The exponential growth that the cryptocurrency market has seen in the past decade has caused much discomfort among governments across the globe, owing to the unregulated nature of transactions and what some may argue is a disproportionate impact of the crypto market on domestic economies. The natural response of most jurisdictions has been to tax cryptocurrency transactions so as to discourage them while also gaining revenue out of them. However, taxation policies face complex questions of determining the true nature of crypto transactions, a question that is yet to be answered with clarity. The knee-jerk reaction that the industry has attracted from the Indian government in particular has materialised in the form of imposition of a virtual digital assets tax on cryptocurrencies. The authors argue that this policy failed to effectively address its objective and only resulted in a sudden downfall of the crypto market in India, creating negative repercussions for the domestic economy. The authors then employ a game theoretical analysis to propose an alternative taxation framework that recognizes the significance of the crypto market and better balances the need for its regulation. Further, they discuss frameworks from a range of external jurisdictions to analyse the expected implications of similar policies in the Indian economy.
Carol Nalubanga, Edmand Bakashaba, Muhammad Sendagi
Background. Aim: To determine the relationship between municipal government revenue collection and service delivery in Rukungiri Municipality. Methodology A case study, descriptive, cross-sectional research design was used for this study. The study adopted both qualitative and quantitative approaches. A case study design was adopted because it enabled the researcher to carry out an in-depth investigation into the concepts under study. The entire population of Rukungiri Municipality is targeted in this research. Also, the municipality has 51 civil servants/technical staff, 20 political leaders (councilors) at municipal and Division levels, 20 taxpayers, 7 service providers, and 25 community projects’ beneficiaries. This is based on different stakeholders’ information relevance in their respective positions. Therefore, the population of the study was 1400 people. A sample of 302 respondents were selected Results One of the findings mentioned is the importance of local revenue in decentralized societies. While it’s true that local revenue plays a significant role in financing local government operations and service delivery, it is important to consider the capacity of local governments to effectively collect taxes. Many local governments in developing countries face challenges in revenue collection, including limited tax bases, weak tax administration capacity, and high levels of tax evasion and informality. Therefore, simply relying on local revenue may not be sufficient to meet the financing needs of local governments and ensure adequate service delivery. Conclusion The findings indicate that there was a positive and moderately strong relationship between revenue collection and service delivery (r = 0.719). This relationship implies that the municipality is using its collected revenue to fund its expenditures for service delivery. Recommendation Strengthen local revenue collection: Rukungiri Municipality should enhance its capacity to collect local taxes and fees efficiently. This can involve investing in modernizing revenue collection systems, training staff, and conducting public awareness campaigns to ensure compliance.
Alex Berke, Tobin South, Robert Mahari, Kent Larson · 5 authors
Tax returns contain key financial information of interest to third parties: public officials are asked to share financial data for transparency, companies seek to assess the financial status of business partners, and individuals need to prove their income to landlords or to receive benefits. Tax returns also contain sensitive data such that sharing them in their entirety undermines privacy. We introduce a zero-knowledge tax disclosure system (zkTax) that allows individuals and organizations to make provable claims about select information in their tax returns without revealing additional information, which can be independently verified by third parties. The system consists of three distinct services that can be distributed: a tax authority provides tax documents signed with a public key; a Redact & Prove Service enables users to produce a redacted version of the tax documents with a zero-knowledge proof attesting the provenance of the redacted data; a Verify Service enables anyone to verify the proof. We implement a prototype with a user interface, compatible with U.S. tax forms, and demonstrate how this design could be implemented with minimal changes to existing tax infrastructure. Our system is designed to be extensible to other contexts and jurisdictions. This work provides a practical example of how distributed tools leveraging cryptography can enhance existing government or financial infrastructures, providing immediate transparency alongside privacy without system overhauls.
