Blockchain Papers

Olivier Accominotti, Stefano Ugolini

No abstract is available for this record.

Natalia Ivanova, Galina Morunova, Vitaliy Fedosov, Svetlana Kuzmina

In this article, the authors consider issues of fiscal decentralization in the context of sustainable development of territories, justify the development trends of the world community in providing public goods for the population. The analysis of this issues is carried out in comparison of indicators for Russia and the countries of the Organization for Economic Cooperation and Development (OECD). This allows assessing the current level of fiscal decentralization in the world community, in Russia, and also determining its prospects. The authors presented the results of the study, which contain the dynamics of subnational budgets of Russia and OECD countries, separately identified local budgets, the dynamics of financing of proactive budgeting, the typology of the main projects of proactive budgeting, examples of municipal-private partnership projects implemented in Russia. In addition, the article sets out new approaches to the financial support of local government activities in the country, based on the introduction of self-taxation, bond loans and other forms of financing at the municipal level.

Daniel Hellwig, Goran Karlic, Arnd Huchzermeier

Decentralized finance has evolved as a major contender for traditional banking systems over the last few years. Evolution in blockchain and cryptography technologies are the driving forces for decentralized finance’s growth. The emergence of Bitcoin in the finance system was a major driving force toward the tremendous growth of decentralized finance. However, with various platforms merging every day, the decentralized finance sector is still in its early, unorganized stages. The current decentralized finance market is chaotic. With a new “coin” being introduced almost every month, standardization is highly lacking in the system. DeFi already has several different applications available. For instance, one can purchase stable coins, or assets pegged to a national currency, on decentralized exchanges, move the assets to a lending platform that is also decentralized to earn interest, and then add the interest-earning instruments to a decentralized liquidity pool or an on-chain investment fund. DeFi enterprises frequently aim at decentralized decision-making, or governance, in everything from the user fees to the products they provide. A decentralized program may be started by one person or a small number of individuals, but as the project gathers traction, its leaders frequently try to step down and cede control to the user base. A decentralized autonomous organization that has its rules and regulations written into computer code and that may issue governance tokens, which allow its holders a voice in decisions rather than allowing the decision-making to a centralized government authority as in case of traditional finance, could represent this transition. While on one side, world governments are still trying to grasp and regulate the sector, on the other side, the technology’s reach has been very limited. Undoubtedly, the emergence of blockchain-based decentralized finance is massively influencing our current finance technology industry. In this chapter, we discuss the current growth in the FinTech industry and the blockchain-based decentralized finance sector. Furthermore, we discuss how decentralized finance can be used in the current FinTech industry.

문병효

No abstract is available for this record.

Adam Chodorow

The IRS recently dealt a blow to Bitcoin enthusiasts by ruling that Bitcoin and other similar currencies should be treated as property–and not foreign currency–for income tax purposes. As a result, those who use bitcoins to purchase goods or services must report gain or loss on each transactionn if the bitcoins have changed value between the time they were acquired and spent. Treating Bitcoin as a foreign currency would have permitted individuals to take advantage of the $200 personal-use exemption and required taxpayers to adopt a formulaic system for tracking the basis of commingled bitcoins.The IRS's decision seems correct as a matter of positive law, but laws can always be changed. In this Article I consid4r whether Bitcoin should be treated as a foreign currency for income tax purposes. I conclude that tax authorities should adopt a foreign currency definition that excludes bitcoin and similar currencies because (1) a broad definition ciould create significant administrative and line-drawing problems, and (2) the government has little interest in promoting alternate currencies . Nor should authorities extend the personal-use exemption to virtual currencies. In contrast, authorities should extend the basis rules applicable to foreign currency to virtual currencies to prevent taxpayers from using the basis rules to improperly reduce their tax obligations.

Valerie Laturnus, Alfred Lehar

No abstract is available for this record.

Zbigniew Dumieński, Nicholas Ross Smith

The incredible growth of cryptocurrencies over the past six months has captured the attention and imagination of the world, with something of a crypto-mania emerging.What was once predominately the domain of a niche group of internet libertarians, cryptocurrencies are quickly becoming the darlings of Wall Street.

Stan Sater

No abstract is available for this record.

Martin Meurers, Johannes Moenius

No abstract is available for this record.

Jorge Martínez-Vázquez, Cristian F. Sepúlveda

No abstract is available for this record.

