Page 72 - Studio International - June 1966

Art prices current

Income tax and the £1,000 purchase by George Savage
The latest version of the British income-tax form of £200, the vendor actually receives £1,140 in the dictum of one of Her Majesty's Judges that it
has achieved a degree of bewildering complexity debased currency, the purchasing power of which is the citizen's inalienable right so to arrange his
beyond anything hitherto imposed on the patience is less than his original £1,000. So far from being a affairs as to pay the least possible amount.
of the long-suffering taxpayer. The reason is the tax on capital gains, the £60 is actually a capital One of the essential difficulties in estimating a
new capital gains tax which, in so far as anyone levy. gain made from the sale of a work of art is the
understands it, now falls on so-called profits Of course this applies equally to all kinds of real assessment of an initial value. If a painting is
gained from the disposal of certain capital assets, property, which has hitherto been to some extent bought in the sale-room and subsequently sold
including works of art costing more than £1,000. exempt from the effects of inflation. Pensioners and then, on paper at least, the result is clear, but a
The sheer immorality of this tax, which a critic holders of government stock are already accus- gain on a painting bought before the tax begins to
as sober as Lord Shawcross has stigmatized as tomed to the erosion of capital and income which operate can only be calculated on its value on a
fraudulent, will undoubtedly lead to wholesale is the product of printing-press finance and irre- predetermined date. This is where the difficulties
avoidance by any and every legitimate means. sponsible Hungarian economic theory. commence, since value depends on so many in-
Lord Shawcross termed this tax 'fraudulent' The capital gains tax, of course, does not affect tangible factors that, except for a few rare in-
because capital gains in an inflationary situation art-dealers. They will continue to pay income-tax stances, payment of the tax will at first undoubtedly
are at least to some extent illusory, and a product on their profits at the normal rate, and if the be voluntary. Quite obviously the end-product of
of the currency debasement for which government private buyer of works of art is to pay a tax on his this Gilbertian situation must be endless disputes
is responsible since it is still unlawful for the citizen hypothetical gains, he will also be able to offset which will clog the administrative machinery, and
to print his own money. A painting costing £1,000 losses against them. He will, in fact, need to apply the few competent valuers will join accountants
today and selling in five years' time for £1,200 will, to art-collecting precisely the same principles of in reaping a rich harvest from arguing claims
if the present rate of devaluation does not increase, tax-avoidance as he would to his normal business. with the Inland Revenue.
leave the purchaser precisely where he was in There is nothing wrong in tax-avoidance by any Should the Inland Revenue dispute the valuation
terms of purchasing power, without allowing any- legal means open to the taxpayer, and certainly provided by the taxpayer then they must produce
thing for interest on capital. But if the government the tax-collector will do his best to view liability evidence to support their own contention in a
then extorts £60 in tax on the hypothetical gain in the most unfavourable possible light. We have form acceptable to the courts. It would not be

Giorgio de Chirico's Oreste e Pilade, bronze, height
11 in., one of an edition of six, sold recently at
Parke-Bernet, New York, for $4,100 (£1,800).

The School of Tyros, 25 1/2 x 13 3/4 in. by Wyndham Lewis, Cazza 1965 by Anthony Caro, steel sculpture painted
sold at Christie's on May 13 for £787 ($2,200). It red, 24 3/4 x 12 1/2 x 48 in., and Girl 1966 by Reg Butler,
once belonged to Sir Osbert Sitwell, and was bronze, height 14 in., two of the works of art to be
exhibited at the Leicester Galleries in April 1921. auctioned at Sotheby's on June 23 for the benefit of
Refused by the Tate Gallery in the 1930's, it lay the Institute of Contemporary Arts.
forgotten in a warehouse in Chelsea for thirty years,
and came to light only recently.
282