Tax axe hangs over art in Sweden

Press, 25 February 1989, Page 19

Tax axe hangs over art in Sweden

NZPA-AP Stockholm In Sweden, a painting on the wall is worth more than money in the bank. It is tax free. But the Government now is planning a big tax reform that is likely to strip away some of the benefits of buying and selling expensive artwork. The change would be a blow to many wealthy Swedes who have discovered Manets and Monets can be attractive tax shelters.

In spite of the egalitarian ideology of the Swedish welfare State, and its taxes that rank the highest in the world, private wealth has blossomed over the last 10 years, bringing new money to old and modern art.

Big companies also boost their prestige by displaying the best of Swedish art in their corporate headquarters. Under present tax law, artwork is exempt from capital gains tax after five years of ownership, a break unavailable to sellers of ’ stocks or real estate. All this has created a boom in the Swedish art market — and in art prices. “Swedes have a lot of purchasing power right now,” said Hans Dyhlen, the director of the Lon-don-based Sotheby’s auction house in Sweden. Another auction house, Bukowski’s, said it sold artwork last year worth 368 million kronor ($lOO million), about four times its sales in 1983. “Art is seen both as an interesting and a relatively secure investment,” Mr Dyhlen said in a telephone interview. “People buy art as a form of security planning.” Swedes, he said, are enthusiastic but nondiscriminating buyers. Goran Hellstrom, of Bukowski’s information department, said prices of high quality work have risen dramatically, and he had a kinder view of local tastes. “People are more

quality-conscious now than five years ago,” he said.

“I guess there have been just too many investments in art for the sake of evading taxes,” a tax official, Sven Karldstedt said. But whether or not the benefits of art ownership will be reduced in the tax reform is “all a political question.”

Last November, a littleknown Swedish real estate tycoon, Hans Thulin, made a splash in the United States modern art world. Within one week he bought Jasper Johns’ White Flag, and Rebus by Robert Rauschenberg, for a total of SUSI 3.3 million ($21.45 million). A week later he paid nearly SUS2 million ($3.26 million) at a Swedish auuction for Nils Dardel’s Dying Dandy. Although the business magazine “Affarsvarlden” listed Thulin among Sweden’s 100 wealthiest families, Stockholm’s tabloids reported that he declared zero wealth in his 1986 tax declaration and paid no income tax in 1986 or 1987. The average worker pays about half his salary in taxes to underwrite social welfare benefits like free education and health care.

The high taxes also generate what Swedes call “tax planning,” the search for legal or illegal ways to evade taxes.

For the small investor, some companies advertise shares in paintings which are stored away for selling after the five-year tax break takes effect, said Karl-Gustav Fernlund, a member of the Governmental committee working on the tax revision.

Mr Fernlund said such companies were “one reason why (art investments) have started to raise attention.” Bukowski’s Hellstrom said any tax on profits in art primarily would affect the quality auction houses and art dealers, which keep all transactions on file, and favour less serious dealers.

He also said a tax could scare away buyers from the national market and encourage them to invest abroad, in spite of a 25 per cent import tax on artwork brought into the country. The broadened interest in art, for whatever reason, has benefited Swedish artists. In a country of 8.4 million, 3200 people are registered artists, and Stockholm has nearly 200 art dealers and’ galleries. Painters and sculptors in Sweden, whether they sell their work or not, can apply for a grant of 40,000 kronor ($NZ10,367) from a Governmental fund, but they cannot qualify two years in a row. Of 2300 applicants last year, 548 received the grant.