Decentralization holds a significant role in the context of decentralized autonomous organizations (DAOs), with its nature being not a fixed value but a comparative spectrum. Prior research investigating the measurement of decentralization in nations’ governance system provides a foundation for our current study. This research aims to integrate these insights to define dimensions and indicators, tailored explicitly for assessing decentralization levels within DAOs. Then, the article undertakes an examination of the suitability of traditional decentralization measurement approaches within the unique DAO context, employing confirmatory factor analysis (CFA) as our analytical tool based on a total of 44 DAOs. Hence, the results suggest that DAOs have three dimensions for measuring decentralization, ‘political decentralization as a participatory engagement’, ‘economic decentralization as a resource distribution’, and ‘administrative decentralization as the self-governing execution of decisions’. By substantiating the applicability of established decentralization measurement frameworks within the unique context of DAOs, the findings not only enhance the understanding of this emergent governance paradigm but also provide DAO practitioners, policymakers, and researchers with invaluable insights.
This paper provides a brief explanation of the block chain and the concept of “crypto currency”, followed by an analysis of Bitcoin for permissibility from the point of view of Shari‘ah. The decisions of well-known houses of fatwas were considered, and a number of criteria were developed and adopted with the help of which the Shari‘ah position of a particular crypto currency can be assessed. The article identifi es provisions and decisions that can become the basis for issuing fatwas related to issues that concern many Muslims who care about the permissibility of their earnings.
This paper delves into the role of technological tools in bolstering cryptocurrency tax compliance for individuals and businesses, addressing the challenges posed by the decentralized and anonymous nature of cryptocurrencies. The investigation revolves around the necessity and effectiveness of software and platforms like CoinTracker, CryptoTrader.Tax, and TokenTax, which aid in monitoring, reporting, and ensuring compliance with tax norms. These tools exemplify the innovation required to reconcile the discrepancy between decentralized cryptocurrencies and centralized tax compliance, mitigating legal risks. Moreover, the inherent characteristics of blockchain technology, including its immutability and transparency, coupled with smart contracts, revolutionize tax compliance by creating tamper-proof transaction records and automating tax calculations and payments. Nevertheless, the implementation of these technologies raises concerns regarding data privacy and security, necessitating robust legal and ethical frameworks. Additionally, the evolving cryptocurrency market, characterized by developments like DeFi, NFTs, and novel blockchain protocols, demands continual adaptation and innovation from these technological tools. Countries with favorable tax environments for cryptocurrencies, such as Germany, Singapore, and Switzerland, are also explored. The paper concludes with comprehensive recommendations for implementing a robust model for taxing cryptocurrencies, emphasizing the significance of employing blockchain analysis software, comprehensive tax software, Artificial Intelligence, APIs, cloud computing, and educational platforms. These tools, integrated meticulously, ensure accuracy, efficiency, and foster a knowledgeable environment, thereby facilitating adherence to tax norms in the rapidly expanding cryptocurrency domain.
Allah Ditta Nawaz, Niaz Ahmed Bhutto, Shabeer Khan
Abstract The global challenge of tax evasion presents a profound impact, leading to diminished tax revenues that are the lifeblood of a nation's seamless operations. This issue is exacerbated by the ingenious strategies employed by tax evaders, which distort economic performance benchmarks and create financial imbalances. Amidst these concerns, cryptocurrencies have emerged as a contentious subject, accused of abetting tax evasion. The covert nature of cryptocurrency transactions poses a significant hurdle for regulatory oversight and transaction recording. In response to this burgeoning concern, our comprehensive study delves into the intricate interplay between cryptocurrencies and tax evasion, utilizing annual data spanning from 2013 to 2020. With an extensive scope testing thirty two hypotheses and twelve interaction terms, our research unfurls the multifaceted dynamics at play. This study embarks by constructing a latest tax evasion index for the esteemed G-7 nations. Employing asymmetric/symmetric panel techniques, our investigation unveils a compelling revelation: cryptocurrencies exert a counteractive influence on instances of tax evasion. Furthermore, the nexus between economic performance and cryptocurrencies bears considerable sway over their correlation with tax evasion. Innovatively, our research charts the intricate relationship between tax evasion and cryptocurrencies across varying levels of economic performance. Notably, our findings underscore that Economic Freedom, Government Integrity, Government Spending, Business Freedom, Labor Freedom, Monetary Freedom, Investment Freedom, and Bureaucracy function as moderators, influencing the association between tax evasion and cryptocurrencies. These insights transcend academia, delivering significant implications to policymakers with informed guidance to devise nuanced strategies and policies.
