Cryptocurrencies, Government and Tax Collection. Let's Talk.

in cryptocurrency •  7 days ago

Over the past few days, the headlines have been dominated by the Paradise papers fiasco. An example of the super rich using the resources available to them in order to avoid paying very large amounts of taxes.

With the advent of cryptocurrencies, especially privacy coins like Monero and Dash, the "little guy" will soon be able to avoid paying taxes as well.

This might have a significant impact on the Government's ability to collect tax revenue. What shall we do about this? Is this a good thing? Do we need to modify our tax laws? Let's have this conversation.

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I bought all of my crypto on the market with after tax dollars. I still purchase things with fiat currency and have to pay sales tax. I own my condo and pay real estate tax, they tax the gas I put in my car, and when I die they will tax my estate, not to mention the hidden tax of inflation. When is it enough with the taxes? Let the little man have his moment with cryptos.

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Yeah, you'll have your moment. In JAIL!

Suck it up, pay the taxes, enjoy the rest of your free money, don't get prison-raped. Just that simple.

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Well they can put you in prison for anything, even if you think you have been the best slave on the plantation, there is always a law to be found that you break. They will turn the world into a prison.

Considering that almost everyone buys bitcoin with their own money, after taxes are taken from their pay check, I don't see any difference between BTC and a Roth account. Roth accounts are basically investment accounts that are paid for after taxes. We can get into the details, but my argument is simply that. Buying BTC is not much different than buying into a Roth IRA and I've already paid taxes when my income was taxed. If the gov wants to tax any gains on BTC they should also tax gains on Roth accounts because they are funded in the exact same way. But as Roth accounts are protected by law, and BTC is protected by cryptography, the Gov is out of luck on this one.

This would be very different if you earn bitcoin as income as opposed to buying it. In that case, you are required to pay income tax regardless of which currency or medium you receive your income. For example, you may be an American citizen working in Japan earning Yen, in such case, your income is subject to American income tax and what you pay is calculated in dollars.

In short, The taxes should be in accordance with how you acquire your BTC. If that's how the tax man sees it, all the better for those of us who buy it rather than earn it.

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The issue is that when you earn your income in cryptocurrencies, it is easier to hide that from the government.

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True, and unfortunately for them they have the burden of proof as to whether or not we actually own/have access to XYZ cryptos. The IRS can't just come to your door and say "you made money on a crypto network and we want our cut." They have to prove it first. Ultimately this whole revolution will force governments to establish a different tax model all-together, perhaps a toll/ fee and license based tax system similar to what many libertarians say is fairer. After all why should I be forced to pay for a bridge that I never use (even vicariously)?

If crypto users think they are going to be able to avoid taxes, they have another thing coming.

Big govt does not look kindly on tax evasion, period. Even state and local govts are getting in the act.

Look at how Amazon caved in the US when the states threatened to not allow them to operate unless they collected and disbursed state sales taxes. And....this is only going to get worse as govts on all levels start to face shortfalls and are scrambling to find new sources of revenue!!!

Trade crypto for crypto all you want. All the govt has to do is hit you at the bottleneck when you try to convert them into actual fiat currency.

If you think you will be able to bypass taxes by spending your crypto with retailers, well you might be able to get away with that at your local coffee shop or boutique retailer, but the major retailers are not going to risk the wrath of the IRS (or what ever taxing agency your country has) just to accept crypto.

You might as well just pay your taxes on your gains rather than risk going to jail and becoming someone's biatch!

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I for one do not want to go to jail for something stupid like not paying taxes. Cryptos going to the moon is like getting free money anyway.

Suck it up, pay the taxes, enjoy the rest of your free money, don't get prison-raped. Just that simple.

It's funny how all the so-called "Anarcho-Capitalists" out here suddenly turn into "Hard Core Conservatives" once they get some money in their pockets.

"If You Are Not a Liberal at 25, You Have No Heart. If You Are Not a Conservative at 35 You Have No Brain" - attributed to many.

In the US, we had a presidential candidate named Bernie Sanders. He promised FREE college tuition for all young people. Young people loved him and flocked to him. Little did they know, or care, where the money was going to come from to pay for that education.

You folks who made huge profits on your cryptos, now you know where that money was going to come from.

Lets be honest. The big orginizations and government departments 'minimise' their tax anyway. They just dont like it that the 'little guy' is now able to do it too. But dont get me wrong. Im all for taxes. I just want a level playing field.

