Paris, once the capital of the world’s art trade, is seeking to recover past glories under a French Government scheme to attract painters, collectors and sales away from London and New York.

Christine Albanel, the Culture Minister, has been instructed by President Sarkozy to slash the taxes and red tape that are blamed for shunting the French capital into the sidings of artistic history.

Among Mrs Albanel’s proposals are a reduction in VAT on art imports and interest-free loans for collectors, under a programme similar to the one developed by Britain’s Arts Council.

“Although France remains an important art market, it is now very far behind the United States and Great Britain,” Mrs Albanel said. “I am determined to act, together with all the professionals in this sector, to overturn this trend.” With the global auction market worth $11 billion (£5.4 billion) a year, the stakes were high, in terms of both finance and prestige, the minister said.

François Curiel, the chairman of Christie’s Europe, said that Mr Sarkozy was the driving force behind the move to restore Paris to the pre-eminence that it enjoyed for much of the 20th century.

“I’m very impressed that, despite everything else he has to do, he’s not put this on the back burner but in the front of the oven,” Mr Curiel told The Times.

“I’ve been in Christie’s for 35 years and it’s the first time I’ve seen a French Government take the bull by the horns. I’m very excited by the sense of urgency.”

Mr Sarkozy, who was elected President in May this year, is said to be dismayed at his country’s decline from the days when it was home to the biggest auctions and the finest painters, such as Pablo Picasso, Marc Chagall and Fernand Léger. He was elected on a promise to revitalise the French economy - and, clearly, the art market is part of that.

In 1950, France’s most important auction house – Drouot – had sales equivalent to those Sotheby’s and Christie’s combined. Last year, Drouot Holding, which represents 70 French auctioneers, sold art and objects worth €500 million (£349 million) – ten times less than Christie’s alone.

According to Artprice, the global art market information provider, France remains the world’s art treasure trove, accounting for 19 per cent of all auction transactions last year. Britain accounted for 15 per cent and the United States 16 per cent.

However, in terms of value, France’s worldwide market share was only 6.5 per cent, down from 8 per cent in 1996. London captured 27 per cent of global revenue and New York 46 per cent.

“France is still losing market share in the face of an emerging China and the dominance of prestige New York sales,” Artprice said.

In 2001, Paris agreed to end the 500-year monopoly enjoyed by French auctioneers and allow foreign houses to operate in France. Nevertheless, despite the liberalisation, the French have failed to make up lost ground. When Monet’s long-hidden masterpiece Nympheas was auctioned for £18.5 million this year, for example, it was at Sotheby’s in London.

French auctioneers blame VAT, which can be as high as 19.9 per cent, and droit de suite– the 3 per cent levy that must be paid to artists’ heirs up to 70 years after their death – for driving artworks out of France.

“The droit de suite alone means that it is 3 per cent more expensive to sell a painting in France,” Mr Curiel said. “This is a brake on development.”

Fresh palette

—Proposals to relaunch art market: Persuade the European Union to accept a VAT reduction on art imports

—Encourage French people to buy artworks through interest-free loans or tax breaks

—Cut red tape around art sales in France and encourage French auctioneers to expand abroad

—Redefine the French State’s role as a purchaser of art

Editor's choice

• The 100 Best Films of the Decade
• 70 facts you didn't know about Marvel
• The 50 Biggest Movies Of 2010