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Contemporary art is a sophisticated form of money laundering for the very rich. As it almost completely exempt from taxation, it's an ideal vehicle, relatively
by wazoox 8y ago
Contemporary art is a sophisticated form of money laundering for the very rich. As it almost completely exempt from taxation, it's an ideal vehicle, relatively fungible and open to crazy speculation.
The crazy financiarisation of our world made many collectible objects prices skyrocket (see old cars, art, etc). But Contemporary art is the best of all, because, contrary to ancient art or old ferraris, its supply is unlimited. A boon to hide in plain sight the billions happily printed at the Fed and BCE.
- cheerlessbog 8y agoExempt from taxation? Isn't it subject to capital gains?
- wazoox 8y agoIn most countries, it's less taxed than other forms of capital (in Europe, it benefits from reduce VAT, no tariffs, and many other advantages) .
- habosa 8y agoA lot of art is "donated" by putting it in a museum. However this is basically a massive tax writeoff for someone watching and securing your art for you! And it still confers all the status on you because it will have a plaque saying "generously donated from the Richie Rich Foundation"
- drcode 8y agoCan you provide documentation for these supposed tax benefits? (I'm genuinely curious) AFAIK there are no tax benefits at the point of buying the art, and cap gains benefits are no different than stocks, real estate, etc.
- cl0ckt0wer 8y agoHere's a great podcast on it: https://www.npr.org/sections/money/2018/02/09/584555705/episode-823-planet-monet https://www.npr.org/sections/money/2018/02/09/584555705/epis...
- drcode 8y agoSorta, though arguably that podcast says the exact opposite: That taxes are high for art transactions and that people have to develop additional schemes to avoid them: I can buy GOOG stock without sales tax, but apparently you DO have to pay sales tax in a Southeby's auction. I'm guessing that asabjorn's comment is more accurate: People donate art at a fraudulently-inflated price to lower their tax liability.
- auiya 8y ago> I can buy GOOG stock without sales tax Right you pay brokerage fee at time of purchase and capital gains tax at time of sale though, which is often larger than sales tax.
- benmmurphy 8y agoApparently that is avoiding sales taxes and in a way that seems completely legitimate. One of the examples was New York. New York has a destination based sales tax. So if you are not using the item in New York you don't pay sales tax on it.
- pastor_elm 8y agonot directly on topic. but he's an article on how holding art can help shield your finances: https://www.nytimes.com/2019/01/12/style/david-libbie-mugrabi-divorce-art.html https://www.nytimes.com/2019/01/12/style/david-libbie-mugrab...
- duado 8y agoThe end goal is that everything gets donated and written off. Here's the basic scheme: * 10 rich guys buy 100 paint splotch canvases from a dude who wears black and smokes cigarettes * they keep 90 canvases in their basement and sell 10 of them back and forth to each other for increasing sums of money, paying taxes along the way * when the prices are at $20 million per painting, they donate all of them, including the 90 in the basement (which appreciated just by exchanging the 10) for $2 billion in combined tax writeoffs
- tomp 8y agoThis implies that donated art basically has an arbitrary valuation (set by "experts" based on some not really free or transparent "market"). Is this true? How is this handled for other assets?
- mdorazio 8y agoSee here [1]. It's based on qualified appraisal and/or valuation of similar works at known auctions. [1] https://www.journalofaccountancy.com/issues/2010/jul/20092096.html https://www.journalofaccountancy.com/issues/2010/jul/2009209...
- duado 8y agoIf Pierre's paintings are being exchanged regularly by a bunch of hedge fund guys for $20 million each, isn't $20 million the market price of a different, arbitrary, painting from Pierre? It isn't really a problem for other assets because they don't have the museum donation market that's key to the scheme working. You can't find a charity who is looking for superyacht donations.
- eeZah7Ux 8y ago> isn't $20 million the market price Not at all: to have a "market" you need buyers, sellers and goods to be fungible. In your example buyers and sellers are only 0.000001% of humanity: other people cannot afford to play this game. Also the goods are unique. Brand new paintings would not be sold by the author him/herself at that price 99% of the time. They skyrocket in value only when sold between billionaires. https://en.wikipedia.org/wiki/Market_(economics) https://en.wikipedia.org/wiki/Market_(economics)
- baud147258 8y agoIf I remember right, in France arts pieces are not taxed as other assets (like flats) are. edit: https://en.wikipedia.org/wiki/Solidarity_tax_on_wealth#Basis https://en.wikipedia.org/wiki/Solidarity_tax_on_wealth#Basis The English version is lacking some exempted elements compared to the French version, where works of arts are explicitly cited.
- jcranmer 8y agoThe French list is basically the same as the English list, except for the second and second-to-last lines which look like overly abbreviated translations: * objets d'antiquité, d'art ou tout simplement de collection, parts de sociétés civiles propriétaires de tels objets (antiques, art, collections, and shares in what I think are trusts of various kinds) * biens ruraux loués à long terme et participation dans des groupements fonciers agricoles (which appears to have been translated as "anonymous bonds"--a better translation is long-term rural bonds and agricultural cooperatives). The French Wikipedia also states that this was replaced in 2018 with a new tax that's on property. My grasp on the French legal terminology here is weak, but I think it refers to real estate property only and does not include personal property, which would include things like artwork.
- baud147258 8y agoThe "collection objects" term from the English version just seemed a little more restrictive than the French equivalent. Also I didn't think about the ISF deletion then.
- deleted 8y ago[deleted]
- omnimus 8y agoYou are not wrong. But people making / selling art are not doing it for that purpose. People buying it? Not all but probably many.
- ddebernardy 8y agoTo those might be thinking that demand probably isn't unlimited, it's true. But art is a business where demand doesn't quite work as one would normally understand it. (Anecdotal.) I once was sitting next to a professional art dealer on a Eurostar. He gave me a hilarious primer on how his business worked as we made our way to Paris. In short, art demand is to a very large extent driven only by what's on display at the art dealers' places during their exclusive parties. A good way to think about this is that art dealers are opinion leaders and create new art trends as they see fit à la Devil Wears Prada.
- mindslight 8y agoDon't forget that fine art "directly held" is exempt from FBAR reporting.
- perl4ever 8y ago"Crazy financiarisation" may have gone further than you think. Multiple artists have engaged in trading securities in order to create chart patterns which are art. http://www.sarahmeyohas.com/stock2016/ http://www.sarahmeyohas.com/stock2016/ and "On 31 March Finance Minister Pravin Gordhan...called on South Africans to mobilise and organise against corruption and State Capture. In Cape Town...hedge fund manager James Gubb heeded the call. As a form of protest, Gubb began trading Gupta-owned Oakbay shares in order to create, in the price chart, a work of art depicting a middle finger."