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If you want to run the risk, be my guest. I for one would rather be safe than sorry.
It's almost the end of the year, which in the US means tax season is right around the corner. I cashed out a few BTC and took some money off the table. To me, it was all free money anyway. If I pay my taxes, then I am free and clear. If I don't they can come at me any time in the next 7 years if they feel like it. All they have to do is threaten Coinbase and they'll know if I paid or not.

Yes, taxes suck, but it's the law and is it really worth the risk???

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Cant we all just have a 20% tax cut 🤷🏻‍♂️💰

Cryptocurrency is going to be really disruptive.. yikes. I hadn't really considered the tax implications yet. I like the sound of Georgism in principle, but how would that work in practice? Say for example, for a bank based in Canary Wharf, would their taxes be based upon the value of that real estate? Would this cause businesses to move out of London to cheaper land, or have I misunderstood the concept?

P.S. Thanks for introducing me to Steemit, I've credited you in my introduction post :)

I am not against taxes. In my country cryptocurrencies are treated as assets. This means you only pay taxes when you buy and sell them within one year. Good for hodler like me. And keeping a transaction record is basic not only for taxes but for having an eye on the profitability in general. But I am aware of the fact that there must be a basic contribution of every human being to the wellbeing of the community (for education, healthcare, innovation and peacekeeping). But our tax system is way to complicated and unfair. I would probably agree to my computer being used for mining a "tax-coin", initiated by the government, as long as my cpu is not ABUSED and I am not able to work with my computer in the usual way. ;) In other words, taxes are neccessary, or we may call it „community fees“, but the declaration system is outdated and the payment system to complicated. It’s time for the government to put effort into this new technology, but not by harming users.

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Ok, I'm not willing to go that far (letting big govt use my CPU). I'd take my machine off-line before I let those scumbags have free reign on my motherboard!

Just saying that if you made a profit on your crypto, and it's almost impossible that you didn't if you got in early, expect to pay some taxes on the profits. It's not worth the risk.

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The biggest thing standing in the way of a tax windfall for governments is the complexity that they have put on the trading of them. I am sure many citizens do not report earnings because they simply don't know how, or do know how and think it is way to complicated. The biggest problem is the "moving target". You buy Bitcoin and then a few seconds, minutes or days later you buy an alt coin. You bought the Bitcoin with fiat, so you have a base price, but by the time you purchase the alt coin the price of Bitcoin has changed. This is especially true if you use limit orders. I have had orders processed, not because my strike price was hit, but rather the Bitcoin or Ether's I used changed in value.

To me a sensible means to tax would be to only look at trades that involved fiat or large trades for property. So you could buy a thousand dollars in bitcoin and then you could trade it in the crypto world to your hearts desire without taxation. But when you decided to convert back to "real money", you would have to pay the capital gains tax. This would be by converting the alt coins back into Bitcoin (or Ethers) and then deducting the purchase price of the original Bitcoin. Later if you run out of 'base Bitcoin' dollars, all coins sold would be considered to be 100% profit.

Example; From the original $1,000 you spent on bitcoins you now have $3,000. in alt coins. You decide to sell half or $1,500. You convert to Bitcoin and then sell it for dollars. You know have $500 in capital gain that can be taxed. Now you let the remainder ride and it goes to $4000. You decide to cash out. At this point you would no longer have a base price as you already used it, so all $4000 would be subject to taxation.

It is my understanding that US government is looking at exempting form capital gains the first $600 if used to purchase something. So no more "latte tax", but if you were to buy a house or a Lambo then that would be taxed based on the gain. Assuming of course there was an increase in value in the underlying crypto.

I only suggest this as it could be done virtually immediately if the government acts. This would make life easier for investors and bring in much needed tax revenue to income starved governments. But I completely agree the best method of taxation is one that is not based on self declaration. I have often felt that stock transactions should be charged a fee based upon the amount of stock traded, and dump the capitol gains. This would be much simpler and would reward investing over day trading.

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"You" don't pay taxes for roads, protection, healthcare or as "community fee". That's what "you" tell yourself. "You" pay taxes because you don't want to be robbed, kidnapped, caged, and if you further resist, murdered.

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You are right. But you are describing me just the other side of the coin. :D

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I'm describing slavery. Taxation is slavery in which the slaves have stockholm syndrome and make up all kinds of nice stories on why it's good that they are being oppressed, controlled, extorted, taken hostage, by a small group of owners with guns .

hey @louisthomas - another good post/video, good insight for anyone wanting to understand the implications of cryptocurrencies & the Government. Easy to follow.

