As April looms and the tax man cometh, everyone's looking for an exemption. But some taxes and exemptions are more defensible than others.
- By Andrew SwiftAndrew Swift is an editorial researcher at Foreign Policy.
Who‘s affected: Chinese pastry-lovers
The bottom line: In the midst of last year’s economic downturn, Chinese authorities upped their tax-collection efforts (which are usually notoriously lax) in a bid to top up the state’s coffers. One of their main targets was the mooncake — a pastry stuffed with lotus seed paste and egg yolks, or “whatever the baker feels like chucking in,” that is a ubiquitous delicacy especially popular in the fall.
Mooncakes were traditionally given out during the Mid-Autumn Festival (historically a time of moon worship) to friends and family to cement relationships. But now, many businesses also offer mooncakes to employees or provide coupon vouchers redeemable at local groceries for the treat. Additionally, the cakes are given as a sort of soft bribe to employers, party officials. Where bakers saw a mooncake explosion, government officials saw yuan signs — and launched an inspection of more than 3,100 companies last year, slapping 30 billion yuan worth of back taxes on gifted mooncakes and coupons. In modern China, apparently, you can have your cake and tax it too.
Webcam Stripper Tax
Who‘s affected: Online pornographers
The bottom line: The Swedish tax authority has apparently never heard of the phrase “not safe for work.” Last year, the Skatteverket began cracking down on hundreds of online webcam strippers who had neglected to pay income taxes on money received for their services. Dag Hardyson, head of the investigation, told the BBC that initially the agency had difficulty identifying some of the strippers and that automated software failed to adequately target the culprits, but, “When we investigated the sites manually, it worked better.”
The Skatteverket estimates the lost revenue to be north of 40 million Swedish kronor ($5.56 million). Hardyson’s explanation probably raises more questions than it answers: “They are young girls, we can see from the photos. We think that perhaps they are not well informed about the rules.” Creepy.
Who‘s affected: Authors, playwrights, other writers, composers, painters, photographers, sculptors.
The bottom line: Starving artists may be a popular romantic image, but they’re generally not given protected legal status, except in Ireland. A clause in the Irish tax code makes income derived from the sale of art (including books and other writings, plays, musical compositions, paintings or photos, and sculptures) exempt from taxation. Introduced in 1969 by then-Finance Minister Charles Haughey, the provision was created with the stated purpose of helping would-be Joyces and Becketts who’ve fallen on hard times.
After charges that not exactly down-at-the-heels groups like rock supergroup U2 were paying no taxes on income of millions of euros, the rule was modified in 2006, allowing only for 250,000 euros of income to fit under the exemption (Bono and Co. subsequently moved their official base of operations to the Netherlands). Last year, a report from Ireland’s Commission on Taxation labeled the exemption unfair, but attempts to repeal the rule were stopped. So Ireland’s penniless poets appear to be safe for now.
World Cup Tax Exemption
Countries: World cup hosts
Who‘s affected: South African residents, nonresidents
The bottom line: South Africa is understandably thrilled to be hosting the 2010 World Cup, which opens June 11. A financial boost is expected as infrastructure improvements reach a massive scale and thousands of foreign tourists travel to the country to support their favorite teams. But because of agreements that FIFA, the world’s governing body for professional soccer, requires of all World Cup host countries, the boon to the state’s bottom line will be minimal.
Before accepting any country’s host bid, FIFA demands significant tax concessions. For its part, South Africa agreed to create a “tax bubble” around stadiums and other official World Cup sites, making any income earned off goods sold within them exempt from taxation. (Athletes, however, are not exempt from taxation. The South African national team, in particular, gets the shaft: They’ll still pay normal income-tax rates, despite being participants.) Although FIFA promotes soccer as a way to bridge global divisions, the organization clearly isn’t afraid to throw its weight around for its own benefit.
Presto … Tax Breaks!
Country: The Netherlands
Who‘s affected: Witches and wizards
The bottom line: Hogwarts it may not be, but a school in the Netherlands provides tax-deductible course work on witchcraft. Margarita Rongen, the headmistress of Heksehoeve (Dutch for “witch farmhouse”), offers a yearlong curriculum in spell-casting, herbology, potions, and divination, among other classes. The class clearly has a large following: Rongen has received applications from as far away as Dubai.
In a case brought before Dutch tax authorities in 2005 by pupil Maaike Buurman, it was ruled that because the course was used “to extend her professional knowledge” — as a tax official put it to Reuters — it was eligible for a tax write-off. Buurman argued she enrolled in the school to help her in teaching the history of the Middle Ages — but of course, a witch would say that.
Uri Friedman is deputy managing editor at Foreign Policy. Before joining FP, he reported for the Christian Science Monitor, worked on corporate strategy for Atlantic Media, helped launch the Atlantic Wire, and covered international affairs for the site. A proud native of Philadelphia, Pennsylvania, he studied European history at the University of Pennsylvania and has lived in Barcelona, Spain and Geneva, Switzerland.| The List |