Watch Tax Notes colleagues David D. Stewart and Stephanie Soong Johnston discuss how tax has influenced snacks, beards, and even legends.
Here are few highlights…
On historical monarchs and taxes
Stephanie Johnston: Under [Henry VIII’s] rule, he introduced a beard tax, which varied based on the beard bearer's social standing. Beards, therefore, were pretty cool. If you paid the tax, you were cool.
Peter the Great, however, was not a fan of the beard. He ruled in Russia in the late 1700s, and he imposed a beard tax because he didn't want his subjects to have beards . . . In exchange for their payment, they got a beard kopek as a proof of payment. Apparently the kopek said, "The beard is a useless burden," and it had a big beard on it. If a man was found without a token and a beard, then he was forcibly shaven.
[Lady Godiva] was an 11th century Anglo-Saxon noblewoman who was married to a guy named Leofric, the earl of Mercia. Legend has it that Lady Godiva was concerned about the tax burden that Leofric was imposing on his subjects. He scoffed at her and said, "Well, I'll lower their taxes if you ride through the town naked." Well, she did. She got on her horse, totally naked . . . and rode through the town. And he held up his end of the bargain and cut taxes for everybody.
On Pringles, Jaffa Cakes, and taxes
David Stewart: One of my favorite tax facts is the long litigation over the definition of Pringles. This is important in the U.K. because food gets a zero rate for VAT purposes, while potato crisps, as an American would call potato chips, are subject to full VAT. In the lower courts, the court sided with Proctor & Gamble, saying Pringles are not potato crisps.
This was appealed by HM Revenue & Customs and it ended up in the Court of Appeal, where there was a long discussion about the nature of what a Pringle is. It turns out . . . they're only 42 percent potato . . . But at the Court of Appeal, they decided that 42 percent was enough to declare them made from potato, therefore they're crisps.
Stephanie Johnston: Jaffa Cakes are popular in the U.K. They're made by McVitie's, which is a brand owned by United Biscuits. And for a long time, the company classified them as cakes . . . In the U.K., biscuits and cakes are zero rated for VAT purposes. But if a biscuit is covered in chocolate, then it's considered confectionary and is therefore subject to the standard rate of 20 percent VAT.
In 1991, Jaffa Cakes became the subject of a pretty famous case . . . A VAT tribunal considered whether Jaffa Cakes are, in fact, cakes or biscuits. They considered many factors like texture, size, packaging, and marketing. The tribunal was even served a giant Jaffa Cake for research purposes. They decided ultimately that they are cakes, and they kept classification. And that's why they are zero rated in the U.K.
On death and taxes
Stephanie Johnston: You know the phrase, "death and taxes?" . . . In a letter dated November 1789 to a French physicist, [Ben Franklin] wrote, "Our new constitution is now established, and it has an appearance that promises permanency, but in this world, nothing can be said to be certain except death and taxes." But according to an investigator, the phrase "death and taxes" came way before Franklin's letter.
It was traced back to play called The Cobbler of Preston. This was a farce in 1716 written by Christopher Bullock. One of the characters in this farce said, ". . . You are not sure; for I say, woman, 'tis impossible to be sure of anything but death and taxes."
Stephanie Johnston: Up until February 2011, tax fraud was punishable by death in China. According to Amnesty International, China had added tax fraud to its list of capital offenses in 1995. And in 2011 they decided to remove it, along with 12 other economic crimes from the list. It was sort of a hall of victory for Amnesty International because it was a very seldomly used punishment.
David Stewart: Are you aware that [the Day of the Dead Parade in Mexico City] exists because of taxes? The story goes that the [Spectre] James Bond movie comes out and there's this really cool parade scene. Apparently, the only reason that scene is there is because of tax breaks that were given to movies that would highlight Mexico City . . . If you remember toward the end of that scene . . . they start flying around in a helicopter. The reasoning behind that was that they needed to get shots of the modern skyline in order to get more tax breaks. From all of this, we learn that . . . people wouldn't have seen how cool that Day of the Dead Parade could look, and they wouldn't have actually decided to adopt that as their own celebration for the Day of the Dead.