p class="MsoNormal"The cryptocurrencies that are an integrated part of blockchains have led to creating enormous value and wealth that attract increasing attention from investors and governments. The sophistication and anonymity of crypto assets create significant challenges for tax administrations as the current tax rules and guidelines in relation to them are either too broad or too complicated. This article proposes a simplified tax regime that would significantly reduce compliance and administration costs when taxing cryptocurrency for which the first taxable event occurs at the moment when crypto assets are converted to fiat currency or other real-world goods or serviceso:p/o:p
Non-fungible tokens (NFTs) have gained significant prominence in the crypto-asset market in recent years, with their use expanding across a wide range of economic sectors, which in turn raises numerous new tax challenges. This chapter analyzes the main controversial issues that NFTs raise in the area of indirect taxation and the challenges faced by lawmakers and tax authorities.
Eva Kicová, Juraj Fabuš, Natália Stalmašeková, Terézia Kvasnicová-Galovičová
Taxing Bitcoin and other cryptocurrencies presents a significant challenge due to their decentralised and pseudonymous nature, complicating enforcement and fostering regulatory inconsistencies across jurisdictions. This study systematically reviews the existing literature on cryptocurrency taxation, critically analysing 38 academic studies to identify key themes, challenges, and gaps in global regulatory frameworks. Using a structured seven-step methodology, it examines how jurisdictions approach cryptocurrency taxation, highlighting ten thematic categories, including jurisdictional comparisons, taxable events, and compliance mechanisms. The findings reveal persistent regulatory fragmentation and a lack of harmonisation, underscoring the need for international cooperation to establish coherent tax policies. By synthesising existing research and identifying unresolved issues, this study contributes to the discourse on balancing technological innovation with fiscal accountability, ultimately advocating for a unified, cross-border approach to cryptocurrency taxation.
For several years now, transactions involving crypto assets have been flourishing, whether they involve buying or selling cryptocurrencies or non-fungible tokens (NFTs) or paying for the delivery of goods or services via cryptocurrencies. In this article, the authors provide an overview and address some of the issues of the Belgian VAT treatment applicable to transactions on cryptocurrencies.
Among the most talked about new technological developments in global finance are cryptocurrencies, digital assets, FinTech (financial technology), RegTech (regulatory technology), and DeFi (decentralized finance). However, very little is actually known regarding its definition, ramifications for the law, and effects on policy. This chapter aims to present DeFi, situate it within the conventional financial industry, establish a connection between DeFi and open banking, and conclude with some policy recommendations. We suggest that decentralization may jeopardize the effectiveness of traditional forms of accountability as well as traditional financial regulation and enforcement. Simultaneously, we discover that reconcentration will occur in a different (perhaps less regulated, less accessible, and less transparent) segment of the value chain where portions of the banking and financial services value cycle are decentralized. In order to guarantee effective oversight and mitigation of risks, DeFi regulation ought to focus on this refocused portion of the supply chain. DeFi&s;s main objective of decentralization actually requires control, not the reverse. Additionally, DeFi might present a chance to create “embedded regulation,” a completely new approach to regulation design. Regulatory strategies may be integrated into the DeFi architecture in its final form, which would decentralize finance, including its regulation.
Over the last couple of years, an increasing number of organizations have arisen that are native to blockchain technology. Recent data shows that these decentralized autonomous organizations (DAOs) that are essentially ‘living on the blockchain’ are becoming increasingly popular. They are attracting substantial amounts of funds, operating both in the Web3 space and off-chain, and creating a significant source of novel tax issues. The existing tax academic research on DAOs is often limited to US domestic tax issues following from the DAO’s legal treatment. This article outlines (part of) the existing income tax landscape for the DAOs and some of the arising income tax challenges. The focus is on the general principles of domestic and international income tax systems. The authors argue that the DAOs create fundamental and practical tax issues potentially leading to income taxed ‘nowhere’. Existing tax frameworks cannot fully embed the DAOs and allow them to maintain their distinguishing features. The incorporation of DAOs does not necessarily solve the tax issues and even exacerbates them in certain cases. The authors call upon domestic and international legislators and policymakers to aim for more tax certainty for shareholders and further tax research of the DAOs.
