Art Collectors' Shenanigans
Via David Sucher, I found an article from the Seattle Post-Intelligencer about Washington State's reluctance to pursue tax-evading art collectors. Apparently, revenue investigator Linda Fryant found a way to track Washington collectors' out-of-state, unreported art purchases--and was put on paid administrative leave because of it. People involved seem surprisingly willing to go on the record in this article; maybe it's because the Seattle PI is a regional newspaper, maybe it's because officials figured few easily outraged political types would pay attention to an arts piece.
Mike Gowrylow, Department of Revenue spokesman, actually went on the record saying:
"We don't want to kill off the business of art collecting. If we have agents going to museums to see what's there and investigating those collectors for use-tax payments, will it destroy the collectors' desire to exhibit in museums?"
While I have to say that he has a point (most art collectors in France remain strictly anonymous out of fear of the "fisc," the IRS), this is still an extraordinary statement for a DOR to make. Maybe I've been reading too much national press, but he's really making himself vulnerable to charges of cronyism with this kind of rhetorical (?) question.
The DOR's accomodation of collectors', um, financial idiosynchrasies seems to be more wide than either the spokesperson or the journalist can express:
According to collectors, the DOR has been willing to waive not only penalties and interest but substantially reduce the principal of the tax bill for those who come forward voluntarily.
A draft of an agreement between the agency and an art collector hammered out in October 2004 is a good example.
It allowed the taxpayer to declare the value of the purchases without showing receipts, and reduced the taxes on that amount by 50 percent because the taxpayer said some sales tax had previously been paid. The draft stipulated that "the time and effort needed to obtain documentation ... would be significant" and that fact-finding in the case would constitute "an extreme burden in cost and time."
A burden for whom?
"For both the taxpayer and the agency," said Gowrylow. "For voluntary disclosures, we can practice an unofficial amnesty. We do it in the interests of collecting funds for the state. These are people we might not reach at all if they hadn't contacted us, usually anonymously through their lawyers."
So, let me understand this correctly. If collectors declare the value of the art themselves, they get a 50 percent tax discount? That system surely creates an incentive to collecting contemporary art, doesn't it? "Oh, well, now so-and-so's art commands five-digit figures, but I bought this piece for a song two years ago!" And the dealer can use the cash part of the payment towards wine and cheese for openings or, depending on the price scale, a remodelling of his or her bathroom.
I would like to be able to move to the epode here, where I would resolve my concerns about collectors' usefulness to the art world and their skullduggery, and about tax collectors' moral responsibility to collect taxes without making class judgments and their pragmatic concern to get as much on paper as possible. But I am not a lyric poet, and I see no easy solutions (or even meaningful syntheses) to this problem.