Daniel Gama e Colombo, Jorge Martínez-Vázquez

This paper examines the impact of fiscal decentralization on both public investment in innovation (measured as the share of research and development - R&D - spending in total government budget) and on the intensity of basic research within the public R&D bundle. We present a theoretical model where a ‘benevolent government’ invests in R&D aiming at maximizing net income available in the country (central government) or in the respective region (subnational government), where states compete to attract capital investment, and where R&D results are subject to interregional knowledge spillovers. The model predicts that decentralization leads to a lower level of public spending on innovation and to a lower share of basic research in government R&D budgets. The implications of the model are empirically tested utilizing country aggregate data. We find evidence that expenditure decentralization leads to lower intensity of basic research within public R&D and that both revenue and expenditure decentralization negatively affect the size of innovation spending. The findings suggest that fiscal decentralization policy, expected to be beneficial in many other dimensions, should be accompanied by measures to compensate for the otherwise decrease in innovation spending and that the assignment of expenditure responsibilities should have central government play a greater role in financing and carrying out basic research.

Joseph Wall, D. Larry Crumbley, Lewis B. Kilbourne, Caleb Blair

In this report, the authors discuss cryptocurrencies — especially bitcoin — and argue that because the IRS lists them as property, they are taxable, and because they are not as anonymous as once thought, they are not free from fraud. Cryptocurrencies are digital assets used as a medium of exchange, but they are not really coins. They can be sent electronically from one entity to another almost anywhere in the world with an internet connection. There are many cryptocurrencies in the market, including bitcoin, ethereum, ethereum classic, litecoin, nem, dash, iota, bitshares, monero, neo, and ripple. Many of the cryptocurrency networks are not controlled by a single entity or company; instead, a decentralized network of computers keeps track of the currency using a token ID. A ledger maintains a continuously growing list of date stamped transactions in real time called “blocks.” This technology is known as blockchain, which records, verifies, and stores transactions without a trusted central authority. The network instead relies on decentralized autonomous organizations (DAOs) with uncertain legal standing.

Robin Boadway, Luc Eyraud

This paper discusses how decentralized countries can achieve sound fiscal relations between the central government and lower government levels. The concepts of “vertical gap” and “vertical balance” provide an analytical framework for identifying and addressing key challenges. These concepts can help policymakers ensure that the financing of subnational governments (composed of transfers received from the center, own revenues, and borrowing) is both efficient and adequate given the allocation of spending responsibilities. More generally, the paper offers some perspectives about the optimal design of decentralization systems by examining the sequencing and economic principles underlying revenue and expenditure assignments, the use of transfers, and borrowing.

Nick Webb

On August 1, 2017, the Bitcoin blockchain experienced a hard fork.The hard fork, spurred by concerns over Bitcoin's scalability, resulted in an entirely new blockchain and an accompanying new cryptocurrency: Bitcoin Cash.However, the new blockchain relies on the history of transactions recorded on the old blockchain.Consequently, at the time of the hard fork, every holder of Bitcoin could have received an equal amount of Bitcoin Cash.This sudden receipt of Bitcoin Cash poses a variety of tax problems.Should the acquired cryptocurrency qualify as income?If so, how should taxpayers calculate this income?Current income taxation law suggests the Bitcoin/Bitcoin Cash hard fork produced gain that, for the most part, was immediately realized.Thus, most taxpayers that received Bitcoin Cash at the time of the hard fork should have reported its value as income to the Internal Revenue Service.However, due to a variety of practical concerns, including a lack of sufficient analogous situations, cryptocurrency's volatility, and the IRS's refusal to follow relevant regulations related to the taxation of "treasure trove," perhaps it would be best to reconsider this conclusion and explore a solution that permits taxation of Bitcoin Cash upon a subsequent sale.

Meryem Ait Ouali, Mohamed Boussetta

Financing local communities relies on a complex network of taxes, subsidies and loans. In the last decade the network has undergone numerous transformations .The reforms implanted in past years changed the systems of public finance substantially. Therefore, financial local autonomy is a term that frequently employed in the literature of federalism and decentralization, but it’s rarely defined conceptually in a careful way to empirical research. Generally it expresses the capacity of local communities to have their own revenue and expenditure budget, distinct from that of the state in which revenue can cover expenses incurred to meet their requirements. Indeed it is a highly valued feature of good governance. This paper is dedicated to a study in theory and practice. Starting with an overview on background of theoretical approach of local financial autonomy, then comparing the experiences of two European countries France, Italy and Morocco in the field. The purpose of this paper is to clarify the meaning of local financial autonomy and give a structured overview of the factors that may potentially influence the liberty of sub national authorities with regard of their own revenue and expenditure budget. Based on indicators and taking into account empirical evidences offered by official statistical datas, established in recent years for evaluating the position of administrative territorial units in relation to central government. The analyses prove that there is no universal model of local public finance applicable to all countries, because each has its own specific historical, cultural and linguistic particularities.