This study examined the association between corporate cryptocurrency activities and tax avoidance outcomes, utilizing data from US public firms covering the period from 2015 to 2023. Financial data were sourced from Compustat, while details regarding cryptocurrency activities were manually extracted from 10-K and 10-Q filings. Our analysis employed a fixed-effects regression model to examine the impact of these activities on cash effective tax rates (ETR). The findings indicate that firms engaged in cryptocurrency activities tend to have a lower ETR compared with those without such involvement. Notably, this effect was predominantly observed in companies directly engaged in cryptocurrency activities, such as accepting cryptocurrency as a payment method or actively trading cryptocurrency on an exchange platform. In contrast, firms involved in crypto mining or initial coin offerings did not exhibit a similar association. Our findings offer significant regulatory insights for governance bodies concerned with the implications of corporate cryptocurrency activities on tax strategies.
In this article, the author discusses how decentralized autonomous organizations (DAOs), as blockchain-based electronic entities, are well-suited to a global digital economy. While challenges related to taxation persist, the author highlights the potential for more efficient tax collection in a digitally integrated world.
This study aims to determine the effect of fiscal decentralization financing sources on poverty levels. This study covers areas in Jambi Province using secondary time series data for the period 2007-2016. This study uses Multiple Regression Analysis. Fiscal decentralization financing sources of local revenue and balancing funds do not have a significant positive effect on poverty levels in Jambi Province, while other legitimate incomes have a positive and significant effect in Jambi Province from 2007-2016. The effect of fiscal decentralization financing sources (PAD, DP, PL) on poverty levels in Jambi Province is 80.2%, while the remaining 19.8% is influenced by other factors not included in this study. And there is a strong relationship between fiscal decentralization and poverty levels of 89.6%.
Decentralized finance (DeFi) is one of the most promising technologies currently developing on blockchain infrastructure.It offers an innovative approach to providing financial services, allowing transactions to be conducted without the involvement of traditional financial intermediaries, such as banks or payment systems.This is achieved through the use of decentralized protocols and smart contracts that automatically execute the terms of agreements.Such decentralization can have a significant impact on international trade, creating new opportunities for businesses and reducing the costs of international operations.The main advantages of using DeFi in international trade include reducing transaction costs, speeding up payment processing, and ensuring transparency in transactions.By eliminating the need for intermediaries, businesses can conduct payments directly with each other, which significantly shortens transaction processing time and minimizes commission fees.This is particularly important in the context of the global economy, where the speed and efficiency of financial transactions are critical to the success of companies in international markets.Moreover, decentralized finance can promote financial inclusion by providing access to financial services in regions with weak banking infrastructure.For small and medium-sized enterprises in developing countries, DeFi opens up opportunities to enter global markets without the need to rely on traditional banking institutions, which are often inaccessible or too expensive for these businesses.In such cases, DeFi becomes an important tool for stimulating economic growth and promoting international trade in these regions.However, despite the significant advantages of DeFi, several challenges limit its widespread adoption in international trade.The main ones include legal
Should the government run an uncertain fiscal policy to finance its liabilities? We call the resulting uncertainty taxspots, and study conditions that make taxspots optimal and recurrent in standard Ramsey problems. We show that prudence and market incompleteness play a role in sustaining taxspots, and that equal-treatment randomizations can be decentralized via taxspots even in the absence of financial markets.
Mohammed Ibrahim Gariba, Samuel Amponsah Odei, Frank Febiri, Romana Provazníková
The motivation of this research is the surge in the integration of the digital economy (DE) and fiscal decentralization (FD) as crucial issues for countries. To maintain sustainable growth, it is important for EU to adopt sustainable development goal (SDGs) practices. However, the connection between DE, FD, and SDG practices has not been thoroughly examined in existing literature. Therefore, the objective of this study was to examine the mediating role of DE between FD and SDGs in EU. We employed a panel dataset between 2016 and 2022 from Eurostat, the Organization for Economic Cooperation and Development, and Government Finance Statistics, using a quantitative research design, and applied the structural equation model (PLS-SEM) analysis to test the hypotheses. The results indicate that FD has a significant negative effect on economic sustainability but a significant positive effect on environmental and social SDGs. In addition, FD has a significant positive effect on DE. We also found that DE has a significant positive relationship with economic and social SDGs. However, DE has a negative but significant influence on environmental sustainability. This study also proved that DE plays a mediating role between FD and Sustainability. This study contributes to theories of fiscal federalism and resource dependency. These original findings have several practical implications for policymakers and contribute to the current debate on the role of FD in SDGs through DE. hence, we recommend that policymakers prioritize the development of broadband Internet access, e-governance resources, and invest in digital skill training programs.
