Everybody who is a fan of being able to dodge taxes by using crypto is forgetting one thing. That tax money is also used to do good things.
Congratulations, you are making enough money to know about crypto and buy it. Now think of this: it’s not as easy to track crypto as it is to track bank money. You can now evade taxes more easily. Are you doing that? If so, now you have even more money. That’s amazing. But meanwhile most really poor people don’t know about crypto. They have other worries: getting bread on the table. And they are still paying their taxes. You are making the gap between poor and rich bigger by owning crypto and not paying taxes.
If we, the world, want to use crypto as a real currency, we should make it possible to track money flows in some way. To make it possible for a government to know how much money (crypto) you are receiving, or make it possible in some way to prove that you are paying enough taxes. Because how are these governments that are now taking care of you going to take care of you if everybody uses crypto and no money flows can be traced anymore? What will happen to taxes? Who is going to pay for public resources?
Imagining how that would work, I could imagine registering one wallet address as yours, i.e. telling the government which wallet to trace. But as soon as that data leaks, the whole world can see how much money you own and where you are transfering it to. That’s probably not something anyone wants.
To me this seems like an issue that crypto developers should be thinking about. And I wonder if Cardano or any other project is doing that (the only thing I can find when I Google for it is articles about how to dodge taxes using crypto).
Hello @owawev and welcome to our forum!
I go with you, that taxes are also used to do good things.
That Money need to be completely traceable is a point where i would discuss.
Ok one fact: if you give the public key of you wallet to the tax authority they gain read only access and can trace it a little bit.
Im not so into the tax systems, but the way how it works in Germany for a normal person:
Your work somewhere and get your salary.
You dont get the whole gross salary, the taxes and the social security contribution will transferred from the employer to the tax authority directly, the rest (net income) will transferred to your wallet. So you have payed enough taxes already.
If you think you have payed to much:
You make a tax declaration, where you calculate your income and you expenses. You also calculate the taxes and the social security contribution. Now if you sum is lower that that what you have payed you give the tax declaration inclusive with all bills, pay slips that matters to the tax authority. They check this and if its correct they transfer you the refund.
If you are an company:
As a company you have to write a tax declaration, a balance sheet and so on.
You need to keep every offer, invoice, bills you have written or you have got for over 10 or 30years. Then with the balance sheet and the income statement you opposing every income with every expense you had. The funny fact is: If you have more expenses than income and money, the tax authority know that you have some transactions you dosn’t have declared and sue you for fraud.
If you have more income than expenses and want to reduce the income a little bit you have another problem: You reduce the income and the tax authority want have the public key of your wallet for read only rights. Then they can read every transaction this wallet have made. So they can see you have more income than declared and sue you for fraud.
If you artificially correct you expenses upwards you have another problem:
You make an expenses (send some money to another wallet you have). Now the tax authority can see this expenses with the read only wallet. The tax authority now want have the bill for this costs and you have no bill. So they assume you never had this expense and they sue you for fraud.
So congratulations 
they sued you for fraud and you now locked into the jail without any access to the coins you saved for not paying you taxes correctly 
__
*Im not so into the tax system and this text is over simplyfied to show my opinion. Im not an tax consultant, if you want any advises or some legal security contact you local consultant or tax authority 
!
Yes exactly, that’s why I was thinking that just being able to read one wallet is not enough. A government would need to be able to also know every wallet that that money receives money from or that that wallet sends money to. Because indeed, if you do not know those wallets, then how can the original wallet owner prove that he is not being fraudulent? And if the government is not able to read those other wallets, how are they supposed to trust anyone?
This is exactly my point, and where I think it becomes tricky and where we need a solution in order for crypto to be accepted / be able to be used as a regular fiat currency.
Any taxation system can be exploited somehow. It’s just a matter of time. There is a useful question governments are not asking (enough) though: How can I move people to want to pay taxes? If taxes are a voluntary system that grants you certain rights, an incentive exists to contribute to society. The situation, as it currently is, is mostly a bunch of decisions made by people with little understanding of the real world coupled with an enforcement of such rules by leverage of power.
