With the possible rise of cryptocurrencies its only going to get worse. I believe governments should back off from income and profit taxing, its going to become more futile then the war on drugs.
Governments should be focusing their taxes and revenue on tangible things that cannot be hidden or evaded, like property. This would solve so many problems in places like London or Vancouver where foreign money floods the market. Why waste time tracking endless trails of shell companies when you can just tax the wealth when it appears in public?
Plus I see income and revenue as non-zero sum, one man or company making more money doesn't preclude someone else from creating wealth. Taxes on this are just a friction on the economy. But property is zero sum, every piece of coastline bought up by rich people as 4th or 5th homes means entire neighborhoods of normal families can only see water when they are on their 2 weeks of vacation.
Ease of collection is just one of the goals of a tax system. Others include fairness, and not distorting the underlying economy more than necessary. Taxing only tangible things might make collection easy, but may not be fair (it'll generally tax higher income people at a lower rate than lower-income people), and may also create artificial incentives to engage in activities that result in non-taxable wealth rather than taxable wealth.
It will only tax higher income people at a lower rate if those higher income people don't receive any tangible benefits from high income. That's a good thing - the person who receives a lot from society will pay high taxes, while the person who receives a little will pay low taxes.
In contrast, with income taxes, the person who produces a lot for society will pay high taxes.
It's well accepted by economists that a consumption tax is the least distortionary tax.
Your argument depends on a stipulation of the definition of "fairness" where the persons most easily associated with production are entitled to the most favorable tax treatment. Without that assumption, all you're saying is that just as there is a suboptimal tax system that is least expensive to collect, so too there's a suboptimal tax system that is least distortionary to the economy.
There are notions of fairness that aren't premised on the idea that tax rates aren't a point score system for rating people, and it can be rational to accept some degree of distortion so long as it's not so powerful that it prevents the economy from serving its purpose (and so long as that distortion is buying us something).
I'm making two arguments. One is based on the economic concept of distortion - people making choices they wouldn't make absent the taxes. That's a strictly positive claim and it's not based on cost to collect.
The other is the normative one. My premise is that people should pay in proportion to the benefit they receive from society. Do you disagree with this claim?
I agree with your positive claim. Some tax systems are more distortionary than others. I think it's likely that consumption taxes are less distortionary than income taxes.
I don't think I agree with your normative claim. I think ceteris paribus that it's a virtue of a tax system if people pay in proportion to the value they get out of society. It sounds like you think that virtue is controlling. I think there are other virtues as well.
Most of the benefits I've received of my higher income are intangible: social security, medical and dental security, mental well-being, confidence, social status, trust, financial fortitude, and respect.
>Why waste time tracking endless trails of shell companies when you can just tax the wealth when it appears in public?
Because the wealth should be taxed in the place (country state, region etc.) where it was made (and whose resources were used in the process) and not where it appears in public.
Tell that to the IRS, which insists that even if you're working in a foreign country, for a foreign company, on foreign projects that they still deserve their cut.
This might sound like a pedantic correction, but IRS people I've spoken to are quite adamant about this: the people of the United States have, through their Congressional representatives, decided that they deserve a share of fellow citizens' foreign-sourced income.
The IRS has no discretion in this matter; they just deliver the bill.
If the US doesn't acknowledge non-resident status, then you're right, Canada isn't like the US. However, as a Canadian who was "working in a foreign country, for a foreign company, on foreign projects" (in the US) for half a year, I can guarantee you that I had to pay both US and Canadian taxes on that income, and I very thoroughly investigated the case because in spite of all the treaties, I ended up double-taxed for a few thousand dollars' worth.
Yep. But it's not just time, to be a "non-resident for tax purposes", you have to close all of your Canadian bank accounts, renounce your government-provided health insurance, etc. I suppose it's not an unreasonable system.
Yes, the special case in the US tax code is that non-residency does not excuse you from paying taxes to the IRS (although I believe there is a non-residency tax deduction on the first $80k or so).
what you describe is extremely unfair. my situation - scraped all cash I could earn in last 12 years of full time IT development/consulting, took a massive mortgage and bought a flat in my dream location in mountains where we go almost every weekend. I will be paying for this for next 25 years till its mine. It will cost me a fortune, it's quite risky move and if things will go very south (ie my health will deteriorate dramatically), I am more than screwed. This will be most probably the biggest investment in my whole life.
I live in rental apartment and probably will keep doing this (where I live and work I can't afford to buy, and won't for various reasons). By your logic, I should be taxed to hell just because you don't like seeing foreign capital buying off properties in London or some other location you want to buy property in? No, thank you. I've lived through communism, resemblance is striking.
I'll number each individual step and you tell me which step isn't clear:
1. I wire 4000 CNY to the BTC exchange.
2. BTC exchange receives my CNY, and shows that I have 4000 CNY in my account.
3. I buy 1 BTC with my 4000 CNY; exchange shows that I have 1 BTC in my account.
4. Later on, I trade that 1 BTC for 600 USD; exchange shows that I have 600 USD in my account.
5. I transfer the 600 USD into my US bank account.
In step 3, since I never took possession of the BTC, it never leaves the exchange, and thus no blockchain transaction took place. If no blockchain transaction took place, then anyone observing the blockchain would be oblivious to my fiat to BTC trades.
Thanks. Step 3 and 4. You wire them the CNY, and how do they get your new BTC? I guess you're saying that the way most exchanges work is with a central depository of BTC and they just internalize (book out) their orders? (Unless the exchanges are really pseudo-derivatives dealers selling CFDs?) Isn't this exactly why places like Coinbase require your identity? (Does BTCe?) And if they aren't internalizing orders, particularly for massive sums which will be hard to find another side of the trade to internalize against, wouldn't that require a blockchain transaction to get more BTC in their depository, unless the exchange starts also acting as market maker, a la EnronOnline?
If I go to BTCe with a $50mm USD deposit, but they only have $25mm BTC equivalent deposited there, and "buy" an equivalent amount of BTC, will they not be required to obtain $25mmUSD equivalent more BTC from the blockchain?
Furthermore, do the exchanges take a position either long or short? If I then liquidate my $50mm worth of BTC, how do they get the fiat to wire to me, if they don't transact with somebody else?
I just fail to see how the major shifts in supply/demand are totally absorbed by the exchanges and never show up on the blockchain. Do the exchanges have an inter exchange market off of the blockchain or something? I agree with you, technically, that for small sums, there's no need for this and so the blockchain volume may not represent total size of the market, but at the scales we are talking about (see how much HSBC laundered for a single drug gang alone), how does this not show up, or rather, how does it never hit the blockchain? Particularly when somebody eventually wants to liquidate back to fiat?
"HSBC was accused of failing to monitor more than $670 billion in wire transfers and more than $9.4 billion in purchases of U.S. currency from HSBC Mexico, allowing for money laundering, prosecutors said."
That is one subset of the problem. BTC has what, $12mm/day volume? This one subset is over 2 years worth of all the BTC volume. Honest question, is off blockchain BTC trading really that big?
Governments should be focusing their taxes and revenue on tangible things that cannot be hidden or evaded, like property. This would solve so many problems in places like London or Vancouver where foreign money floods the market. Why waste time tracking endless trails of shell companies when you can just tax the wealth when it appears in public?
Plus I see income and revenue as non-zero sum, one man or company making more money doesn't preclude someone else from creating wealth. Taxes on this are just a friction on the economy. But property is zero sum, every piece of coastline bought up by rich people as 4th or 5th homes means entire neighborhoods of normal families can only see water when they are on their 2 weeks of vacation.