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The biggest issue in the art market is transparency and it continuously amazes me that governments allow it to go on because at minimum, a lot of tax money is l

The biggest issue in the art market is transparency and it continuously amazes me that governments allow it to go on because at minimum, a lot of tax money is lost. The fact that this sector is so under-regulated enables the opacity, making it a great avenue for money laundering and fraudulent behaviour including forgeries (enabled not just by forgers but some dealers), inaccurate reporting (flawed stats), price manipulation, collusion (at all levels and between individuals and organizations), etc. Buyers often never know whether they just overpaid or underpaid or what the current value for a piece is. Change is most possible (and has been occurring in fragments) in the primary art market vs secondary (resales, mostly of dead artists). BTW, for those implying artists benefit the most: galleries often make the bigger share of any sale they're involved in, with commissions ranging anyhere from 50-70% or more. Plus, auction house premiums are often at least 20%, leaving less of profit for seller (after subtracting original purchase price).

JumpCrisscross 9y ago
> a lot of tax money is lost Art sales are taxable.
- Geekette 9y ago
  Of course, art sales are taxable but how much tax can be collected when many transactions are undeclared, item prices of declared sales are not reported correctly for various reasons, thus incorrect amount of tax is assessed? A lot of the activity in this sector is simply undetectable, even to many insiders.
- wastedhours 9y ago
  You don't have to on-shore art. You can keep it as a store of wealth in "Freeports" (logistics hubs within airports around the globe) and not have to pay tax on the purchase or asset in your homeland if you have the required funds sitting outside of your tax base, which in these cases, is quite likely.
- simonsarris 9y ago
  Yeah and you buy a piece for $1m and sell it for $1.1m to the guy who wants to "donate" it to a non-profit for a tax write off of $10m, offsetting his tax bill on something much larger. It's a vehicle for tax write offs and laundering.
  - xtreme 9y ago
    I never understood how this works. If you donate $X to charity, you reduce your taxable income by $X but now have $X less. If you paid your tax on $X, you would still have $X-Y. How can the former approach save you any money?
    - simonsarris 9y ago
      > If you donate $X to charity When $X is $REAL_LIVE_MONEYDOLLARS, yes. When $X is $ARTWORK_THAT_I_CLAIM_IS_WORTH_10M, which I bought for not 10M but 1M, but got "appraised" at 10M, what did I just do? Pay $1M for $10M of tax writeoffs.
    - coldtea 9y ago
      Or, you know, you can get your friends running the charity to accept 1/N * $X, but ascertain they accepted $X from you (e.g. by giving you back the rest through various channels). Even better, the charity is run by some politician's friends or relatives, and you pay $X indeed, but you're basically buying several favors (plus special cuts and treatment that's worth more than 10 * X).
bfuller 9y ago
Agreed, if galleries had to list their prices it would be better. Although eventually they would just start colluding and we would be in the same place.
- Geekette 9y ago
  If open pricing were mandated as part of a detailed and systemic reform, it could work. I.e. if reporting is coordinated such that discrepancies are automatically flagged (e.g. in price/inventory receipts between gallery, buyer and artist).
jbob2000 9y ago
Arguably, this is why art is so valuable. You have to know what you're looking for, you can't just show up with a bucket of money and expect to be a player. You have to know someone in the business, it's an industry that is highly based on community knowledge.
- gt_ 9y ago
  To be more specific, it’s not based on knowledge of art but knowledge of community. The art market is a subculture in every sense. It has only a superficial relationship with objective human creativity or even art history. “You have to know what you’re looking for” is both correct and misleading. The thing you’re looking is predominantly a record of aristocratic relations. This was not always the case, but it is very much is now. The way to view it is as a bubble. It’s a bubble based on the notion that common people cannot be trusted to evaluate art. This claim does hold water, but it was historically based on cultural intelligence which is no longer synonymous with capital wealth. The average art history knowledge an art investor has is fairly superficial, which is probably best, because the market could care less about theory and critique.
  - dmschulman 9y ago
    Look no further than Art Basel to confirm this
- Geekette 9y ago
  Arguably, this is why art is so valuable. You have to know what you're looking for ... You have to know someone Art can still be valuable without such gatekeeping and often fraud-inducing secrecy. Art is intrinsically valuable in the eye of the beholder (based on whatever reasons attracts them to it). One shouldn't have to know what one is looking for beforehand, as long as one recognizes it on sight and decides to acquire it. The serendipitous journey to discovering your taste or buying on impulse shouldn't be marred by anxiety over accessing the right gatekeeper. And contrary to popular opinion, art need not be expensive to be good or valuable.