Abstract The verdict in the case of Skatteverket v. David Hedqvist (Kokott, Advocate General (2015) Opinion delivered on 16 July 2015, Case C-264/14. ECLI:EU:C:2015:498. Available via TandF Online. https://doi.org/10.1080/20488432.2015.1096631 .) is crucial for understanding how the EU treats virtual currencies, such as Bitcoin, in terms of Value-added Tax (VAT). This case involved the Swedish citizen David Hedqist who was seeking clarity from the Swedish Tax Authority Skatteverket on exchanging money for Bitcoins. The case set a precedent exempting such services from VAT under the EU’s VAT Directive (Council Directive 2006/112/EC (2006) On the common system of value added tax. OJ L347. Available via EUR-Lex. https://eur-lex.europa.eu/legal-content/EN/ALL/?uri=CELEX:32006L0112 . Accessed 3 January 2024.). Specifically, Article 135(1)(e) of the EU’s VAT Directive excludes those transactions from VAT that include money-related transactions, that include deals or negotiations about different kinds of money, including cash and coins that are officially legal tender, i.e., used for buying things, except for collectable items like special coins or notes that people collect but do not use as a means of payment. Skatteverket (Kokott, Advocate General (2015) Opinion delivered on 16 July 2015, Case C-264/14. ECLI:EU:C:2015:498. Available via TandF Online. https://doi.org/10.1080/20488432.2015.1096631 .) clarified that cash transactions are not subject to VAT, even though they are considered services for VAT purposes. Despite this clarity, the evolving landscape of digital assets’ uniqueness, including Non-Fungible Tokens (Alawadhi KM, Alshamali N (2022) NFTs Emergence in Financial Markets and their Correlation with DeFis and Cryptocurrencies. Applied Economics and Finance 9:108. https://doi.org/10.11114/aef.v9i1.5444 . Available at CORE. https://core.ac.uk/download/pdf/524752899.pdf . Accessed 3 January 2024.), continues to challenge VAT frameworks across member states. Using insights from the European Commission’s Working Paper 1060, this article advocates for a unified approach tailored to digital and crypto services, addressing complexities in NFT taxation to reduce uncertainty and foster market cohesion. The findings highlight the importance of legislative changes and increased cross-border collaboration, as well as provide recommendations for policymakers and stakeholders in the digital finance and platform sector (European Commission (2024) Working Paper 1060. Available at: https://ec.europa.eu/info/publications/working-paper-1060_en . Accessed 3 March 2024.). By proposing strategic harmonisation of VAT enforcement, the research helps to improve tax compliance and support long-term growth in the EU’s digital market (Cappai M (2023) The role of private and public regulation in the case study of crypto-assets: The Italian move towards participatory regulation. Computer Law & Security Review 49:105831. Available at: https://www.sciencedirect.com/journal/computer-law-and-security-review/vol/49/suppl/C .; Hasa J (2021) Digitaalisten palvelujen rajat ylittävä kuluttajakauppa ja laajeneva arvonlisäveron erityisjärjestelmä. Licentiate thesis. University of Lapland, Faculty of Law. Available at: https://lauda.ulapland.fi/bitstream/handle/10024/64771/Hasa_Juho.pdf?sequence=1 . Accessed 1 March 2024.).
Georgios Birmpas, Philip Lazos, Evangelos Markakis, Paolo Penna
In this paper, we investigate the impact of reward schemes and committee sizes motivated by governance systems over blockchain communities. We introduce a model for elections with a binary outcome space where there is a ground truth (i.e., a "correct" outcome), and where stakeholders can only choose to delegate their voting power to a set of delegation representatives (DReps). Moreover, the effort (cost) invested by each DRep positively influences both (i) her ability to vote correctly and (ii) the total delegation that she attracts, thereby increasing her voting power. This model constitutes the natural counterpart of delegated proof-of-stake (PoS) protocols, where delegated stakes are used to elect the block builders. As a way to motivate the representatives to exert effort, a reward scheme can be used based on the delegation attracted by each DRep. We analyze both the game-theoretic aspects and the optimization counterpart of this model. Our primary focus is on selecting a committee that maximizes the probability of reaching the correct outcome, given a fixed monetary budget allocated for rewarding the delegates. Our findings provide insights into the design of effective reward mechanisms and optimal committee structures (i.e., how many DReps are enough) in these PoS-like governance systems.
