Gambler's tax bill threatens his art museum

Entrepreneur built major tourist attraction from horse-racing bets, after being assured by authorities that the winnings were tax-free

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SYDNEY // The future of an art musuem that thrust the unlikeliest of Australia's capital cities on to the global art scene is in doubt because the owner faces a tax bill of almost A$40 million (Dh155.2m).

Having made millions from betting on horse racing, David Walsh used the proceeds to amass a huge art collection and open an extraordinary museum in his hometown of Hobart.

The Museum of Old and New Art (Mona) has put the island state of Tasmania's capital - long regarded as a cultural desert and social backwater - on the map since it opened early last year.

But the project is in peril because the Australian Tax Office has demanded a share of his winnings, and interest, dating back to 2003.

Mr Walsh, 51, who is fighting the claim in the federal court, says he has never concealed the source of his income from the tax office, and that it had assured him his gambling earnings were not taxable.

While he says he is willing, even keen, to pay tax, he cannot afford the retrospective bill, especially after pouring all of his available cash into Mona.

The A$180m museum, which houses more than 2,000 paintings, sculptures and installations, has drawn 600,000 visitors in its first 18 months, winning tourism awards and international plaudits.

But it is still operating at an annual loss of A$8m, says its owner, who employs more than 170 people.

Local politicians and tourism operators are horrified by the prospect that Mona, which has delivered a boost to the depressed Tasmanian economy, may have to close.

Among those springing to Mr Walsh's defence is his local MP Andrew Wilkie, who is best known for his outspoken opposition to the poker machines that are blamed for Australia's high levels of problem gambling.

Mr Wilkie has accused the tax office of unfairly targeting "tall poppies", or individuals who stand out because of their success.

In recent times, authorities have pursued well-known figures including Paul Hogan, star of the Crocodile Dundee films.

Other observers note that taxing the winnings of professional gamblers is problematic, since they could, in theory, also offset losses against their tax bills.

Mr Walsh said he hoped the tax office would "come to its senses" and negotiate a reasonable settlement out of court.

"It seems rather pointless for them to pursue me, destroy Mona, damage the economy and the Australian cultural scene, put 170 people out of work and at the end of the day get nothing," he said.

Already Tasmania's single biggest tourist attraction, Mona contains an eclectic mix of ancient and modernist works, including the Belgian artist Wim Delvoye's Cloaca, a model of the human digestive system that produces mock excrement at regular intervals.

The building, situated on the banks of the Derwent River, is also unusual, with a tennis court on the roof.

A university dropout who devised a mathematical model enabling him to win vast sums, particularly on racing, Mr Walsh calls his creation an "un-museum" and a "subversive Disneyland".

There are no wall labels to explain the artworks. Instead, visitors are given an interactive iPod-style device.

He hopes Mona will eventually become profitable, and has plans to build a hotel at the site, and a second museum exploring the relationship between art and science. The plans have had to be shelved because of his financial problems.

Mr Walsh, who belongs to an international betting syndicate, began buying art almost by accident.

After winning the equivalent of about A$18,000 at blackjack during a visit to South Africa, and realising he could not take it out of the country, he bought a palace door made by Nigeria's Yoruba people.

"I'd seen it in a gallery in Johannesburg," he says. "I rang the gallery, 18 grand changed hands and I ended up being an art collector."

In 2004, after being told by the tax office that his syndicate was not liable to be taxed, he began to plan Mona.

"Had they made a different decision then I might not have got myself in this diabolical financial position I'm now in," Mr Walsh said.

"I'm completely happy to pay tax. I'm a supporter of high tax regimes and I think I should be part of that. But I wouldn't be able to pay this bill even if I hadn't built Mona."

He could still, perhaps, gamble his way out of trouble. When the museum was under construction, he received two large bills totalling about A$10m, which he was unable to pay.

"My gambling partner said, 'why don't we just bet really big on the Melbourne Cup?' So we did, and we won a heap of money, over $10m.

"That was enough to pay the bills and Mona got finished."