I've heard that in France it is legal and that the girls have to get monthly STD screenings. I also don't think it would be THAT hard to regulate taxes and such with them... I mean, it's a service, like any other. What works for the plumber or the electrician legally/financially could work for the prostitute, too, right? So it's a little less sexy to carry a ledger around with you... Some guys might like that, hehehe.
Though, I'm pretty much down for legalizing and taxing everything...