I will gladly pay tax to any political system that holds itself accountable and has my best interests at heart: healthcare, insurance of economical and other risks, proper management of resources, defense, etc. Any government “For the people, by the people” should realize what these words mean. “For the people” means “all people”, not just the majority that voted for you. Politics should create policy to provide solutions for a wide variety of individuals and they will be met with less hostility towards their taxation structures.
Somehow I dont know why they would need this.
In my opinion the government dont need to trace every transaction over x accounts (ok for anti terrorism it would be good yes, but this isnt the topic now) For the tax itself you have got paper bills or uneditable electronic bills which are you proof of something. If you buy something you will receive a bill. This bill is you proof of purchase, your proof of payment and so on.
Companys creating them (its a must) and need to keep them for 10 years or for important document over 30 years. If a company doesn’t have created a bill for an income (according to tx-id XYZ in their wallet) they acted fraudulent. If they havnt got an bill for exposes (according to tx ID ZYX in their wallet) someone acted fraudulent.
The main thing are the bills and your wallet.
Maybe their will be a law, that enforces you to give your public key of the wallet to you tax authority. The unique transaction id from the wallet need to be the same as on the bills and that can only be if you have 1 wallet with every transaction. Every other imaginable way would lead to the fact that the tax authority will know that you have acted fraudulent.
So please give me an example how a company could vanish transactions, without interferences between the paper bills and the transactions on their wallet.
Important is that my facts above are only for companys!
Ok, I guess you are right about companies. It may become easier for them to transfer huge sums of money without anyone being able to trace it, but I guess that’s a different type of problem, and it is already happening now, too (albeit differently).
So maybe then this goes for people that are employed. When you receive your wage, you need to pay taxes (in most countries). That would mean that a government in some way needs to be able to verify that you are actually paying those taxes. It’s slightly scary to me that you would have to share your wallet in a read only fashion; because those read only credentials can leak and from that moment on anyone may know exactly what you spend your money on. A solution that just “proves” that taxes were paid is probably possible without anyone ever needing access to your wallet.
For the companys the read only wallet is a good solution i think.
For private persons:
Ok we have two types how it work:
The employer pays the taxes
In this situation we could set up an smart contract. Every Ada for Taxes is one fungible Token. So the employer would get for every Tax payment an equal sum of FT from the Smart Contract.
Now the employer can give this FTs to the employee with the regular wage payment.
At the end of each year the employee can prove the tax payment with the FTs. (The employee give it into an new smart contract and will get an Tax-Payment-ID for the year xyz) So you have an ID for your tax declaration which is an proof of payment.
You need to pay the taxes by yourself
This is somehow more difficult. Maybe we can use the same solution with the FTs mentioned above or we set up an wage/salary Smart Contract which is mandatory for the companys to use.
The companys paying the whole salary/wage to the smart contract.
The smart contract calculating the individual tax for every payment. So the smart contract can fork it into two payments. One payment to the tax authority with the taxes and the other payment to the employee with the net salary.
With this way we have an private way how you can pay taxes correctly, without loosing your privacy.
But if the company is paying it directly to the employee, i can’t imagine any way to solve the problem.
I really do think that we’re trying to solve a problem that more or less doesn’t exist. We should ask why people don’t like to pay taxes and act on that. Tracking fraudulant money streams almost always revolves around a punitive (we can’t let them get away with this), rather than a restorative position (How can be help correct the situation for the victim). Crime is more easily prevented by deincentivizing the crime as opposed to oppressing it. As an example, drug trafficking would cease to exist if we provide cocaïne free-of-charge in specialised clinics where voluntary social assistance is provided.
