Top 10 Wacky Tax Stories, 2010
On reading recently that the Texas Society of CPAs has thoughtfully compiled a list of recommendations for money-minded toys that “give children the gift of financial literacy,” such as remote-controlled electronic safes, I suddenly realized that there’s a huge need for toys that teach tax literacy. How can we expect our children to master a 70,000-page tax code and the intricacies of tax accounting unless they start really, really early?
While I’m waiting for the patents to come through on my Pals ‘n’ Playmates FAS 109 Calculator and FIN 48 Shark Attack! Board Game, I’ve put together my annual roundup of bizarre-o, vaguely business-related tax stories, just to prove that taxes can be every bit as much fun for grown-ups as they soon will be for kids.
1. FIFA: “This Tax Is Stupid, Anyway.” A highlight of the summer for me was the World Cup soccer tournament in South Africa. The United States’ early exit at the hands of Ghana was a downer, but I enjoyed the creative headlines in the U.S. press the next day: “Out of Africa,” “Ghana With the Wind,” and so on. My favorite was the New York Post’s unbeatable sour-grapes header: “This Sport is Stupid Anyway!”
Soccer’s governing body, the International Federation of Association Football (FIFA), scored what must count as one of the oddest tax exemptions of the year. In exchange for the “privilege” of hosting the Cup, the government of South Africa agreed to allow little FIFA fiefdoms within its borders. Goods sold inside the so-called “tax-free bubbles” surrounding ten stadiums were not subject to value-added tax, and the profits from such sales were exempt from income tax, enabling FIFA to rake in untaxed, monopolistic super-profits, according to the Tax Justice Network.
Fortunately for FIFA, its headquarters are in staid Zurich, Switzerland, rather than in England, the birthplace of the game. Tax fairness activists in Britain don’t take kindly to what they perceive as multinationals’ schemes to bilk developing nations out of much-needed revenue. Given half a chance, protesters would surely have dressed up as giant soccer balls and paraded outside FIFA’s doors, using the same tactics they deployed against global mega-brewer SABMiller (blogged here).
2. Now They Can Gold-Plate Their Entire Yacht Fleet. Calls for an end to a sales-tax exemption for precious metal coins and bars seem to have fallen on tin ears in the State of Washington, even though the loophole reduces the state’s revenue by around $2 million a year, reports OPB News. One lawmaker remarked: “Everyone who looks at that list [of exemptions] says, ‘This is crazy — what do you mean they get a sales tax exemption for gold bullion? That’s just nuts.’”
Nuts or not, the vindication of the right to buy treasure chests full of slabs of solid gold without also lining the state’s coffers must have come as a relief to bazillionaires Jeff Bezos (founder of Amazon.com) and Steve Ballmer (CEO, Microsoft), who fought like pirates this year to defeat an initiative that would have imposed a special income tax on the wealthiest 1.2 percent of Washington residents. Ballmer celebrated his victory by cashing in $1.3 billion (yes, that’s billion, with a b) in Microsoft shares a couple of weeks later.
3. State of Washington Persecutes Urchins. OK, this is going to seem like I’m picking on the Evergreen State, but I can’t stand idly by without protesting this tax authority’s unprincipled attack on the sea urchin industry. Lawmakers delayed a reduction in the state’s fish food excise tax, scheduled for this year, until 2013. Sea cucumbers were not spared from this shameless big-government money grab. Rob Shrum at the Tax Foundation reeled in this story.
4. What Was That About a Tax, Frog-Face? In September, legislators in Romania abandoned an unwise attempt to tax the professional activities of witches and fortune-tellers, surely two of the nation’s principal industries and biggest foreign currency earners. Reports that the politicos caved under threat of being transformed into amphibians turned out to be just rumors.
5. The Great Chicken Flock Fraudster. This guy did it all — sham asset management companies, mythical pension plans, and “bogus chicken-flock deductions claimed for clients who were not eligible to claim them because they did not qualify as farmers under federal tax law,” according to Accounting Today. Yet CPA Allen R. Davison is apparently still out there somewhere giving tax advice. Maybe the judge thought that a spell in the slammer would only help Davison hone his tax fraud skills, given the fact that more than 1,200 prison inmates cheated the IRS out of about $9 million by fraudulently claiming the home buyer tax credit this year.
6. Tax and the Art of Pole Dance. Sure, it’s really hard to do and requires special training and skills, but pole dancing is not choreographed, so it’s not an art form, ruled the New York State tax appeals court in May. Which means that clubs offering exotic dance are not exempt from collecting sales tax from their patrons.
The decision fueled calls for a “pole tax” to be collected on admission to adult entertainment establishments, for the benefit of local schools. Surprisingly, and endearingly, a group of Long Island strippers rallied in support of the tax. “We just want to give back to our communities, because the state is cutting back on school aid,” said one, quoted in a Fox News report.
7. New York Cracks Down on Bagel Deadbeats. New York bagel joints joined strip joints on the defensive in August when state tax officials stepped up enforcement of sales tax on sliced or prepared bagels, or those eaten whole in the store (though not on take-out sales — a source of major confusion).
I can’t believe the authorities got away with this. I would have thought that messing with bagels in New York would be an open incitement to civil disorder and revolution, kind of like taxing Botox in Palm Springs, or snow shovels in Buffalo, or sea urchins in Seattle. Or even belt buckles in Texas! Ha!
8. Belt Buckles in Texas. Oh. Never mind. Turns out that Texas does in fact have a special treatment for belt buckles; they’re subject to sales tax, even though belts as such are exempt. During sales tax holidays, that is. On the other hand, cowboy boots are exempt, but climbing boots are taxable, which makes much more sense. (Hat-tip to the folks at the Tax and Accounting Business of Thomson Reuters for this one.)
9. Oldest Profession — Newest Tax Write-Off? One guy who must be glad he doesn’t live in Texas is belt-buckle connoisseur David Brooks, ex-CEO of body armor manufacturing firm DHB Industries. Brooks was convicted in September on 17 counts connected with a massive stock fraud scheme uncovered jointly by the IRS and the FBI. Prosecutors argued that he systematically looted the company to pay for a jaw-dropping list of personal expenses, including a $60,000 sculpture of a Wall Street bull, a stable of 100 purebred trotting horses, and a $100,000 belt buckle in the form of the Stars and Stripes, encrusted with diamonds, rubies, and sapphires.
Oh, and prostitutes. But that was a legitimate business expense to motivate employees and increase their productivity, according to Brooks’s attorneys. The IRS doesn’t agree, for some reason.
10. United Nations Airs Cow Emissions Tax. One word: methane. (More here if you dare.) ###









December 16th, 2010 at 5:36 pm
A fun round-up!
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