JumpCrisscross 9y ago

> a lot of tax money is lost Art sales are taxable.

Geekette 9y ago
Of course, art sales are taxable but how much tax can be collected when many transactions are undeclared, item prices of declared sales are not reported correctly for various reasons, thus incorrect amount of tax is assessed? A lot of the activity in this sector is simply undetectable, even to many insiders.
wastedhours 9y ago
You don't have to on-shore art. You can keep it as a store of wealth in "Freeports" (logistics hubs within airports around the globe) and not have to pay tax on the purchase or asset in your homeland if you have the required funds sitting outside of your tax base, which in these cases, is quite likely.
simonsarris 9y ago
Yeah and you buy a piece for $1m and sell it for $1.1m to the guy who wants to "donate" it to a non-profit for a tax write off of $10m, offsetting his tax bill on something much larger. It's a vehicle for tax write offs and laundering.
- xtreme 9y ago
  I never understood how this works. If you donate $X to charity, you reduce your taxable income by $X but now have $X less. If you paid your tax on $X, you would still have $X-Y. How can the former approach save you any money?
  - simonsarris 9y ago
    > If you donate $X to charity When $X is $REAL_LIVE_MONEYDOLLARS, yes. When $X is $ARTWORK_THAT_I_CLAIM_IS_WORTH_10M, which I bought for not 10M but 1M, but got "appraised" at 10M, what did I just do? Pay $1M for $10M of tax writeoffs.
  - coldtea 9y ago
    Or, you know, you can get your friends running the charity to accept 1/N * $X, but ascertain they accepted $X from you (e.g. by giving you back the rest through various channels). Even better, the charity is run by some politician's friends or relatives, and you pay $X indeed, but you're basically buying several favors (plus special cuts and treatment that's worth more than 10 * X).

bfuller 9y ago

Agreed, if galleries had to list their prices it would be better. Although eventually they would just start colluding and we would be in the same place.

Geekette 9y ago
If open pricing were mandated as part of a detailed and systemic reform, it could work. I.e. if reporting is coordinated such that discrepancies are automatically flagged (e.g. in price/inventory receipts between gallery, buyer and artist).

jbob2000 9y ago

Arguably, this is why art is so valuable. You have to know what you're looking for, you can't just show up with a bucket of money and expect to be a player. You have to know someone in the business, it's an industry that is highly based on community knowledge.

gt_ 9y ago
To be more specific, it’s not based on knowledge of art but knowledge of community. The art market is a subculture in every sense. It has only a superficial relationship with objective human creativity or even art history. “You have to know what you’re looking for” is both correct and misleading. The thing you’re looking is predominantly a record of aristocratic relations. This was not always the case, but it is very much is now. The way to view it is as a bubble. It’s a bubble based on the notion that common people cannot be trusted to evaluate art. This claim does hold water, but it was historically based on cultural intelligence which is no longer synonymous with capital wealth. The average art history knowledge an art investor has is fairly superficial, which is probably best, because the market could care less about theory and critique.
- dmschulman 9y ago
  Look no further than Art Basel to confirm this
Geekette 9y ago
Arguably, this is why art is so valuable. You have to know what you're looking for ... You have to know someone Art can still be valuable without such gatekeeping and often fraud-inducing secrecy. Art is intrinsically valuable in the eye of the beholder (based on whatever reasons attracts them to it). One shouldn't have to know what one is looking for beforehand, as long as one recognizes it on sight and decides to acquire it. The serendipitous journey to discovering your taste or buying on impulse shouldn't be marred by anxiety over accessing the right gatekeeper. And contrary to popular opinion, art need not be expensive to be good or valuable.