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How does it work? And what’s the evidence that this is true? People love to say this but I’ve never seen anyone go beyond the surface on the took. The impressio

How does it work? And what’s the evidence that this is true? People love to say this but I’ve never seen anyone go beyond the surface on the took. The impression I get is it’s mostly people who don’t know what they’re talking about repeating a pleasing idea.

amiga386 2y ago
It's used for money laundering, wealth transfer and tax avoidance. You buy and sell art, especially art that permanently resides in freeports, with cash, with shell companies that don't declare their ultimate beneficiary. You then avoid anyone knowing that you paid criminal X or criminal X paid you with the proceeds of crime. You avoid your government knowing that you have $XXX,XXX,XXX of assets stashed away that you're not declaring. You don't pay capital gains tax on it. And so on. Governments around the world have been passing legislation in the past few years, and putting diplomatic pressure on governments of other tax havens, to tighten scrutiny of these international financial transactions. https://www.artsy.net/article/artsy-editorial-freeports-operate-margins-global-art-market https://www.artsy.net/article/artsy-editorial-freeports-oper... https://news.artnet.com/market/switzerland-freeport-regulations-367361 https://news.artnet.com/market/switzerland-freeport-regulati... https://safehaven.com/markets/markets-other/How-The-Ultra-Wealthy-Are-Using-Art-To-Dodge-Taxes.html https://safehaven.com/markets/markets-other/How-The-Ultra-We... https://en.wikipedia.org/wiki/Panama_Papers https://en.wikipedia.org/wiki/Panama_Papers
- AnthonyMouse 2y ago
  You're providing evidence that crime exists, not that art as a whole is "predominantly a tax evasion and racketeering scheme". Where is the evidence that this represents the majority of art purchases? It's also weird to even call this a tax dodge. If you make money in New York and not London then you should be paying taxes to New York and not London because your operations are using New York streets and New York sewers and hiring kids from New York schools etc., and that's what those taxes are paying for. You haven't used any of London's infrastructure to do it so they don't get any of the money. If you make money in some free port or <unspecified location> which is so un-tied to any other jurisdiction that you have no meaningful operations in any of them, why should any of them have a claim to the money? None of them have done anything to earn it.
  - keiferski 2y ago
    Art is definitely used as a tax dodge by the wealthy, but to suggest that the entire ecosystem is nothing but that is not correct. People that say this usually lack a deeper understanding of contemporary art.
    - AnthonyMouse 2y ago
      I'm still not clear how this is even supposed to be tax evasion. If you're not operating in a jurisdiction then you shouldn't owe them any taxes. Which jurisdiction is even alleged to be owed the money, and on what basis?
      - keiferski 2y ago
        Well, presumably the whole concept of a Freeport is kind of a “hack” against the tax system. These items are treated as if they’re in transit, but they are stored indefinitely.
        AnthonyMouse 2y ago
        They're treated as if they're outside of the jurisdiction, because they are. It's not a hack, it's just a fact. It's not even weird. The weird expectation is that areas outside of a given country's jurisdiction wouldn't exist.
      - thfuran 2y ago
        US citizens owe the US government taxes on their income regardless where it was earned, barring some specific exclusions. At any rate, where a company is registered or where an asset is held doesn't necessarily have much bearing on where work is done or what infrastructure is used and to what extent.
        AnthonyMouse 2y ago