In the mid-1990s I wrote the first English-language book on local government in Latin America (Nickson, 1995 ). At that time there were also very few works on the subject in Spanish or Portuguese. The tardy appearance of works on such a topic reflected the long history of centralization and the long-standing neglect of academic investigation of sub-national governance in the region. The information available was so limited that in the case of some countries (notably Argentina) it was even difficult to obtain an accurate figure on something as basic as the number of municipalities. The book covered the history of local government since the late colonial period, its legal status, its structure, local service provision, local finance, electoral system, administrative organization, citizen participation, and inter-municipal relations. It also provided descriptive profiles of municipal government in 18 countries in the region. Since then there has been an explosion of publications on local governance in the region, highlighting the transformation that has taken place in the wake of a major decentralization process than had begun a decade earlier. Several studies agree that a significant leap has been made in the level of decentralization in Latin America (Bossuyt, 2013 ; Carrera, 2013 ). This period of time is sufficient to assess the impact of this transformation.
A government's primary duty is to provide its people with public services, for which it needs funding to cover its costs. Taxation, among other things, serves as a significant source of funding for public spending. The government has been able to uncover new avenues for revenue collection because to technological advancements. The peculiar issue of cryptocurrency taxation in India is one of them. Cryptocurrencies, in contrast to fiat money, are decentralized and run on a peer-to-peer infrastructure that is free from outside interference, such as that of the Reserve Bank of India. This Article's goal is to investigate cryptocurrencies and the current regulatory framework around them. It explores the various forms that cryptocurrencies can take and analyses (1) the domestic legal framework that currently exists and how it relates to cryptocurrencies, (2) domestic laws that affect how cryptocurrencies are taxed, and (3) The reactions of the world's major economies to cryptocurrencies
The global backlash against tax havens has pushed secrecy-seeking capital to explore alternative opportunities in non-tax-haven countries and new financial technologies (FinTech). We identify two major corporate practices—organizational ring-fencing and swarming—that have enabled secrecy-seeking capital to adapt to new regulatory realities and illustrate these practices empirically with the extreme case of Estonia. In the 2010s, several Nordic banks turned their Estonian offices into hotbeds of high-risk transactions, ring-fencing their Baltic affiliates from their group-level systems and generating several money laundering scandals with global repercussions. More recently, secrecy-seeking capital ‘swarmed’ into Estonia’s large cryptocurrency sector and thereby thwarted effective supervision of the activities of the firms involved. Neither swarming nor organizational ring-fencing have been sufficiently explained by existing approaches in International Political Economy (IPE) as new core practices of secrecy-seeking capital. We study both practices in a mixed-methods research design and provide novel empirical insights to illuminate this phenomenon. In filling this gap, our study paves the way for a second generation of global tax governance scholarship amidst the cryptocurrency and FinTech boom, and calls for a research agenda that addresses these new practices that take advantage of the lack of administrative capabilities in non-tax-haven jurisdictions.
Katherine Baer, Ruud de Mooij, Shafik Hebous, Michael Keen
Abstract Policy-makers are struggling to accommodate cryptocurrencies within tax systems not designed to handle them; this paper reviews the issues that arise. The greatest challenges are for implementation: crypto’s pseudonymity is an inherent obstacle to third-party reporting. Design problems arise from cryptocurrencies’ dual nature as investment assets and means of payment: more straightforward is a compelling case for corrective taxation of carbon-intensive mining. Ownership is highly concentrated at the top, but many crypto investors have only moderate incomes. The capital gains tax revenue at stake worldwide may be in the tens of billions of dollars, but the more profound risks may ultimately be for VAT/sales taxes.
