Behind the taxman's knock

ART: For the industry to mature, it'll have to look beyond just earnings and set systems in place.

Take a canvas, let's say 3'x5', a few dabs of paint, a champagne and cheese opening, and prices upwards of Rs 50 lakh and you've got the taxman interested. Very interested.

If a few people are buying works of art valued at several crores every year, what must their incomes be? What kind of homes would they live in? What cars do they drive? What about capital gains on art? Is there under-invoicing?

It was inevitable "" this raid on galleries three days ago. Which is why it's difficult to understand the shock it's sent through the art fraternity. After all, from nightclubs to fashion designers, everyone has been raided in the past, and with art prices in your face, you could almost feel the hot breath of the income tax hounds on your backs.

If it's strictly outrage and "no comments please" from the rank and file, blame it on the prima donna status of most galleries which do deal in cash, under-invoice cheque payments, and don't declare either capital gains or acquisitions. And yet, the last decade has probably seen the most concentrated effort at cleaning up the industry by its very constituents.

Whatever the charges about rigging prices, there's no getting away from the fact that up to Rs 600 crore of the Rs 1,600 crore art market comes from public auctions where prices are openly acknowledged, and payments include buyer's premium and VAT, payable by cheque. The better galleries have switched into legit mode too with all payments strictly sterile of cash transactions.

Still, there's no escaping the greed and cash economy that both flourish and account for anywhere from a third to half the industry, by some estimates. If that seems like a lot, remember that till a decade ago, almost the entire industry was illegitimate.

It is, in fact, to its credit "" and that of some frontrunners "" that it has been able to rid itself of its more dubious origins. And at least one of them, Neville Tuli of Osian's, says the raids should be viewed positively. "The income tax authorities have improved over the years, they've learnt more and ask pertinent questions about money laundering."

Tuli feels there is some justification to the raids, and that those who have not been able to clean up their acts through internal regulations, will now be forced to do so through means of external regulations.

"At the end of the day," he assures, "the income tax system is a positive, viable system." And the responsibility of managing art as assets requires mature handling, he insists.

Do the others agree? At the rate at which they're requesting anonymity, not returning calls, or simply shunning the press, it's clear that there are many who have to first get to that level of maturity. Part of the legitimising process, some might snigger.