Abstract. The purpose of a consensus protocol is to keep a distributed network of nodes “in sync,” even in the presence of an unpredictable communication network and adversarial behavior by some of the participating nodes. In the permissionless setting relevant to modern blockchain protocols, these nodes may be operated by a large number of unknown players, with each player free to use multiple identifiers and to start or stop running the protocol at any time. Establishing that a permissionless consensus protocol is “secure” thus requires both a distributed computing argument (that the protocol guarantees consistency and liveness unless the fraction of adversarial participation is sufficiently large) and an economic argument (that carrying out an attack would be prohibitively expensive for a potential attacker). There is a mature toolbox for assembling arguments of the former type; the goal of this paper is to lay the foundations for arguments of the latter type. For example, the Ethereum protocol is oft-claimed to be “more economically secure” after “the merge,” meaning in its current proof-of-stake incarnation relative to the (proof-of-work) original. What, formally, does this assertion mean? Is it true? Could there be alternative protocols that are “still more economically secure” than Ethereum? How do the answers depend on the assumptions imposed on, for example, the reliability of message delivery or the active participation of non-malicious players? An ideal permissionless consensus protocol would, in addition to satisfying standard consistency and liveness guarantees, render consistency violations prohibitively expensive for the attacker without collateral damage to honest participants—for example, by programatically confiscating an attacker’s resources without reducing the value of honest participants’ resources, as is the intention for slashing in a proof-of-stake protocol. We make this idea precise with our notion of the EAAC (expensive to attack in the absence of collapse) property and prove the following results: (1) In the synchronous and dynamically available setting (in which the communication network is reliable but nonmalicious players may be periodically inactive), with an adversary that controls at least one-half of the overall resources, no protocol can be EAAC. In particular, this result rules out EAAC for all typical longest-chain protocols (be they proof-of-work or proof-of-stake). (2) In the partially synchronous and quasi-permissionless setting (in which resource-controlling non-malicious players are always active but the communication network may suffer periods of unreliability), with an adversary that controls at least one-third of the overall resources, no protocol can be EAAC. In particular, slashing in a proof-of-stake protocol cannot achieve its intended purpose if message delays cannot be bounded a priori. (3) In the synchronous and quasi-permissionless setting, there is a proof-of-stake protocol with slashing that, provided the adversary controls less than two-thirds of the overall stake, satisfies the EAAC property. Thus, while only “classical security” is possible in the dynamically available or partially synchronous settings, proof-of-stake protocols with slashing can obtain additional “economic security” in the quasi-permissionless and synchronous settings. All three results are optimal with respect to the size of the adversary. With respect to Ethereum, our work formalizes the potential security benefits of proof-of-stake sybil-resistance coupled with slashing and the common belief that the merge has increased Ethereum’s economic security. Our work also provides mathematical justifications for several key design decisions behind the post-merge Ethereum protocol, ranging from long cooldown periods for unstaking to economic penalties for inactivity.
The system of financial support of the social process of the country must constantly adapt to the influences of the external environment both in the conditions of the hybrid war with Russia and in the conditions of the post-war period. This requires systemic transformational changes in the socio-economic environment, reform of the financial system, further improvement of the decentralization of the management of state financial resources, since expenditures from the state budget to cover the costs of armaments and ensuring the independence of Ukraine will have a large specific weight annually. Under such conditions, local budgets will rely more and more every day on the tasks of financing a significant part of the social needs of the local population. Accordingly, the effectiveness of regional systems of taxation of individual territories with local taxes and fees is primarily confirmed by volumes sufficient to form the revenue part of local budgets for the purposes of ensuring the successful functioning of territories of local importance and their development. Therefore, the role of local taxes and fees is growing daily and contributes to the accumulation of the amount of financial resources necessary for the development of both territorial communities and the state as a whole, which will significantly reduce the burden on the state budget of the country. The article examines problematic aspects of the formation of revenues and expenditures of local budgets in difficult economic conditions arising under the influence of a hybrid war with Russia. Emphasis is placed on the necessity of restructuring the national budget policy in the context of the formation of guarantees for the financial support of the social needs of the population of Ukraine, its comprehensive protection and the creation of decent working and living conditions. The important role of local taxes in the formation of revenues of local budgets of territorial communities is substantiated based on the systematization of the approaches of scientists and the conducted expert assessment of the state and changes of local budgets in 2021-2022. Problematic aspects in the payment of local taxes are identified and the ways to solve them are outlined. The need for further improvement of the tax legislation, capable of ensuring the formation of a new tax model for the purposes of optimizing the tax regulation of payment of local taxes and increasing revenues to the local budget, has been proved.