Blockchain can enable small countries to overcome systemic constraints and strengthen their economies. Based on dynamic capabilities theory, we develop a conceptual framework that explores the applicability of blockchain for fostering economic development. Specifically, we postulate that the agent’s role in dynamic capabilities theory can be extended from the organisation level to the country level. Our proposed framework integrates blockchain as an economic driver and dynamic capabilities on higher-order and lower-order levels (i.e., business and investment development, human capital development, financial system enhancement, regulatory framework improvement, and systems and infrastructure improvement) to show their impacts on different aspects of economic development. International regulatory and political factors serve as moderators that determine whether a national blockchain-based strategy will ultimately be successful. In summary, we illustrate how blockchain as an enabler of dynamic capabilities can contribute to a small country’s economic development.
As the decentralized finance industry gains traction, governments worldwide are creating or modifying legislations to regulate such financial activities. To avoid these new legislations, decentralized finance enterprises may shop for fiscally advantageous jurisdictions. This study explores global tax evasion opportunities for decentralized finance enterprises. Opportunities are identified by considering various jurisdictions’ tax laws on cryptocurrencies along with their corporate income tax rates, corporate capital gains tax rates, level of financial development and level of cryptocurrency adoption. They are visualized with the manifold approximation and projection for dimension reduction (UMAP) technique. The study results show that there exist a substantial number of tax evasion opportunities for decentralized finance enterprises through both traditional offshore jurisdictions and crypto-advantageous jurisdictions. The latter jurisdictions are usually considered high-tax fiscal regimes; but, given that they do not apply tax laws, tax evasion opportunities arise, especially in jurisdictions that have high financial development and high cryptocurrency adoption. Further research should investigate these new opportunities and how they are evolving. Understanding the global landscape surrounding tax evasion opportunities in decentralized finance represents a first step at preventing corporate capital flight of cryptocurrencies.
Cryptoasset miners verify and record transactions, maintaining the integrity and security of the blockchain network. The Department of Finance ("Finance") has recently proposed new Excise Tax Act (ETA) provisions regarding the goods and services tax (GST)/harmonized sales tax (HST) treatment of crypto mining. Under these proposed provisions, crypto mining activities provided to anonymous recipients will not be subject to GST/HST, but the crypto miners performing these activities will also not be eligible to recover any GST/HST paid on their business inputs (and thus will be forced to bear the brunt of the tax themselves). We believe that Finance's decision to tax what it can identify—the business inputs of Canadian crypto miners—is a roughly balanced but reasonable approach. Although Finance might be legitimately criticized as departing from Canada's decision to eliminate the cascading of tax found in the former origin-based federal sales tax, it seems impossible to administer a destination-based transactional tax such as the GST/HST when faced with "anonymous" recipients (the users of the crypto miner's services). Finance appears to have minimized the cascading of tax by including a carve-out for identifiable recipients of a crypto miner's services, allowing the regular zero-rating rules in the ETA to apply in limited circumstances. In the face of utter uncertainty, Finance's reactive approach is likely the best that it can do. Given the rapid evolution and inherent decentralization of the crypto space, a more broadly based proactive approach would seem imprudent at this time.
This research considers a new dimension of the effects of the underground sector by examining the spillovers on cryptocurrency holdings. Cryptocurrencies offer a relatively greater ability to dodge taxes and ensure the anonymity of holders, providing attractive avenues for underground operators to stash their informal-sector earnings. Our results, based on data from more than 50 nations, show that a greater prevalence of the underground economy in a nation is indeed associated with greater cryptocurrency holdings. This result holds across an alternative measure of the shadow economy, and when the bi-directional causality between the shadow economy and cryptocurrency holdings is considered. In other noteworthy findings, greater FDI crowded out cryptocurrency holdings, while greater financial globalization and greater economic uncertainty, ceteris paribus, increased them.
