April 11, 2011

Monday, April 11, 2011 - No comments

Part III of V: The Use of High Value Art and Collectibles to Launder and/or Transfer Capital

by James Bond, ARCA Class 2011

STAMPS

An alternate and little talked about venue for capital transfer is the use of rare stamps, a pastime the U.S. Government says has 20 million collectors. Stamps are an ideal venue for the transfer of capital because they are highly portable and convertible with collectors all over the world who are highly private. In an effort to obtain information about the use of stamps to transfer capital a Brooklyn dealer was called and after telling him the thesis topic was ask if he knew of any stories relating to the topic and if he could offer advice as to how to research the topic on the internet. His response to all questions and his only answer to both questions was two utterance of the word No. Taxation of profits from stamp collecting has proven difficult according to Mr. Robert Scott, director of the stamp department at Sotheby’s in New York who said:
That’s why there is a great deal of anonymity in stamp collecting.
Mr. Herman Herst Jr. an author and collector of stamps for over seventy years gave the following assessment:
[Stamps are] …a lot easier to sell than jewelry…. You can get them out of the country and take them to Germany, Switzerland, no questions ask. The same thing getting them here. It is about [the] one international commodity that ignores national laws…Gold you need a license to import it in any quantity. Bring diamonds in and you’ll pay big duty. Real estate, you can’t move.
This purported ability to move freely and invisibly around the world takes on added significance when the value of some of the rare stamps, like the values of some of the old master, is considered along with their portability. While their relative value does not rival that of the art market, their portability and relative invisibility is a distinct asset. An anonymous collector purchased the world’s most valuable stamp, Treskilling Yellow, for $2.6 million in 1996. In 2009 the Heritage New York Stamps Auction had total sales of over $1.8 million with the Rare and Choice stamps commanding prices from $30,000 to $10,000. Heritage Auctions has annual sales of more than $600 million. A ready market for the acquisition or sale of stamps is available in Europe through private dealers and auction houses. The largest stamp auction in the world is held at the Rapp auction house in Switzerland. This is significant in relation to transferring capital because the Swiss do not consider tax evasion a crime.

Another method used during WWII was to place rare, cancelled stamps on envelopes that were then exchanged for goods and services when the person carrying them reached their final destination.

PUBLIC PHILANTHROPY

During the first half of the twentieth century, wealthy art collectors established museums to display their collections but this began to change when governments started allowing tax deductions against income for the donation of artwork to designated non-profit, charitable, or religious organizations. This was beneficial even for small collectors who were too small to set up their own non-profit foundation. The amount allowed for deducting donated art varies according to politics and the revenue needs of each country, but generally falls in the 20 to 50 percent range. The ‘golden egg’ principle articulated by Marx can be manifest if a donated work of art has appreciated, for the deduction is computed using the fair market value of the object irrespective of its cost. Thus, art capital becomes translated into M2 which is deducted against income which lowers tax liability thus increasing net worth. In effect tax deductions for donated art become a type of private philanthropy as explained by R.T. Naylor:
U.S. museums [now] rely almost exclusively on what now passes as private philanthropy…In other words ‘private philanthropy’ in modern North America is just a back-handed form of state subsidy in which the government cedes to a rich private citizen the right to not pay a certain amount of taxes, the privilege of deciding which charitable, religious or educational causes gain the benefit, and the power to dictate just how the endowed institutions will use the bequest.

0 comments:

Post a Comment