In the ever evolving landscape of decentralized finance automated market makers (AMMs) play a key role: they provide a market place for trading assets in a decentralized manner. For so-called bluechip pairs, arbitrage activity provides a major part of the revenue generation of AMMs but also a major source of loss due to the so-called informed orderflow. Finding ways to minimize those losses while still keeping uninformed trading activity alive is a major problem in the field. In this paper we will investigate the mechanics of said arbitrage and try to understand how AMMs can maximize the revenue creation or in other words minimize the losses. To that end, we model the dynamics of arbitrage activity for a concrete implementation of a pool and study its sensitivity to the choice of fee aiming to maximize the value retention. We manage to map the ensuing dynamics to that of a random walk with a specific reward scheme that provides a convenient starting point for further studies.
Jorge Martínez-Vázquez, Eduardo Sanz Arcega, José Manuel Tránchez-Martín
The aim of this chapter is to offer an overview of best practices for subnational fiscal governance. Based on the theoretical and international empirical evidence on fiscal decentralization design, we address the comon four pillars that encompass any subantional financing system: expenditure responsibilities, sources of revenue, the system of intergovernmental transfers, and credit and borrowing. Last but not least, we highlight the crucial importance of formal and informal political institutions in making decentralization work. All in all, beyond purely fiscal issues the eventual performance of any decentralized setting may depend on the institutions that make (or do not make) it work.
Álvaro Hernández Sánchez, Beatriz María Sastre-Hernández, Javier Jorge-Vázquez, Sergio Luis Náñez Alonso
This article highlights the complexity of taxation surrounding cryptocurrency transactions due to the lack of uniform regulation, creating uncertainty for both taxpayers and tax authorities. After determining the tax obligations of individuals in taxation, a survey has been conducted to assess the level of knowledge and compliance with tax obligations related to cryptocurrencies. The survey, in which 103 people participated, reveals the confusion and errors that prevail in perceptions of the tax obligations for cryptocurrencies, particularly in transactions such as swapping and staking in personal income tax. This results in almost half of the respondents (49.5%) not declaring any of their operations with cryptocurrencies. The reasons for this include the fact that the majority of respondents (66%) find the regulation of cryptocurrencies in Spain confusing and difficult to understand. Additionally, 87.4% believe that tax agencies should provide more information and resources on the taxation of cryptocurrencies and digital assets, and that there should be clearer and more comprehensive regulation. However, it should be noted that 41.7% also consider that tax regulation discourages investment in cryptocurrencies.
Jori Grym, Jaakko Aspara, Monomita Nandy, Suman Lodh
Tax evasion is a major issue for authorities worldwide. Understanding the factors that influence individuals' intrinsic motivation to pay taxes, known as their tax morale, is important for improving tax compliance. This study investigated gender differences in judging tax evasion in the context of cryptocurrency trading. Specifically, a survey study explored whether different moral foundations, financial literacies, and political orientations among females vs. males might explain potential gender differences in judging tax evasion. In an online survey, 243 U.S. adults read a vignette about a friend evading taxes in a cryptocurrency trading context. In a correlational analysis, we found that females judged tax evasion harsher, as being more morally wrong than males. Of the psychographic factors, only individualizing moral foundation values (i.e., fairness and harm avoidance) explained the harsher moral judgment by females. That is, individualizing moral foundation values were at a higher level among females, which further predicted females' harsher judgment of tax evasion. While females also had, on average, lower financial literacy and knowledge of cryptocurrencies than males, these did not predict their harsher judgment of tax evasion. The findings contribute to research on gender differences in moral judgments and highlight that a given transgression, or a specific crime, may violate different moral values in men and women. The results demonstrate to policy makers that it is important to take into account gender differences, in campaigns promoting tax morale and compliance.