The use of private digital assets based on distributed ledger technology and cryptography methods is increasing every year. The opportunities provided by crypto assets due to their special characteristics can be used when issuing digital assets controlled by the state. The subject of this article is the study of digital currencies of central banks (CBDC), the digital ruble, consideration of their differences from cryptocurrencies and the opportunities provided by them to strengthen tax control in the field of compliance with tax legislation by subjects of economic relations. The research was carried out using universal (analysis, generalization) and special legal methods of cognition (comparative legal, historical legal). The novelty of the study consists in updating approaches to identifying the essence of digital currencies of central banks, including the digital ruble and the possibility of their influence on compliance with tax legislation. As a result of the study, the author concluded that the need to introduce digital currencies of central banks is now under active study by the central banks of a large number of states. The advantages for users of these assets will be speed, availability of assets even in regions that are difficult to access for banking services and security from the state. For regulators, the introduction of these assets will reduce interest in cryptocurrencies, transactions with which are often made for illegal purposes, as well as give additional incentives in the fight against tax evasion.
Hamidah Babirye Nsereko, M. Tait, Nadine Oosthuizen
Purpose/Objectives: The purpose of this study was to determine the ideal contract compliance process in Uganda from a state department perspective. Design/Methodology/Approach: In conducting this study, the interpretivist approach using the qualitative methodology was employed. Telephonic interviews and focus group discussions via the Zoom online platform with semi-structured interviews were conducted among 29 procurement officers, heads of finance departments, heads of procurement departments, auditors and accounting officers. The interviews explored matters concerning what is regarded as the ideal contract compliance process. Findings: The findings indicate that the ideal contract compliance involves the following nine stages: understanding the law; procurement planning; requisitioning; establishing funds availability for the items procured; sourcing providers; contract awarding; appointing contract managers; monitoring deliveries; and payment. Practical Implications: Studies such as the current one widen the management scope and suggest that state departments should read the mind of society and continuously engage with them; make SMART plans and budgets; streamline processes; involve technical people; legally assess the contract; and follow the existing laws. Originality/Value: The cost of contract non-compliance is high and could lead to missed deadlines; delays in executing contracts; litigation and even cancellation of contracts. This could result in a lack of transparency and accountability; poor performance; inefficiency; and poor resource usage. To prevent these negative impacts, state departments could add policy recommendations to implement an effective contract compliance process.
The taxation of bitcoins and similar cryptoassets is of immense economic importance to the individual taxpayer and to society as a whole. In recent years, they have effectuated a number of tax law issues in Denmark. In Norway, Sweden, and Denmark, the taxation of bitcoins and similar cryptoassets is based on the general rules of tax law. This article contains a comparative analysis of the three Scandinavian countries’ tax treatment of gains and losses on them. The analysis shows that the Norwegian and Swedish rules that have been significantly changed and modernized do not at all present the same challenges as the Danish rules. In Denmark, there is need for uniformity, predictability, and clarity to be introduced into the taxation rules. Therefore, the article also provides some reflections how to change the Danish tax legislation. Bitcoins, cryptocurrencies, cryptoassets, capital gains taxation, Danish income tax, Norwegian income tax, Swedish income tax, speculation taxation
Decentralized Autonomous Organization (DAO) is a blockchain-based governance structure allowing all shareholders to participate in daily decision-making through voting on proposals. However, as centralization trends of blockchain documented in previous literature, voting delegation is on the rise for governance efficiency. This paper utilizes a DeFi company called MakerDAO to analyze the efficiency of such delegation design on DAO. Firstly, the delegates have demonstrated their expertise, thereby more likely to participate in voting and make well-informed choices. Secondly, voting delegates may prioritize personal interests over the collective interests of MakerDAO when their interest conflicted with MakerDAO is large enough and they gain sufficient voting power to influence the voting outcome. Thirdly, market monitoring can generally reward (punish) delegates for correct (wrong) votes through giving new or withdraw old delegations. What’s more, delegates with skills will be further rewarded. However, it remains challenging to consistently penalize delegates whose interests misalign with those of DAO, even when their holdings are transparently visible. This paper contributes to literatures on the evolutionary process of decentralized designed platform to be centralized or reintermediated.
