When is a chocolate bar a work of art?
When it's part of a multi-million-dollar tax scam, says Kotaro Miyata
Some of New York's most prestigious art dealers have admitted tax evasion after a probe by the Manhattan district attorney, Robert Morgenthau.
The investigation was aimed at stopping the practice of pretending to send expensive merchandise outside New York State, which enables buyers to avoid an 8.6 per cent sales tax. Prosecutions have raised $16m (£9.4m) in unpaid sales taxes and fines.
The biggest fine to date, $500,000, has been paid by Otto Naumann, a Manhattan gallery which deals in old masters. In June, the dealer pleaded guilty to failing to collect $250,000 in taxes on $3m of sales. The gallery attracted attention last year after it put Rembrandt's Minerva up for sale for $40m.
Dealers go to great lengths to circumvent the law. Some produce false documents, others send empty crates to addresses outside New York. The most interesting tactic was employed by the Macklowe Gallery, a well-known dealer in early-20th-century decorative art, such as Tiffany lamps, which was caught shipping boxes of chocolate bars, while the real purchased goods were delivered to their new owners in New York. It was found guilty of not paying $42,500 in taxes on sales of over $510,000 and fined $95,000.
Other galleries collared by prosecutors include Bob P Haboldt, a Dutch and Flemish masters specialist, SJ Shrubsole, experts inantique silver, and Chatelaine, a jewellery dealer. The trio have paid a combined $670,000 in fines for failing to pay $357,000 in taxes.
The inquiry was triggered by the arrest of Dennis Kozlowski, former chairman of troubled US industrial group Tyco International. He was charged with avoiding taxes of more than $1m after buying six paintings for over $13m, including a $3.95m Monet. He is believed to have asked for them to be shipped to Tyco's New Hampshire HQ, only for them to be sent back to his New York address. He is defending fraud charges. A trial on tax charges is expected after the fraud case ends.
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