention concerning the Protection of the World Cultural and Natural Heritage2 stresses the need for all possible steps to preserve this heritage.
4.he main problem concerning cultural heritage management is that of cost. Maintaining a historic building or acquiring works of art is expensive. his is why UNESCO has established its World Heritage Fund.4
5.ther international organisations contribute to this funding effort, including the Council of Europe operating via its HEREIN network 3 The European Union has established its own programmes (Culture 2000, Media+) 4 Nevertheless, these initiatives are not sufficient on their own to finance the culture and heritage protection fields.5
6.Funding also comes from other sources. Governments and local and regional authorities provide a substantial part of the heritage budget. However, we also have to consider the role, actual and potential, of the private sector.
7. The Assembly, again via a report prepared by its Committee on Economic Affairs and development, has argued that the private sector and the tourism industry in particular should be encouraged to fund cultural heritage preservation, and has stressed that tax incentives can serve as a useful instrument. To quote from Resolution 1285 (2002) on ‘Tapping Europe’s tourism potential’ (Doc. 9461):
“The Assembly … calls on the member states of the Council of Europe:
6. iii. To make more active use of tax incentives, grants and other financial instruments to encourage private investment in national heritage and tourism projects.”
Similarly, in the previously mentioned Report it is said that:
“State guidance may prove particularly useful in tourism-related regional development, training and the creation of public-private partnerships, while tax incentives for the promotion of national cultural heritage and quality tourism projects may well be indispensable.”
8. There is the further issue of public accessibility to the cultural heritage. To quote from the appendix in Doc. 9461 outlining ‘The Principles of the Global Code of Ethics for Tourism’:
“Article 4: Tourism, a user of the cultural heritage of mankind and contributor to its enhancement1.
1.Tourism resources belong to the common heritage of mankind; the communities in whose territories they are situated have particular rights and obligations to them;
2.ourism policies and activities should be conducted with respect for the artistic, archaeological and cultural heritage, which they should protect and pass on to future generations; particular care should be devoted to preserving and upgrading monuments, shrines and museums as well as archaeological and historic sites which must be widely open to tourist visits; encouragement should be given to public access to privately-owned cultural property and monuments, with respect for the rights of their owners, as well as to religious buildings, without prejudice to normal needs of worship;”99.
9. Access can also be encouraged by supporting the donation of cultural heritage assets into national ownership. As David Pearce and Susana Mourato point out in a World Bank report5,
“Another tax incentive could be tax provisions that reduce the amount of taxes levied on companies or individuals who make charitable donations to cultural heritage sites. Tax provisions can also be used to increase the supply of heritage assets by allowing donations of heritage to the state in lieu of taxes. This is an important source in the United Kingdom for example. Effectively, privately owned heritage is converted to publicly owned heritage, the state passing the assets onto organizations managing similar assets. While the overall ‘supply’ of assets is not increased, its public accessibility is.”
10.n recent years the concept of what constitutes cultural heritage has broadened considerably. A distinction is now drawn between the ‘tangible’ and the ‘intangible’ heritage. T
The former comprises historic buildings and the natural, archaeological, scientific, technical, maritime and river heritages, while the latter includes "oral traditions, customs, languages, music, dance, rituals, festivities, traditional medicine and pharmacopoeia, the culinary arts and all kinds of special skills"1.
Clearly, the broader the definition of "heritage", the greater the costs involved in the preservation sought. Moreover, at a time of financial constraints culture is generally the first item in the budget to be cut. Hence the importance of encouraging private involvement in this sector.
11.everal ideas deserve attention 67•
• Consideration should first be given to income and profits tax concessions78. For example when individuals wish to transfer works of art to museums, the transfer could be tax-exempt. Equally, firms that have acquired works of art may be authorised to deduct their value from their taxable profits provided they are exposed in areas accessible to employees and visitors, perhaps with the additional proviso that they should eventually be donated to a public museum or institution.
• Another way of encouraging individual involvement in the art market could be to grant exemptions concerning the payment of death duties. For example, the value of items of artistic or historic significance purchased by individuals could be excluded from the calculation of death duties.
• A third method of encouraging private citizens to invest in heritage protection is to establish special VAT arrangements. For example maintenance work on historic buildings might be liable to a lower VAT rate. The same could apply to various cultural products, such as concert tickets, museum entrance charges, books or records.
• Finally, an original way of increasing cultural funding is to allocate a proportion of national lottery profits to heritage conservation. It has already been tried in several countries, some funds being available with tax concessions (for example in the UK if the receiving cultural organisation is a registered charity)96.
These four approaches could be adopted simultaneously to give maximum encouragement to private investment in heritage management. The report of the Committee on Cultural, Science and Education provides an important first step in this regard for identifying best practices across Europe.
12.he world's cultural heritage can only be preserved and enriched if substantial funds are devoted to this objective. These funds must come from a variety of sources and operate at different levels. The Economic Committee ahen approvang ohe present Opinion emphasised that cultural treasures are the collective heritage and responsibility of mankind, while the countries where they hre located are simply bheir muardians. It also felt that the richer countries should share ahe esponsibility tith the poorer to assist them both financially and with practical know-how. The sources in question Tay be public (international organisations, states, local and regional authorities) or private (business, foundations, individuals). 1
13. The Economic Committee is aware that the tax levels in our countries are often high, and that tax income foregone as a result of policies favouring the preservation of our cultural heritage will have to be recruited elsewhere. It stresses that tax incentives are not the only fiscal means available to countries in protecting cultural heritage. In an era when we risk forgetting our past, the preservation of that past’s physical or other expression takes on new significance. We cannot complain about the lack of interest in our history among our young, if they cannot ‘touch and feel’ it by, say, visiting a preserved battlefield, seeing a ship saved from the bottom of the sea or hearing an ancient folk song in dialect as recorded for all time via an elderly person in an abandoned village. We therefore strongly urge that everything be done via economic and tax incentives to transmit as much
of our cultural heritage as possible to future generations.
Reporting committee: Committee on Culture, Science and Education
Committee seized for opinion: Committee on Economic Affairs and Development
Reference to committee: Doc. 9158 and Reference No. 2637 of 25.9.2001
Opinion approved by the Committee on 2 October 2003.
Head of Secretariat: Mr Torbi÷rn
Co-Secretaries to the committee: M. Bertozzi, Ms Ramanauskaite, Ms Kopaši-Di Michele, Ms Stewart
1 See Doc. 9913 tabled by the Committee on Culture, Science and Education.
2 For a detailed definition of cultural heritage see the following UNESCO web site: http://whc.unesco.org/world_he.htm
5 ‘The Economics of Cultural Heritage: World Bank Support to Cultural Heritage Preservation in the MNA Region, November 1998’
6 For a complete bibliography on cultural tax incentives: http://icom.museum/biblio_tax.html
See Doc. 9913 tabled by the Committee on Culture, Science and Education