Federal and State Taxes problem?

People,

I was interested in Intercoin when I first read about it because it suited my view of how part of an improved world economic system could / should work - I have finally gotten around to posting questions here and now have actually started reading the White Paper - I think I might post specific questions as I read the White Paper instead of posting one big response with lots of questions later.

Question 1.

I understand where the authors of the WP are coming from WRT local communities doing things that are self-supporting but I can see that even if say The Federal or State governments are too useless to do anything themselves, they will still react badly to a system that tries to do something but will not involve Federal (eg GST in Australia) or State (Payroll in NSW) taxes being collected. So even though the governments wouldn’t have collected these taxes themselves without being proactive themselves somehow, they will STILL complain and almost certainly take legal action to prevent a system from working that does not involve implementing those taxes somehow . .

How could a local InterCoin system operate in such a stupidly hostile environment?

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I think blockchain, smart contacts is the answer. We already know you cannot trust everyone. But you can trust code!

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Not sure what you mean - how do SC help a community currency operate in an environment where the State and Federal Govts are going to prevent it?

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Well, technology has a way to empower individuals and local organizations. In the past, we had to use the federal post office (and Lysander Spooner was not too happy about it) but later we got email, which has revolutionized how we send mail. In the past, we had to print using centralized print services (which often required an imprimatur from an authority), and do our computing on mainframes, but now we have personal computers and printers. All kinds of pornographic and seditious material can be printed and disbursed, now that people have their own technology – and governments around the world have come to accept it in small amounts. There was a time when you needed access to institutional infrastructure in order to get the word out, but the Web has made it so anyone can deploy code to publish anything, and anyone else in the world can consume it. The revolution of smart contracts is similar – anyone can deploy their own smart contracts (including DeFi “protocols” like UniSwap or Aave) and others can start to transact with what is essentially an autonomous organization.

When it comes to local currencies, we do plan to require KYC for the communities themselves, who issue them. For example, the Sinaloa Cartel can start their own “drugcoin”, but it would have to pass KYC with several providers. The Mexican government and other governments can then choose what to do with them. Intercoin Inc. doesn’t plan to take upon itself to do any of the enforcement, nor does plan to do the KYC, but rather to set up an SRO of KYC providers, similar to certificate authorities on the Web. The SRO member would police each other and vote to kick out ones that are giving out the KYC too liberally. These entities, incidentally, would also be responsible for determining the per-capita wealth of a community, in order to help subsidize its members if it’s very poor.

Anyway, so the federal governments may require federal taxes to be built into the local currency’s rules, on various purchases. Intercoin isn’t dictating what each community would do, but its federal government may compel it to add these rules. The rules would be automatically applied during transactions (e.g. sales tax or VAT tax) but everything would be automated and transparent.

Intercoin’s goal isn’t to help with tax evasion or money laundering, but rather to make a financial operating system that lets people issue and manage their own currency, and make their own decisions. By cutting out the middleman, crypto can be permissionless, it can be private, it can let people do what they want without paying a ton to intermediaries. So it has value even in places where transactions are being taxed.

Smart contracts cannot be taken down, once they are operating. People are going to be able to use UniSwap, for example, to swap USDT for ETH no matter what. They won’t be blocked arbitrarily from withdrawing money from Binance, nor will they wait days or have to get permission from a middleman. So this has a ton of value, not least of which is that it enables permissionless innovation in fintech. The VC firm Andreessen Horowitz just published this article two days ago: Open Source is coming to Fintech.

As for me personally: after working on decentralized systems for nearly a decade, I have come to believe that if large swaths of people are resorting to sneaking around in order to evade the government, then that is a band-aid: they have to fix their government. For example, if freethinkers have to use encrypted channels to communicate, then the problem is upstream of that.

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@Greg ,

Thanks for the substantial response!

I understood that - I just couldn’t see the relevance of it from @cryptostaceyb to what I had asked.

Right - which might help the situation I am trying to describe but see later.

Interesting.

Yes - unless we could convince the Feds that it isn’t worth their effort to worry about getting involved - see later.

Of course.

Neither is mine.

Same as me.

Agreed.

OK, I am starting to see some relevance to my original questions.

We are more-or-less on the same page there.

I have two scenarios: 1. A small town. 2. A big city. - talking about just #1 FTTB:

Say I “assume” that our local currency (to begin with at least) is only going to be involved in stuff that the Feds are probably not going to be interested in:

a) Trade between the less well-off inc the local Aboriginal population
b) Unemployed people
c) Retired people
d) Food retailers (some food does not incur a GST)

Then:

  1. I advertise in the local paper and radio etc that upon supply of suffcient KYC info, I will AirDrop x amount of local coin (mined somehow) to each person applying and these coins can be used to pay me for IT and Medical Advocate services.

  2. Provide my service to people who want them and “charge” them the approp fee in the local coin.

Hopefully this exercise would generate sufficient media and local interest that other providers would also AirDrop further coins and a local coin economy would start to build but it would be at a sufficiently innocuous level that the Feds would be prepared to ignore it - however if it got too big and some products and services needed GST added to transactions, then we would deal with that at the time.

This sounds like it could kickstart something but my main concern in this situation is that transactions would have to be incredibly simple - the equivalent of sticking a card in a machine - ie any complex app stuff wouldn’t be viable . .

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I agree with you on the simplicity aspect especially taking in consideration that every community might be different, poverty might be high and higher education low. We have discussed it as a team to have ambassadors that will help these communities set up best roadmaps and best practices. It will all start when we have a community to implement best practices and learn and improve from there.

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Thank for this explanation!!!

You took the words right out of my mouth.