August 13, 2022

Taylor Daily Press

Complete News World

Pandora’s Leaves: Picassos and Warhols Without Corn Taxes

How can an exhibition in Brussels sell millions of euros worth of artwork and not pay taxes on it? By creating a Hong Kong post box, which the exhibition itself states to exist only on paper.

On February 5, 2016, the seller’s gavel fell at auction for a work by Pablo Picasso at Sotheby’s in London. The paper “Nu couché endormi” moves at a price of 197,000 pounds (230 thousand euros) from the private collection of Marina Picasso’s granddaughter. The buyer is the Brussels Vedovi Gallery. A few days ago, the Brussels Gallery purchased a joint work of Andy Warhol and Jean-Michel Basquiat from Christie’s for more than $2 million, through a private sale. The Brussels Gallery has already sold the work to a client who has transferred the millionth from the Uruguayan capital Montevideo.

pandora leaves

In the Pandora Papers, documents from 14 offices that set up structures in tax havens were leaked. They opened Pandora’s box, with more than 11.9 million files about mailbox companies in notorious tax havens. It comes with 2.94 terabytes of confidential data. The Panama Papers, which limited disclosure to a single Panama law firm, sparked a torrent of financial scandals around the world five years ago.

Together with ICIJ’s Consortium of Investigative Journalists and more than 600 journalists from 150 media outlets around the world, de Tejd examined the documents of the Pandora Papers for several months. It is the largest collaboration in the history of journalism. With the help of Knack and Le Soir, we were able to examine more than 33,700 files referring to Belgium. We tracked 1,217 Belgians or residents of our country, who had a total of 1,215 companies and mailboxes set up in tax havens.

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Vedovi Gallery is an international player in the art world. For over 25 years it has had its only branch in Waterloolaan in Brussels, surrounded by luxury boutiques such as Louis Vuitton, Gucci, Bulgari, Delvaux, Cartier and Armani. Active in the “secondary art market,” the gallery specializes in the buying and reselling of expensive works by contemporary European and American artists, post-war, and contemporary. This ranges from Ed Ruscha, Lucio Fontana, Rudolf Stingel, Cy Twombly, Gerhard Richter, Marcel Brodthers, Max Ernst, Maurizio Cattelan, Tom Wesselmann, Mark Grotjean, Roy Lichtenstein, Warhol, Basquiat, Magritte and Picasso.

In 2009, Vedovi won a bidding war at Christie’s for one of his clients for a Picasso Mousquetaire à la Pipe. Price: $14.6 million. The exhibition can also be found in the most prestigious art galleries. Last month, Vedovi had a booth at Art Basel, where he displayed a series of works by Belgian surrealist René Magritte. Prices rose to 3 million dollars.

But if you check the latest annual accounts of the Brussels Expo, you won’t find millions of dollars there. For 2020, there is still a negative gross margin of 172 thousand euros and a loss of 252 thousand euros. Also in the previous year, before Corona, there was only a gross margin of 129,000 euros and a profit of barely 44,000 euros. In recent years, the gallery has hardly paid any taxes here.

Although all press articles and on the exhibition website refer to Vedovi as the Brussels fair, it appears in Pandora Papers with PO Box in Hong Kong. It bears the name Global Art Portfolio Limited. As many as 320 emails, accounting papers, artwork inventories, sales charts, forms and other files were leaked from the Asiaciti Trust, an office in Singapore that establishes mailbox and trust companies for clients around the world.

Global Art Portfolio Limited does not have its office or staff in Hong Kong. The company, which was founded in November 2013, exists only on paper and has simply been given the Hong Kong post office address of Asiaciti, which includes a host of other mailbox structures operated by Asiaciti.

only on paper

The fact that Vedovi Gallery in Hong Kong has no real activities is repeatedly described in black and white in the leaked documents: “The company has no branches in Hong Kong. The only branch of the company is an office in Belgium. This office is personally managed by Mr. Fedovy, a well-known art dealer.

In Belgium, the gallery is run by Willem Vidovey, who lives here and made his way into the gallery world after visiting Sotheby’s. But Vedovi often referred to in Hong Kong documents is his brother Paolo Giacomo, who founded the gallery with Willem in 1995 after a career in banking and real estate. Paolo, who discovered a love of art through his brother, is also the ultimate beneficiary of the building of the mailbox. He officially lives in Monaco, although the French daily Les Échos also noted a pied-à-terre in Brussels in 2018.

Why did Vedovi set up such a PO Box construction in Hong Kong? This is also reflected in the leaked documents. On paper, all investments in artwork are attributed to Hong Kong Global Art Portfolio Limited. The Brussels Fair does not allow its multi-million dollar paper deals to pass through Brussels, but through Hong Kong. Zero tax is paid on million dollar trades.

