The price of art.

realitykeeper

Have you ever wondered why a piece of art that looks like the sort of thing a six year old might create could be valued at tens of thousands of euro? I have heard various explainations but I have a theory which to me seems more plausible.

Lets say a wealthy individual wants to avoid paying a lot of tax on his income. Now, lets say this individual has a son or daughter or niece or nephew who is not particularly talented at anything. Well, all the wealthy individual has to do is pay an enormous amount of money to his untalented relative for an artwork that person created. The highly inflated art purchase can be written off against taxes just like gym membership. That way the money stays in the family and it explains why a few lines on a blank canvas can fetch 25,000 euro or why 75,000 is paid for a painting of two bland rectangles.

This theory does not apply to almost all artists or their work. The theory only pertains to the wealthy paying high prices for what I would consider talentless rubbish.

For this theory to work, the wealthy would perhaps be more likely to purchase these overpriced artworks from each others offspring rather than their own, thereby evading suspicion from the taxman. It is of course entirely possible that such paintings do fetch genuine high prices afterwards because collectors may assume the painting really is worth what was originally paid. (The Emperor`s invisible clothes effect).

Am I wrong?

Overheal

...I can write off my gym membership?

realitykeeper

Of course you can if you are in business. If you are PAYE, probably not but your boss can write off any recreational perks he provides.

Franz Von Peppercorn

1) Personal purchases can’t be written off for taxes.
2) it would be pretty obvious if all modern art was bought by relatives.

Art is a wonderful way to launder money as the value of it is so subjective.

For instance, I have a million that I want to get to South Africa but a stand alone wire of that value without good reason can raise red flags. However, if I buy a painting for a million from South Africa 99.99% of people could not tell what the painting is actually worth and so you can make the transaction appear valid.

That's a simplification obviously.

But probably mostly truly valuable art works as a good store of value (leaving aside potential for appreciation in value) as an alternative to sitting in a bank

realitykeeper

There may also be a cultural aspect to the value of art. For example, if one were to gather up every piece of abstract European and African art worth over a million euro, my guess is that most of these would be painted by Europeans. But, what if Europe became desperately poor and Africa became fabulously wealthy, could that change the portportion of the latest European vs African abstract artworks which are worth a fortune? My guess is that it would.

If an abstract painting is genuinely brilliant, it shouldn`t matter where it was painted or by whom. It is true, the subjective nature of art might be more relevant than the art itself when it comes to pricing. Is this subjectivity due to personal taste or a desire to evade tax or is the geographical location of the artist`s exhibition also a factor?

Have you ever seen the movie Micky blue eyes?

orourkeda1977

I thought part of the reason why people buy these sh1tty art pieces is oul lads comparing Mickey Measurements.

It's just oul lads with more money than sense waving their flutes around in a show of opulence

orourkeda1977

orourkeda1977 wrote: »

I thought part of the reason why people buy these sh1tty art pieces is oul lads comparing Mickey Measurements.

It's just oul lads with more money than sense waving their flutes around in a show of opulence

That too.

But also a way to transfer millions across borders and avoiding transaction monitoring systems.

Dohnjoe

Vintage cars? Antique furniture? Ludicrously expensive wine? Race horses? Ancient artefacts? First edition stamps and comic books?

People pay enormous sums of money for extremely rare objects. If it's a vast tax evasion conspiracy, I think somehow the IRS and global tax authorities will spot it long before internet folk do

Ipso

Deleted User wrote: »

orourkeda1977 wrote: »

I thought part of the reason why people buy these sh1tty art pieces is oul lads comparing Mickey Measurements.

It's just oul lads with more money than sense waving their flutes around in a show of opulence

That too.

But also a way to transfer millions across borders and avoiding transaction monitoring systems.

What happens after they transfer it? They still have to sell it to get money back, and any gains is subject to tax.

Ipso

Ipso wrote: »

What happens after they transfer it? They still have to sell it to get money back, and any gains is subject to tax.

More to do with the transfer of wealth. You can move valuable objects e.g. diamonds and paintings, to hold wealth there. You can then keep it as that asset, or exchange it for other assets. You can enter into a complex layering process to hide the true origins of cash and maybe keep a nice empty house in westminster.

If you move cash via traditional channels everyone knows your business.

Dohnjoe

Deleted User wrote: »

More to do with the transfer of wealth. You can move valuable objects e.g. diamonds and paintings, to hold wealth there. You can then keep it as that asset, or exchange it for other assets. You can enter into a complex layering process to hide the true origins of cash and maybe keep a nice empty house in westminster.

If you are buying it - you make a cash transfer, thats the true origin of the money right there

Dohnjoe

Dohnjoe wrote: »

If you are buying it - you make a cash transfer, thats the true origin of the money right there

Not an necessarily an international transfer though, and that's just one transaction. Money laundering is all about complex chains of transactions of an international nature to obfuscate the original source of money. Art can be a useful part of that chain by moving wealth from one country to another. If you do so through a traditional bank network there's a paper trail, e.g. 5 mill from bank of Ireland to bank of America new York. If a transaction doesn't make sense in the context of that customer a red flag is raised, police are informed.

You'd be suprised how much banks have to put into anti money laundering controls today, it's their biggest compliance cost. Have a look at the FATF website if interested.

I'm not just making it up :-)

https://www.acamstoday.org/art-and-antiquities-conduits-for-money-laundering-and-terrorist-financing/



Edit : just on the quoted comment, yeah you're absolutely right that's the transfer. And that may even be picked up by local police if it looks unusual. But when the painting then travels to Columbia to pay for something. Then elsewhere, then elsewhere, and elsewhere, and a few changes of ownership and purchases by trust companies etc it becomes damm near impossible to follow the trail

Dohnjoe

Deleted User wrote: »

Not an necessarily an international transfer though, and that's just one transaction. Money laundering is all about complex chains of transactions of an international nature to obfuscate the original source of money.

Why don't they just launder the money then, why does art have to be involved?

Also when buyers purchase art there will proof of purchase, and certificates of authenticity - that's because the art world is full of forgeries. If a piece can't be traced to source, it cannot be valued properly

It doesn't have to be involved, it's one of many methods.

Honestly, it's an incredibly complex area laundering money, one of the main goals is to have wealth leave a country without being traced.

If you are interested, I'd suggest taking a quick gander at the FATF website, what they do and the process of money laundering.

specky4eyes

https://www.youtube.com/watch?v=QZz2PhTQJCA