Would love to get you on an episode of Crypto Nights, let me know your thoughts on our latest episode that has done pretty well on Steemit!

https://steemit.com/steem/@antonburton/steem-to-usd5-by-january-as-explained-by-wildtrader-crypto-nights-episode-10

Drop me an email on cryptonights1@gmail,com and we will get this arranged, just want to talk to like-minded people on their projects and the world of crypto :)
Up-voted & Followed
Anton

There is no doubt that the cryptos are going to be integrated more in the society and therefore also more in the order of our societies.

If bitcoin continues to avoid taxation then it will in reality be a libertarian revolution that will cause several changes in our society.
I personally don't believe that bitcoin will avoid taxation forever and it is therefore is a matter of time before the taxation will start.

I don't think that the current establishment will accept that bitcoin and cryptos is having taxation asylum, unless they are benefiting from it.

Lovely Explanation !!! Started following you on steem it and youtube.

Man... what a buzz kill.

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The bigger buzz kill will be being locked up with Bubba the sex offender.

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Been locked up... the sex offenders are the ones that stay scared.

On the White Paper of our Guarani - GUA cryptocurrency it is already state that in order to execute our development plan , any activity outside of the cryptocurrency ecosystem which require conversion from cryptocurrency to Fiat currency, after conversion we will declare it as income in the Income & Expenditure accounts , pay the relevant tax related to the amount converted and be happy! Lol
Honestly we truly believe it is also our responsibility within the digital currency ecosystem-our cryptos to act in such a manner that governments are unable to impose any limitation that destabilize the cryptocurrency ecosystem. This procedures just add to the current Tax system of any government as to give cryptocurrency it's credits without any government imposition, simply by an act of moral ethics.
In the end all the other business pay tax why should we be different?
You might argue that the current Tax system is like this or that, but thats another matter, a subject to another post.
Visit us: https://www.guarani-crypto.net

Crypto is going to make winners and losers. The US is going to be a big loser in giving up the world's foremost reserve currency. But it is also going to be a big winner. Consider that the trillions of bond holders are going to be paid back in seriously inflated dollars. This includes, for example, the Chinese government. All the US treasury has to do is create a crypto "FEDCOIN" in which tax payment is demanded. The dollar inflates. The debt goes away.

What is the best way to convert your crypto into fiat? I am currently using coinbase and depositing it into my bank account. The last thing I want is to pay taxes on my profits. I have heard of Local Bitcoins.. are there better ways to convert into fiat?

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Localbitcoins is the best way

Find someone with fiat in the real world, organize a trade in the real world, he gets crypto/you get fiat.

What's there to lose?

If you are really paranoid, I suppose that the IRS might ask the NSA for your phone GPS movements, browsing history, bank transaction records, and might pay a detective to investigate you and prove that you bartered crypto for fiat on the open market and did not include that in your transaction history for tax submission.

Now imagine the government trying to do that on a scale of tens of thousands of individuals.

A) They are as of yet (as far as I know) completely unprepared for that
B) They probably are trying to come up with a way of doing that now, but how long before they can actually start going after people?

If you were smart, you would have made enough profits by then to flee the United States Incorporated and would have moved most of your assets outside of the US to a small, relatively low-key country, where you could develop your property and live a life connected to the world-wide-web where you were always in an extremely beneficial position.

By then, the US would have turned into a corpotocracy (a kind of fascist/technocratic society where the government is just the armed forces of the corporations). If you still lived in the US, most of your rights would have been taken away and thousands of your compatriots would have already been locked up in jail for doing things even less bad than that

So what do you want to do?

We're entering turbulent times... ''Desperate times call for desperate measures'' is as good of a motto to have as "If You Are Not a Liberal at 25, You Have No Heart. If You Are Not a Conservative at 35 You Have No Brain" as mikethenutt nikethemutt put forward above.

Hey @Louisthomas

Super interesting conversation to have.

I was gonna say, everybody pays taxes through VAT.

The US was built on the concept of getting rid of direct taxation (income tax) and only using indirect taxation (what you call VAT)

Land-taxes would be good because corporations use the most land and I believe corporations should pay for the bulk of government's needs...

I mean in a capitalist society, where the government enforces property rights, the direct beneficiaries of the state-enforced social contract are the corporations...