        > US citizens owe the US government taxes on their income regardless where it was earned, barring some specific exclusions. That seems like the flaw here, not the other thing. Why should the US government have any entitlement to tax activity that occurs entirely outside their jurisdiction? > At any rate, where a company is registered or where an asset is held doesn't necessarily have much bearing on where work is done or what infrastructure is used and to what extent. But that's the point. They're meant to tax in the places where this sort of thing happens. If you have a building somewhere, there is property tax. If you make sales somewhere, there is sales tax or VAT. If you have employees somewhere (or are an employee and perform work somewhere), there is payroll tax. Storing art can be done most anywhere, so naturally it happens in the places that allow it under the most favorable terms, but what's the problem there? It's the same as companies putting their facilities in some other jurisdiction because it has lower taxes. It's the normal and expected thing and one of the rare incentives for governments to improve their cost efficiency through competition.
Nevermark 2y ago
For starters, you can purchase and store art in an airport storage area where it never goes through any customs. [0] Presumably, this is art that will accrue in value, but is (rarely) ever viewed, so is purely a financial vehicle for maintaining and transferring ownership of wealth outside any taxation jurisdiction. Another game is the ultra rich and famous getting richer. Art is valued not just for its objective aesthetic appeal (ha ha! As if!!) but based on its providence. Meaning who created it, and also its history. Included who has owned it. If you are Oprah Winfrey, and you purchase some art that only the top 1% of 1% can afford. It is likely that when you sell it, not only will the exclusivity of the particular artifact itself have gained value, but now that his has been owned by Oprah, it will be worth even more. And by modeling the value she places on art, she validates these extreme price levels both when buying and selling, which benefits the whole art world. [1] Which, in full circle, makes art even more useful as a financial instrument. [0] https://en.wikipedia.org/wiki/Geneva_Freeport https://en.wikipedia.org/wiki/Geneva_Freeport [1] https://news.artnet.com/market/oprah-sells-famed-gustav-klimt-portrait-150-million-851537 https://news.artnet.com/market/oprah-sells-famed-gustav-klim...
- perfmode 2y ago
  physical NFTs
janandonly 2y ago
Under Dutch tax law: if you have a gold coin you need to pay “box 3” meaning wealth tax on it. But if you have a bunch of gold coins you can call them “an art collection” and now you don’t pay any wealthy tax on them at al.
- AnthonyMouse 2y ago
  This is one of the main reasons that wealth taxes are bad policy. There are many assets that could have significant value, but the value is highly subjective. Since an accurate valuation is impossible and the range of plausible valuations is wide, it inherently becomes a system for arbitrage and distorts investment into whatever assets minimize the tax. Overestimating the value of hard-to-price assets is massively destructive (people get rid of and make no attempt to acquire those assets because the tax exceeds their value; no more art), but setting their value to zero or otherwise underestimating their value does exactly as you're seeing. Nearly all other taxes solve this by applying the tax when a transaction occurs and the current value is known in the form of the price being paid by the buyer to the seller.
  - pydry 2y ago
    There's an easy fix for that. You tell the government how much it is worth for tax purposes. If the government thinks you have underestimated it they reserve the right to buy it at that price. It would make tax evasion risky and expensive.
    - perfmode 2y ago
      clever. how’d you come up with that?
      - habitue 2y ago
        It's called a harberger tax: https://en.m.wikipedia.org/wiki/Harberger_Tax https://en.m.wikipedia.org/wiki/Harberger_Tax
holoduke 2y ago
Of course it is. In many countries there is tax on liquid assets. Thats why these people buy art, cars etc. Things the tax authority cannot easily identify. Its also easy to transport these goods to another country. Its easy to change the value temporarily so you can move funds arround very easily. I know some people doing it and storing their stuff in Dubai. Tax evasion is number one reason.

