Comment   |   Volume 164, Issue 4

Devising an Artful Tax: An Appraisal of Payment‐in‐Kind Income Taxes in Mexico and the United Kingdom

By
164 U. Pa. L. Rev. 983 (2016)

March 2016












Now in effect for almost sixty years, Pago en Especie allows Mexican artists to satisfy their annual income taxes by giving the government a certain number of their paintings, sculptures, drawings, photographs, or other visual works each year. Although no cash payment occurs, the government sees tremendous value in these acquisitions. Endowed each year with more artwork, the government now boasts the world’s premier collection of Mexican contemporary art, with close to 7000 works. Artists also view the scheme favorably. Relieved of paperwork, audits, and counting pesos, an artist can devote himself completely to his creativity and take pride in knowing that the work he submits on tax day will become part of a national repository.

While no other country has gone as far as Mexico in adopting a payment‐in‐kind tax program for art, in 2012 the United Kingdom passed legislation authorizing the Cultural Gifts Scheme (CGS), which allows all taxpayers—not just artists—to donate a preeminent object to a qualifying institution in the United Kingdom. As in Mexico, individual taxpayers and the government both reap significant benefits from this program. For a taxpayer, the tax reduction earned for donating a preeminent object may significantly decrease the income taxes owed. For the United Kingdom, CGS ensures that important cultural and artistic works remain in the country and continue to enrich the nation’s cultural landscape.

As Pago en Especie and CGS have gained more attention, there have been rumblings that the United States should consider implementing a similar payment‐in‐kind income tax program for contemporary artwork and other forms of cultural property. Simplifying tax payments, accommodating artists’ needs, accumulating a national collection, and promoting tourism are common justifications for adopting such programs. However, while Pago en Especie and CGS initially appear attractive to artists and art lovers alike, an in‐depth examination of each reveals numerous administrative, fiscal, and precedential shortcomings that could undermine—rather than enhance—a larger income tax system.

Devising an Artful Tax: An Appraisal of Payment‐in‐Kind Income Taxes in Mexico and the United Kingdom - PennLawReview.com