This paper outlines the key complexities in applying traditional tax principles to proof of stake – or staking – rewards. How staking activities and rewards are characterised is fundamental to determine how a jurisdictions tax rules will ultimately apply. Core issues for taxing staking rewards surround arguments around four key interrelated themes: (i) dilution and realisation (ii) passivity and the performance of services (iii) validators and delegators and (iv) minting new tokens and transaction fees. This paper presents an exploration of some of the key tax principles relevant to staking rewards, drawing on legislation, precedent and guidance across Australia and the United States of America to exemplify the challenges therein. In doing so, this paper examines the role of the staker, the theoretical diluting effect of minting staking rewards, income characterisation and the challenges of residency and source. Such considerations highlight that the bespoke, decentralised nature of staking means that jurisdictional claims and overlaps will challenge taxpayers and tax authorities in the tax compliance function.
The Regulation of the Minister of Finance of the Republic of Indonesia Number 68/PMK.03/2022 as the legal basis for cryptocurrency income tax does not reflect the principle of fairness because the consideration is based on the principle of ease of administration. This paper aims to provide an alternative income tax legal framework on cryptocurrency based on the principle of justice. It is expected to be a step to increase state revenue through the sector of cryptocurrency tax. This paper employs a conceptual and comparative approach to normative research. Furthermore, the researcher compares income tax regulations and policies on cryptocurrency in Indonesia and Canada with the theory of justice to obtain answers to legal problems. The Regulation of the Minister of Finance of the Republic of Indonesia Number 68/PMK.03/2022 does not reflect the principle of justice because the final tax rate does not reflect the tax burden. In addition, there are limitations on the tax collector's authority, so tax collection is not comprehensive. Therefore, this paper compares and analyses income tax regulations and policies in Indonesia and Canada to obtain several alternative forms of fair tax legal framework on cryptocurrency. Alternative cryptocurrency income tax regulation that can be accommodated by the government is to change to a progressive rate to fulfill tax fairness, change the collection system to a self-assessment and do not differentiate the source of income and also cooperate with various exchanges to exchange transaction data to prevent criminal acts.
Although blockchain technology is disruptive, revolutionary, and foundational, its application across different countries with varying levels of socio/economic development is uneven. Accordingly, this paper examines blockchain technology in ASEAN (Association of Southeast Asian Nations). With its sizeable populations and economic diversity, ASEAN provides a suitable staging ground for examining the factors that facilitate or impede blockchain technology. This paper discusses the preconditions for blockchain adoption, enabling factors relating to regulatory policies, and illustrative cases depicting new blockchain solutions or improvements over current practices. Based on these narratives, a six-step roadmap delineates the need for regulatory clarity, the balance between public versus private policies, and pathways for securing competitive strategies and organizational advantages.
This article aims to explore the fundamental elements of a blockchain-based tax system by approaching the research question of when to use blockchain for tax. The authors, after introducing the basics of blockchain technology, address the conceptual theoretical perspective by identifying the preconditions under which blockchain can concretely represent a valuable opportunity for tax. In this respect, the analysis starts from the systematic literature review and also covers the different points of view from which to consider the development of a blockchain-based tax system, including the tax administration’s perspective, the taxpayer’s perspective, and the ecosystem perspective. Furthermore, the article addresses the empirical analysis of the current blockchain pilot projects in the tax domain; in this respect, the objective is to verify whether and how each use case concretely addresses the above preconditions. The authors also discuss some future possibilities for more blockchain-based use cases having regard to revenue sourcing rules under the OECD Pillar One proposal and transfer pricing control. In the conclusions, the authors argue that, to comply with the principle of tax efficiency, blockchain-based use cases for tax should always comply with the preconditions identified under the present study.