Taxman targets Tasmania's biggest gallery

Gambler who used his millions to open the island's main tourist attraction faces vast bill

Long regarded as a cultural desert and social backwater, Hobart has been buzzing since the Museum of Old and New Art (Mona) opened in the Tasmanian capital last year. Housing the private collection of a multimillionaire professional gambler, David Walsh, Mona has attracted half a million visitors to its underground galleries beside the Derwent River.

The A$100m (£66m) museum, built on the proceeds of gambling, has put Tasmania on the map and become its biggest tourist draw. It has also brought its eccentric owner to the attention of the Australian tax office, which has decided it wants a share of Mr Walsh's winnings. He has now received a A$40m tax bill, which he says he cannot afford to pay, and which has thrown Mona's future into question.

A university dropout with a gift for figures who devised a mathematical model enabling him to win vast sums, particularly on horse racing, Mr Walsh says he has no objection, in principle, to paying tax. What irks him is that the tax office repeatedly assured him that his gambling income was not taxable. Now it wants to tax him retrospectively, which he considers unjust, and he is fighting back in the federal court.

With Tasmanians aghast at the prospect of losing Mona, Mr Walsh has won support from some unlikely quarters. His MP, Andrew Wilkie, who has campaigned for the abolition of fruit machines, has accused the tax office of unfairly targeting "tall poppies". Another prominent Tasmanian politician, Bob Brown, a Presbyterian who until recently was leader of the Australian Greens, has urged the federal government to intervene.

Mr Walsh himself is hoping tax authorities will "come to their senses" and negotiate a reasonable out-of-court settlement. "It seems rather pointless for them to pursue me, destroy Mona, damage the economy and the Australian cultural scene, put 170 people out of work and at the end of the day get nothing," he told The Independent on Sunday.

With its eclectic mix of ancient and modernist works, and its vast scale – Mr Walsh's A$80m collection contains more than 2,000 paintings, sculptures and installations – Mona has won many plaudits from the international art world. Billed as an "un-museum", and a "subversive Disneyland", it confounds and intrigues visitors. Works on display include the Belgian artist Wim Delvoye's Cloaca, a model of the human digestive system which produces mock excrement at regular intervals. The building, too, is unusual, with a roof tennis court and no wall labels to explain the artworks.

Mr Walsh, who owns an adjacent vineyard and micro-brewery, was hoping to build a hotel and another museum exploring the relationship between art and science. But his expansion plans are on hold.

The 51-year-old began planning for Mona in 2004, he says, after the tax office assured his syndicate that it was not liable for tax. "Had they made a different decision then, I might not have got myself in this diabolical financial position I'm now in. I'm completely happy to pay tax. I'm a supporter of high-tax regimes, and I think I should be part of that. But I wouldn't be able to pay this bill even if I hadn't built Mona."

It is not inconceivable that he could gamble his way out of trouble. When the museum was in the latter stages of construction, he received two large bills amounting to about A$10m, which he was unable to pay. "My gambling partner said, 'why don't we just bet really big on the Melbourne Cup?' So we did, and we won a heap of money – over A$10m. That was enough to pay the bills, and Mona got finished."

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