The example of the entrepreneur trying to maximize profits by evading taxes can be more productively solved by clearly showing an advantage to paying taxes. I know this vet that barely pays taxes, but charges the most out of almost any vet around, yet has 1.6 million EUR home, horses, stables, etc. You could make taxation of companies transparently available and you could require that companies clearly display the taxes they paid. People would immediately be able to tell this vet does not pay taxes providing a social incentive. And there’s other incentives to be thought of as well. Also notice how you’re making use of social responsibility and our innate nature as social animals here?
A social problem needs a social solution, not a mathematical or punitive one.
I dont think so. I see too many problems with this:
If a company donate their money to special initiatives it reduces their taxable income. So they pay less taxes for beeing good.
People are not this good. If it is on your own choice to pay taxes: you can get 100.000€ or pay taxes where you dont get something for yourself.
If you live in an country where you dont belive in the goverment you wouldnt pay them, right?
Why did we have laws, when people would brave and so on?
I think laws can get replaced by smart contracts, they are the mathematical law.
I am not claiming that people are more good than they are. Adult development psychology suggests that about 10% is not or not sufficiently socialized. Those people might not collaborate with a more voluntary system, but that doesn’t mean the rest of us can’t. My point is that an enforcement of laws on a minority might not be in our best interest. We are tricked by our ego in formulating an opposing force or response when the best one would be to ignore those crooks and keep building a socially fair society with low taxes and great services. Why do we keep complaining about the 1% when there is 99% of us who can build society as we see it? The trick is that we actually have to build it instead of pointing at the 1% and say “You should do this for us and that is how it’s gonna be.” Between the 90-99% of us we have enough resources, or with the power of the crowd we can create them.
(Some parts of your message I could not understand, sorry.)
Mh it’s complicated to talk about taxes.
I understand your opinion and it’s a good one. To do it like you suggest, we need to lower the expenses for operating. Also we need to list the costs for things. The best example ist the BER airport near our Berlin. You are free to look what this airport costs and how long it took place to build it.
Somehow i would also think that only western cultures accept this system. If i am looking right to Russia or China i would think that they accept it. I can’t explain but it’s a feeling.
In my opinion we could use the system how it is and replace old and expensive systems with smart contracts?
It could be really cool if your tesla car automatically pay the taxes for having it or pay for the gas at a gas station. There could be so much great stuff with smart contracts.
Back to the topic:
I understand your opinion and would be happy if this is standard world wide but i think that not so much people would be so.
Blockchain is a sad technology if the only thing it can do is to make our current systems more “efficient”. It’s like giving somebody a fork with 5 ends instead of 4. Where’s the use in that? How can it transform our world? Because at the moment, most of the transformation has been in acceleration climate change and creating new riches which haven’t changed all that much themselves.
The transformative effect of blockchain tech is that decentralization allows decentralization, for example in governing our society. That not all of us are fit to be part of such a society shouldn’t prevent us from building it. At the moment, power is concentrated in money, business and politics (to name a few). The key thing about a more voluntarily and co-created tax-system is that it decentralizes its governances to the people taxed by and benefitting from it.
Societal issues and accomplishments have often been the results of a leverage of resources. Rome built a road network in Europe which started a lot of good things. They also murdered and acted as a bully to other forces. Companies and billionaires are leveraging their resources because it is easy to do so. They need permission from 1 person only. The masses have the same power even if they haven’t fully woken up to it yet. It’s harder to organize a crowd, but that’s why we have blockchain. Blockchain alone will not be enough though, as it needs to be combined with insights in adult development psychology and social technologies like consent-based governance formats.
We’re a social victim of resource leveraging as well. We chase after the American dream that is displayed so visibly in front of us. When we reach a certain level of wealth (or even before) we agree to use the same methods of leverage as those we were a victim of and the cycle repeats. Blockchain won’t reach its full potential until we do. I believe your conservative ideas on keeping things as they are to be destructive to society and I hope you’ll reflect on them.
I like your idea of smart contracts for all of this! Also the NFT for proof of tax paying sounds interesting 