In the age of incessant technological advancement, the phenomenon of decentralized cryptocurrency as quickly emerged as an inescapable element of social, economic and legal discourse. At the same time, pre-eminent international tax issues such as tax evasion, profit shifting and other criminal activity have deeply exacerbated. A correlation coefficient does not necessarily exist between these two variables. However, it is often intimated that the magnitude of tax evasion is predicated on the opportunities for evasion. \nIn cognisance of this fact, this essay tenders the argument that cryptocurrency portends serious potential as a foreboding role player in the international tax evasion rhetoric. It is highlighted that â in spite of the growing apprehension of cryptocurrency â many regulatory authorities and institutions maintain a passive disposition towards the intricacies of cryptocurrency. \nAs such the primary research objective is steered towards tracing the origination and operation of cryptocurrency and Bitcoin in particular. Utilizing this point of departure, certain attributes of Bitcoin are highlighted as being problematic from a tax administration and enforcement perspective. It is demonstrated how the idiosyncratic features of Bitcoin render it propitious to the general polemic of tax evasion. An argument is further appraised that depicts Bitcoin as potentially having functional intersections to conventional notions of tax havens. The rampant criminal activity that has been engendered by cryptocurrency is also portrayed. \nThe research is limited to examination of the potential of Bitcoin in regard to cross-border tax evasion and illicit financial flows. As such aspects such as the potential interaction of Bitcoin with Value-Added tax and exchange control are omitted. \nOn finality, an examination is conducted on the responses to Bitcoin from authorities in the United States and South Africa. It is found that despite a lack of regulatory congruity from different bodies in the United States, gallant strides have been made in classifying Bitcoin and attending to the tax evasion threats it poses. On the other hand, it is found that South African authorities have cognized the existence of Bitcoin. This has however not led to any direct, concrete regulatory response. In light of this, a number of recommendations have been suggested as a catalyst for reform.
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 âbenevolent governmentâ 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 â especially bitcoin â 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 âblocks.â 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.
This paper discusses how decentralized countries can achieve sound fiscal relations between the central government and lower government levels. The concepts of âvertical gapâ and âvertical balanceâ 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.
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.
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 itâs 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.
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 ârobot taxâ 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.
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 governmentsâ 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.
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.
Olga Gouveia, Enestor Dos Santos, Santiago Fernåndez de Lis, Alejandro Neut · 5 authors
Los libros contables distribuidos (distributed ledgers, en ingles) constituyen una tecnologĂa que permite una version digitalizada del dinero en efectivo al tiempo que potencialmente mantiene sus cuatro caracterĂsticas principales: la universalidad, el anonimato, la intercambiabilidad entre pares (P2P) y un valor nominal constante.
This article concerns capital taxation and public good provision in a two-layer fiscal union where the federal government uses lump-sum transfers to redistribute resources between two local jurisdictions, and where each local government uses a capital tax and a lump-sum tax to finance the provision of a local public good. The novelty is to allow for simultaneous horizontal and decentralized leadership (double leadership) which means that one of the local governments is able to exercise Stackelberg leadership both vis-a-vis the other local government and vis-a-vis the federal government. Among the results it is shown that the capital tax becomes redundant as a policy instrument for the double leader if the other state government acts as a decentralized leader vis-a-vis the federal government. If, instead, the other state government does not exercise leadership vis-a-vis the federal government then the double leader will implement a capital tax which is allocatively efficient from the perspective of the fiscal union as a whole. It is also shown that double leadership exacerbates the under-taxation inefficiency that earlier research has shown exists in a fiscal union with decentralized leadership.
Article Geld 2.0 (auch) als Herausforderung fĂŒr das Steuerrecht â Die bilanzielle und ertragsteuerliche Behandlung von virtuellen WĂ€hrungen anhand des Bitcoins was published on October 26, 2017 in the journal FinanzRundschau (volume 99, issue 20).
Die Digitalisierung hat unseren Alltag fest im Griff: Ferien werden im Internet gebucht, Informationen online beschafft, die klassischen AdressbĂŒcher 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 verĂ€ndert. In diesem Umfeld wurde im Jahr 2009 die erste, damals noch weitgehend unbekannte virtuelle Peer-to-Peer WĂ€hrung mit der Bezeichnung «Bitcoin» zum digitalen Leben erweckt.
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.
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.
In the Polish legal system, shares of local government units in state Personal Income Tax (PIT) falls into the category of the local governmentâs 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 unitsâ revenues on central tax decisions in the form of âlocal-governmentalizationâ 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.
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.