I wouldn't discourage his desire to express himself through his art - it will only make him want to do it more and in secret. Your comment that he "wastes time" doing this talks to your perspective on the issue that might need to be changed. Tagging is his way of expressing himself, his person, his ideas and his creativity in a way that is rewarding to him. I see it as a gift.
I'm going to say something really bizarre, let him tag his room walls.
Tell him he can tag all his wants in his room to express himself and his art in his room. Do you have an outside wall that no one can easily see? Let him tag that. For teenagers, tagging is a popular form of artistic and personal expression - albeit annoying to adults.
It is like playing pool in the 1940's and skateboarding in the 1980's. It takes tremendous focus and practice to become a good skateboarder - however, for many years adults tried to limit boarding - as a result, it became a truancy/loitering law issue with kids videotaping each other on the steps of the State Capital, on the rails of the AG - it became fun to be defiant.
Some communities got smart and created board parks where kids could board all they wanted. Now skateboarding parks are mainstream in newer communities. I see tagging just like boarding.
Use his passion to teach him life skills.
Teach him to save his allowance for pens, paints, etc. Or save for a nice camera so he could take digital photos of his work. I would send it in to contests and also help him to create a website for his own gallery.
Creating a website is difficult and it teaches incredible life skills. It requires logical thought, mathematics, writing skills, reading skills, artistic skill, research skills, resourcefulness, savings (costs money to maintain), entrepreneur skills, commerce, etc.
It is the recognition or the thought that others will see his work that is hugely rewarding.
Unconventional recommendations, I know. I just know when my mom told me I couldn't do something, I wanted to do it more and more and I did without her knowledge.
Here is a website of a famous tagger in the UK. He has graffic/adult content on his site, so I wouldn't show this to your son, however, you can see how his tag sign (name/signature) is the first thing that comes up on his site. I really like some of his outdoor work. Creative, expressive. See how one of his photos shows guys looking at his work. That is the reward. It is his desire to be recognized for creative and incredible artwork.
http://www.banksy.co.uk/
Here is another one...amazing stuff. http://www.cantwo.com/ Email the guy, he has a "contact" on his site. Talk with him about what you can do to channel the energy of your son.