In order not to have to pay taxes, Fedovy wrote in letters to the Hong Kong authorities themselves that the exhibition in Hong Kong is not suitable for anything. He even says the art dealer hasn’t set foot in Hong Kong in years. “Although the company is registered in Hong Kong, it has no business in Hong Kong. Management is outsourced to an independent service provider. All business activities of the company, including the procurement, maintenance and sale of artwork, are conducted in Europe. As a result , the company’s income is not taxable in Hong Kong,” according to a 2017 document signed.

Tax exemption

This has to do with Hong Kong’s “regional tax system”. Only the profits you make in Hong Kong are taxed at rates ranging from 8.25 to 16.5 per cent. For your overseas earnings, you can ask the Hong Kong authorities for full tax exemption. This is “income abroad”. Whether or not the fair pays taxes on million-dollar deals in Belgium does not matter to enjoy the tax exemption, the fair tells the tax authorities in Hong Kong.

All business activities are conducted in Europe. Thus, the company’s income is not taxable in Hong Kong.

In any case, almost no taxes have been paid at the Belgian company in recent years, according to annual accounts. In Monaco you can claim tax-free dividends. Belgium has also had an interesting double tax treaty with Hong Kong since 2003, in order to keep dividends tax free here as well.

In Pandora Sheets, long Excel tables describe in detail how millions of dollars handle the best artwork. Payments do not end up in an account in Hong Kong, but flow through bank accounts in Basel or Singapore. The gallery buys for millions of euros from famous auction houses, such as Sotheby’s, Christie’s, Phillips or Artcurial, as well as from galleries or other art collectors around the world.

prince of things
© Fidovi Gallery Sabam Belgium 2021

The fair often shares the cost price – and thus also the subsequent profits – with other fairs or other investors. Then Vedovy, for example, a gallery in New York that each owned half of Warhol’s. Sometimes the gallery contains only a quarter of Picasso and there are three other investors. For example, in 2015, there was a deal with the daughter of an Italian billionaire for half of the film Le Prince des Objets by René Magritte from 1927.

We also find transactions with other structures in tax havens. Among other things, the more than two-meter-high “GE” work, which Basquiat painted with Warhol. For Frank Stella’s ‘Saskatoon II’ it is about 5m wide, opposite sides are shown in 2015 and 2016 which appear to be located in the Cayman Islands or in Panama.

Direct sales to individual customers also passed through Hong Kong on paper. For example, with the ex-wife of a billionaire who bought the business of Rudolf Stingel and Robert Riemann, with a Latin American model who was also very rich and bought business for Ed Ruscha and George Kondo, or with a New York real estate investor who bought the Magrittes ‘La Gorgone’ from 1943. Payments to carriers in the US or Europe through the Hong Kong structure. Even a deal with another Brussels fair passed through Hong Kong.

The March 2017 balance sheet indicates that over $9 million in profit has been accrued across Hong Kong. In tax papers for the 2016/2017 fiscal year, the number “0” stands for “taxes due”. In the External Earnings box for that year, there is HK$14.6 million, or about €1.6 million.

Never across Hong Kong

Is the Hong Kong tax exemption being used right or wrong? Is it an artificial construction or is it perfectly legal? According to tax experts, it is up to the judge to rule on this. The Belgian tax authorities can ask questions to the tax authorities in Hong Kong to determine whether or not something material is going on there. According to tax experts, the question is also where the art pieces are actually sold and stored. Is this happening in Belgium? Or through lockers or warehouses in Switzerland, for example? These are all elements that determine the legality of the building.

We find some answers in Pandora’s papers. The company’s artworks are stored in a gallery in Belgium. Customers, who come from Europe and the United States, arrange business assembly and transportation by themselves. So the transport never went through Hong Kong,” Global Art Portfolio wrote to the Hong Kong authorities in 2018. January 2018 inventory shows the gallery contains more than $15 million worth of artwork. There is no canvas in Hong Kong.

Despite our insistence time and time again, since September 20, Galerie Vidovi has never answered our questions. On Friday we called the fair in Brussels for the last time. Nobody can talk to us.

Family behind Villa Empain in Pandora Leaves

Villa Empain, the famous Brussels villa dating from 1931 built for industrial baron Louis Jean Empain, is owned by the Boghossian Foundation. Built of cut granite and a protected monument, the Art Deco Temple came into the hands of a foundation founded in 1992 by Robert Boghossian and his two sons Jean and Albert, jewelers of Armenian descent. We also found a Bogosian build in the British Virgin Islands in Pandora’s Papers.

The mailbox company, Seagate Overseas Limited, has a descendant, Robert Boghossian, 43, as a beneficiary. He holds Belgian citizenship but lives in Switzerland, according to leaked papers from the construction management office Alcojal.

The mailbox creation will be used for both “passive investments and active business activities” and also appears to lead to a Swiss account. No one in the Boghos family wanted to talk to us.

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