Sami Ahmed

New technologies, such as blockchain, cryptocurrency (e.g., Bitcoin), and artificial intelligence are rapidly changing how transactions occur in the United States. While scholars have started to examine how a number of areas of law should adapt, very little work has been done on what these changes mean for taxation. Yet these developments could have a huge impact on tax revenues. For example, some approaches to taxing transactions using cryptocurrency could result in these transactions being conducted abroad, beyond the reach of the U.S. taxing authorities. And if robots replace large segments of the labor force, this could drastically shrink federal and state income tax bases. The approach to taxing new technologies is a careful balance of capturing value and not disincentivizing growth. For example, if governments decide to levy a “robot tax” to replace revenues the income tax is no longer generating, they may accidentally stifle innovation in that jurisdiction. At the same time, these new technologies also provide tools that governments can harness to levy taxes far more effectively than they currently do. For example, using blockchain technology to track the history of income and company shares allows for the potential of an integrated tax system, which combines the currently separate corporate and personal taxes into one unified taxation regime. The effects of this transition are a removal of many distortions and behavioral inefficiencies. Just because technology can be used to levy taxes far more creatively does not mean that it should be. But given the rapid rate at which technological change is occurring, governments cannot afford to sit back and make these decisions by inertia. Rather, the main argument of this is that governments should: (i) recognize and adapt to shifting tax bases; and (ii) use technology such as blockchain to better target the populations and behaviors desired to be taxed. The paper recommends specific examples of how to better tax and use technologies, such as blockchain, to reform current taxation schemes. There is also ample discussion of whether cryptocurrency will be regulated as a security (as per the Howey test and recent SEC enforcement actions), a discussion of foreign jurisdictions' approaches to cryptocurrency regulation and taxation, and recommendations to the SEC and IRS on how they should adjust their taxation of cryptocurrency.

Austin Elliott

After granting permission to the Internal Revenue Service to serve a digital exchange company a summons for user information, the Federal District Court for the Northern District of California created some uncertainty regarding the privacy of cryptocurrencies. The IRS views this information gathering as necessary for monitoring compliance with Notice 2014-21, which classifies cryptocurrencies as property for tax purposes. Cryptocurrency users, however, view the attempt for information as an infringement on their privacy rights and are seeking legal protection. This Issue Brief investigates the future tax implications of Notice 2014-21 and considers possible routes the cryptocurrency market can take to avoid the burden of capital gains taxes. Further, this Issue Brief attempts to uncover the validity of the privacy claims made against the customer information summons and will recommend alternative actions for the IRS to take regardless of whether it succeeds in obtaining the information.

Ministry of National Development Planning, Alen Ermanita

For more than a decade, Indonesia has been practicing decentralization. During this period, local governments still experience difficulties in generating local revenues to fund their development. Local government bonds (LGBs) are actually one of the finest sources for financing local development. However, until now there is no real practice in issuing local bonds in Indonesia though it is allowed in the existing regulation. There are still many considerations which hindered the realization of LGB issuance ranging from the rule of mechanism to the local governments’ readiness themselves. To gain more insights about the issue, learning from another country (in this case: Japan) on how they manage LGBs effectively and securely will be beneficial. Comparison model between the two countries is chosen to see the regulation and managerial aspects in LGB implementation including the main institution in central level, rules of the game, buyers and purposes. By having this comparison, it is expected that some crucial factors can be looked at, which may then provide us some information on why LGBs are yet to bloom in Indonesia. Moreover, the comparison is expected to provide some basics about the possibility to ease policy adoption for Indonesia in managing LGBs. 

Hao Qi, Feng-Yuan Zou, Fei-Hu YANG

China economic development has entered a new normal. Consumption plays a more and more important role in promoting economy. Based on the empirical statistics, we adopted the VEC model to analyze the dynamic linkages and influences between public expenditure and consumption. The conclusion is there are different impacts between central and local public expenditure, and in the long run, only the latter has a strongly positive effect on consumption. So trying to coordinate the relationship between central and local finance is of vital importance under the background of economic transition.

