Billionaires are storing hundreds of millions of dollars’ worth of art on superyachts

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Source – https://www.vox.com/the-goods/2019/2/4/18210829/superyacht-art-storage-billionaires-tax-avoidance

People who own yachts have lots of things to worry about. Is a yacht a good financial investment? (Usually not.) Will a group of class-warfare-waging rascals untie the boat from its dock, causing thousands of dollars in damage? (If you’re Betsy DeVos, yes.)

And then there’s the latest concern plaguing superyacht owners: Is a yacht really a good place to store an art collection, which is worth more than the yacht itself?

A growing number of billionaires — at least three, which is a lot since there are currently only 2,208 billionaires in the world — are finding that storing art on superyachts comes with its own set of problems, according to a new report by the Guardian. In one case, a billionaire’s children damaged a Basquiat painting by throwing cornflakes at it, and the crew added to the damage by trying to wipe the cereal off. Another yacht was the site of an unfortunate incident involving a champagne cork and a multimillion-dollar painting. On another, crew members having a pillow fight accidentally broke a £75,000 lamp. Those issues seem less related to yachts than to human behavior, but what do I know, I don’t own a yacht

Perhaps unsurprisingly, the news that the superrich were not only buying yachts worth hundreds of millions of dollars but filling said yachts with art worth hundreds of millions of dollars and then accidentally damaging that art was not received well. “People are using GoFundMe to beg for insulin while this is happening in the same time and place,” tweeted Rep. Alexandria Ocasio-Cortez (D-NY). “It’s no wonder logical, compassionate ideas” — like her suggestion that the top marginal tax rate should be raised to 70 percent — “are called ‘radical’ when the present is dystopian.”

The fact that the world’s billionaires are storing expensive art on giant, expensive boats that are terrible for the environment while millions of people struggle to get by is, as both Ocasio-Cortez and Vox’s Matt Yglesias suggested, a sign that those billionaires aren’t being taxed enough. It’s also worth noting that using superyachts as floating art galleries isn’t just a way of bragging about how much money you have — in some cases, it’s also a form of legal tax avoidance.

The extent to which yachts and art collections are used to get out of paying taxes is unknown, largely because of the complexities of international tax law and the intricate mechanisms the superrich use to shield their wealth from tax authorities. In 2017, as part of the Paradise Papers investigation, the International Consortium of Investigative Journalists found that Europe’s superrich often enlist accountants and wealth managers to help them avoid paying the compulsory value-added tax on luxury purchases like yachts and jets. These luxury vehicles are often registered in offshore accounts — a practice that Alex Cobham, the chief executive of the UK-based Tax Justice Network, told the ICIJ was “a symptom of global inequalities.”

Billionaires’ ability to avoid paying taxes on yachts and sports cars isn’t just a symptom of these inequalities; both illegal tax evasion and legal tax avoidance help the rich reduce their tax burden, meaning they can effectively hoard money that could have otherwise been used to provide social services for the non-yacht-owning masses. Tax avoidance is also rampant in the art market, which is often referred to as the largest unregulated market in the world.

“In general, tax law favors the wealthy. Complexity favors the wealthy,” Tim Schneider, an art business reporter at Artnet News, told me. “Wealthy people are the ones who can afford to hire accountants and lawyers who can find all the loopholes. The more complex we get in terms of all of these different variances of international law and international bodies, whether it’s setting up offshore shell corporations and trusts or [buying] floating vessels that are robust enough that you can put high-value art on them, I think you have opportunities to unearth [tax] advantages you wouldn’t [otherwise] have.”

Yachts can also help billionaires avoid other regulations. In 2015, French authorities seized a €26 million Picasso painting from Spanish billionaire Jaime Botín’s yacht, claiming that Botín was attempting to smuggle the painting to Switzerland by private jet in order to auction it off in London. Spanish law prohibits nationals from exporting “any movable property belonging to the Spanish Historical Heritage” without authorization, according to Artnet News. Botín, for his part, argued that he was just sailing his yacht, as one does. But the issue of whether yachts can be used for unsavory purposes like tax avoidance remains.

Andrea Marechal Watson, a freelance journalist who writes about art spaces and has writtenabout superyacht art collections, told me she has heard of instances of people having art auctions on yachts in order to get out of paying the VAT. And, she added, yachts can be an ideal place to store art. “You don’t actually have to go to extra steps to conserve art on a yacht. Yachts are arguably safer and more climate controlled as any luxury home,” she said. “The temperature and humidity are kept constant, and you’ve probably got more people servicing a yacht than you would in a house — very few people have a staff of 50 in a house.” But plenty of yacht owners have crews of 50 or more.

Ultimately, superyachts may actually be the best place to store priceless art. After all, what’s safer, or more metaphorically apt, than hanging your personal Picasso or Basquiat in a floating testament to inequality?

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