amiga386 2y ago

It's used for money laundering, wealth transfer and tax avoidance. You buy and sell art, especially art that permanently resides in freeports, with cash, with shell companies that don't declare their ultimate beneficiary. You then avoid anyone knowing that you paid criminal X or criminal X paid you with the proceeds of crime. You avoid your government knowing that you have $XXX,XXX,XXX of assets stashed away that you're not declaring. You don't pay capital gains tax on it. And so on. Governments around the world have been passing legislation in the past few years, and putting diplomatic pressure on governments of other tax havens, to tighten scrutiny of these international financial transactions. https://www.artsy.net/article/artsy-editorial-freeports-operate-margins-global-art-market https://www.artsy.net/article/artsy-editorial-freeports-oper... https://news.artnet.com/market/switzerland-freeport-regulations-367361 https://news.artnet.com/market/switzerland-freeport-regulati... https://safehaven.com/markets/markets-other/How-The-Ultra-Wealthy-Are-Using-Art-To-Dodge-Taxes.html https://safehaven.com/markets/markets-other/How-The-Ultra-We... https://en.wikipedia.org/wiki/Panama_Papers https://en.wikipedia.org/wiki/Panama_Papers

AnthonyMouse 2y ago
You're providing evidence that crime exists, not that art as a whole is "predominantly a tax evasion and racketeering scheme". Where is the evidence that this represents the majority of art purchases? It's also weird to even call this a tax dodge. If you make money in New York and not London then you should be paying taxes to New York and not London because your operations are using New York streets and New York sewers and hiring kids from New York schools etc., and that's what those taxes are paying for. You haven't used any of London's infrastructure to do it so they don't get any of the money. If you make money in some free port or <unspecified location> which is so un-tied to any other jurisdiction that you have no meaningful operations in any of them, why should any of them have a claim to the money? None of them have done anything to earn it.
- keiferski 2y ago
  Art is definitely used as a tax dodge by the wealthy, but to suggest that the entire ecosystem is nothing but that is not correct. People that say this usually lack a deeper understanding of contemporary art.
  - AnthonyMouse 2y ago
    I'm still not clear how this is even supposed to be tax evasion. If you're not operating in a jurisdiction then you shouldn't owe them any taxes. Which jurisdiction is even alleged to be owed the money, and on what basis?
    - keiferski 2y ago
      Well, presumably the whole concept of a Freeport is kind of a “hack” against the tax system. These items are treated as if they’re in transit, but they are stored indefinitely.
      - AnthonyMouse 2y ago
        They're treated as if they're outside of the jurisdiction, because they are. It's not a hack, it's just a fact. It's not even weird. The weird expectation is that areas outside of a given country's jurisdiction wouldn't exist.
    - thfuran 2y ago
      US citizens owe the US government taxes on their income regardless where it was earned, barring some specific exclusions. At any rate, where a company is registered or where an asset is held doesn't necessarily have much bearing on where work is done or what infrastructure is used and to what extent.
      - AnthonyMouse 2y ago
        > US citizens owe the US government taxes on their income regardless where it was earned, barring some specific exclusions. That seems like the flaw here, not the other thing. Why should the US government have any entitlement to tax activity that occurs entirely outside their jurisdiction? > At any rate, where a company is registered or where an asset is held doesn't necessarily have much bearing on where work is done or what infrastructure is used and to what extent. But that's the point. They're meant to tax in the places where this sort of thing happens. If you have a building somewhere, there is property tax. If you make sales somewhere, there is sales tax or VAT. If you have employees somewhere (or are an employee and perform work somewhere), there is payroll tax. Storing art can be done most anywhere, so naturally it happens in the places that allow it under the most favorable terms, but what's the problem there? It's the same as companies putting their facilities in some other jurisdiction because it has lower taxes. It's the normal and expected thing and one of the rare incentives for governments to improve their cost efficiency through competition.

Nevermark 2y ago

For starters, you can purchase and store art in an airport storage area where it never goes through any customs. [0] Presumably, this is art that will accrue in value, but is (rarely) ever viewed, so is purely a financial vehicle for maintaining and transferring ownership of wealth outside any taxation jurisdiction. Another game is the ultra rich and famous getting richer. Art is valued not just for its objective aesthetic appeal (ha ha! As if!!) but based on its providence. Meaning who created it, and also its history. Included who has owned it. If you are Oprah Winfrey, and you purchase some art that only the top 1% of 1% can afford. It is likely that when you sell it, not only will the exclusivity of the particular artifact itself have gained value, but now that his has been owned by Oprah, it will be worth even more. And by modeling the value she places on art, she validates these extreme price levels both when buying and selling, which benefits the whole art world. [1] Which, in full circle, makes art even more useful as a financial instrument. [0] https://en.wikipedia.org/wiki/Geneva_Freeport https://en.wikipedia.org/wiki/Geneva_Freeport [1] https://news.artnet.com/market/oprah-sells-famed-gustav-klimt-portrait-150-million-851537 https://news.artnet.com/market/oprah-sells-famed-gustav-klim...

perfmode 2y ago
physical NFTs

janandonly 2y ago

Under Dutch tax law: if you have a gold coin you need to pay “box 3” meaning wealth tax on it. But if you have a bunch of gold coins you can call them “an art collection” and now you don’t pay any wealthy tax on them at al.

AnthonyMouse 2y ago
This is one of the main reasons that wealth taxes are bad policy. There are many assets that could have significant value, but the value is highly subjective. Since an accurate valuation is impossible and the range of plausible valuations is wide, it inherently becomes a system for arbitrage and distorts investment into whatever assets minimize the tax. Overestimating the value of hard-to-price assets is massively destructive (people get rid of and make no attempt to acquire those assets because the tax exceeds their value; no more art), but setting their value to zero or otherwise underestimating their value does exactly as you're seeing. Nearly all other taxes solve this by applying the tax when a transaction occurs and the current value is known in the form of the price being paid by the buyer to the seller.
- pydry 2y ago
  There's an easy fix for that. You tell the government how much it is worth for tax purposes. If the government thinks you have underestimated it they reserve the right to buy it at that price. It would make tax evasion risky and expensive.
  - perfmode 2y ago
    clever. how’d you come up with that?
    - habitue 2y ago
      It's called a harberger tax: https://en.m.wikipedia.org/wiki/Harberger_Tax https://en.m.wikipedia.org/wiki/Harberger_Tax

holoduke 2y ago

Of course it is. In many countries there is tax on liquid assets. Thats why these people buy art, cars etc. Things the tax authority cannot easily identify. Its also easy to transport these goods to another country. Its easy to change the value temporarily so you can move funds arround very easily. I know some people doing it and storing their stuff in Dubai. Tax evasion is number one reason.