Thomas Linder, Stephan Meyer

Die Digitalisierung hat unseren Alltag fest im Griff: Ferien werden im Internet gebucht, Informationen online beschafft, die klassischen Adressbücher durch Facebook und LinkedIn ersetzt, Flugtickets direkt auf das Smartphone geladen und Neuigkeiten im Internet gelesen. Auch im Bereich des Zahlungsverkehrs schreitet die Entwicklung schnell voran. Internet Banking, elektronische Kartenbezahlsysteme und Fintech-Produkte haben die Art der Dienstleistungserbringung grundlegend verändert. In diesem Umfeld wurde im Jahr 2009 die erste, damals noch weitgehend unbekannte virtuelle Peer-to-Peer Währung mit der Bezeichnung «Bitcoin» zum digitalen Leben erweckt.

Florian Kuhlmey

Income and property taxation are among the most prevalent policy instruments to finance local expenditure in countries with a high degree of decentralization. However, little is known about their relative efficiency and redistributive properties. This paper compares both tax instruments within the same framework and investigates their relative attractiveness to finance local expenditure. It further allows for inter-municipal spillovers and rivalry in the consumption of the publicly provided good. The analytical model identifies the different inefficiencies in both tax regimes which include intra- and inter-municipal free-riding. In a numerical illustration, the model is solved for the resulting equilibria. This allows to quantify the gross welfare loss from decentralization and also reveals a decomposition of the welfare loss into its components.

Haryo Kuncoro

Spatial interaction among local governments in fiscal setting decisions is receiving increasingly attention in the applied public economics literature. Spatial interaction models rely on the presence of an externality from local budget making, that is external effects originate from inter-jurisdictional resource flows due to tax competition for a mobile base, or from local public expenditure spillovers into neighboring jurisdictions. Similarly, the intergovernmental grants competition exists when there is a rivalry among local governments to get them from central government. This paper attempted to identify how great the fiscal competition among local governments in Indonesia. Using spatial statistics, we concluded that the fiscal competition among municipalities was greater compared to the pre fiscal decentralization period. It seems that the local tax setting and expenditures decisions in particular municipality can be attributed to the mimicking behavior to neighbor regions. Also, we found that the fiscal competition among municipalities could be attributed negatively to the fiscal disparity. Those imply that in the regional autonomy era the local governments tend to increase their local own revenue intensively and demand for intergovernmental grants in order to finance their expenditures. In the long run, they could lead to the high cost economy, worsening fiscal dependency, and inefficiency of local government expenditures. Those findings above suggest that the distribution of intergovernmental transfers among regions should consider the local tax effort and the services minimum standard plays an important role to achieve the efficiency of local government expenditures.

Ryta Dziemianowicz, Marzanna Poniatowicz

In the Polish legal system, shares of local government units in state Personal Income Tax (PIT) falls into the category of the local government’s own revenues. Such assignment does not meet the basic attribute of the so-called decentralized taxes, which is the taxing power. The local authorities cannot affect the income tax revenue in this case, while at the same time they suffer financial consequences of amendments in the construction of this tax. In Poland, this issue, among other things, fueled a discussion on the need to reduce the dependence of local government units’ revenues on central tax decisions in the form of “local-governmentalization” of the Personal Income Tax and introduction of the so-called municipal (local) PIT. Not only does the article aim to present this concept, but also to identify potential advantages and risks connected with the possible introduction of municipal PIT in the Polish system of local finance.

Jean‐François Brun, Maria El Khdari

The fiscal incentives literature emphasizes how the design of transfer systems has a significant implication on the behavior of local governments within decentralized systems. The empirical findings on the relationship between intergovernmental transfers and the incentives they create for local revenue generation are inconclusive and differ from country to country. Given the lack of data on local public finances, this type of study rarely involves developing countries. Using a unique and rich socio-economic and public finance data covering a large set of Moroccan municipalities over the period 2005 to 2009, this paper contributes to the new generation of fiscal federalism literature by assessing the fiscal incentive effects of two types of transfers: general purpose transfers (unconditional) defined by a formula and specific purpose transfers (conditional) allocated on an ad-hoc basis. After correcting for the endogeneity problem, our findings support the existence of a significant incentive effect of unconditional transfers and a less robust effect of conditional transfers. Suggesting that transfers from the central government complement local own revenues by encouraging Moroccan municipalities to collect more revenues.