Yeah sure, people receive social services and sewage/electricalgrids/etc as regulated by the government but I think in this day-and-age what would be interesting would be trying to have a societal conversation about the classic economics-theory dilemma: the free-rider problem

Personally, I think in this age of cryptocurrency, the whole idea of government that you were discussing is a moot point.

The big 'nanny' state (I don't like that word but I hope you get what I mean by it, AKA the government that extends itself to regulating many aspects of society and the economy), is doomed for a massive collapse...

I'm a bit like you, or at least still on the fence on this, regarding how to replace the government's role in providing much-needed social services..

But I think that there is an option to provide free healthcare and education at the point of contact without the government.

Just imagine a scenario where you had a London Fire-Fighter Services Steemit. It would say it needs 500,000 SBDs to operate per year.

Just like Wikipedia has managed to stay add-free through donations this entire time, why couldn't the London fire-department raise all the money it needs, through crypto and other more conventional means, just by engaging the public and promoting its vital services?

I would assume that if the fire department of London said ''You know what, fuck the Tory government, we're going directly to the people and we are no longer a public institution but a fraternal or friendly society that just wants to put out fires and rescue people's lives for all the good folk who reside in the various Boroughs of London..

With a bit of big data and statistics, they could easily figure out what we're their goals to get the funding and support they need, come up with targets, say: ''We need 10,000SP to be delegated by people living in Hackney to be able to provide fire-fighting services in that Borough''.

They could then IRL go out and engage Hackney's community, as well as reach out for domestic/international support outside that community, until they were able to proudly state ''The London Friendly Society of Fire-Fighters is now proud to announce that we will be able to put out all fires in Hackney for the next calendar year''

It's really not far from people's reach to actually promote these kinds of ideas...

I'll be posting my piece about Fraternal Societies and Friendly Societies this evening, come back and check it out later and see if you don't think that this idea of voluntary mutual-aid could not be implemented in a successful way in this age of crypto, whereas 100 years ago, when all we had was gold and silver pieces (or precious-metal-backed paper money), this would have been much harder to achieve.

And PS: A lot of the social services that the NHS provides today for not free at the point of contact, but usually a cap of 8GBP, would have been provided by Friendly Societies 80 years ago for free...

So the fact that government got involved in say healthcare and had a net positive impact can actually be debated too.
What really happened is that government monopolized what was already a pretty prevalent concept and social system of providing inexpensive and accessible healthcare to working-class folks..

Seriously, before Fraternal Orders were forced to incorporate in the 20th century, there were alternatives that we made illegal...

Today we might just be actually reversing this trend of government monopolization of vital sectors of society...

That's my 2 cents for you!
But what an interesting and important conversation to have!

Will be following

Crypto will force long long overdue tax reform. The rich and powerful have some of the lowest tax rates using offshore companies etc while ordinary people have to pay much higher rates. Just another example of crypto disrupting something giving power back to the people where it belong. Lets level the playing field with crypto and force the government to reform!

Government and Taxes suck! but you all know that. good post!

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Always have, always will. Still, it's the law and unless you want to risk being the bunk-mate of Bubba the sex-offender, I'd just hold my nose, pay the taxes, and enjoy the rest of your massive profits from the crypto moon-shot.

louisthomas a great post but with respect you are wrong and reinforce many neo-liberal myths that enslave us.

The first thing you did not do is differentiate the roll that tax has on a currency sovereign as opposed to a currency user.

For clarification a currency user is a US state (California) or an Australian state (Victoria) and also a country such as Greece who has given up their currency. A currency sovereign is a country that produces its own currency such as the USA, Australia, Britain, China, and Japan.

Let’s be clear from the start my comments relate to ‘currency sovereigns’ unless otherwise specified.

It may come as a bit of a shock but a currency sovereign does not need your tax dollars in order to spend or fund health, education, infrastructure, or any other service. In fact tax receipts are destroyed on receipt reducing total money supply.

The main purpose of tax is to create demand for the currency, but can also be used to control other aspects of society. Your tax dollar does not pay for anything.

This is very simplistic, but think about it; how is it possible to tax a currency before it is created in the first place? In order to tax, a currency sovereign must first spend the currency into existence. You can’t drink from an empty cup.

It’s not tax that enslaves, it is the acceptance of the myth that taxes funds spending that enslaves.

This is a video that Professor Bill Mitchell gave at a NZ university a few months ago, I would strongly encourage you all to spend the time and watch it.

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Educative...thanks.