There’s a section in Re:think called ‘Globalisation provides opportunities for a more prosperous future, but also challenges Australia’s tax system’.
And in that section is this:
‘Financial markets are increasingly globally integrated, and the international flow of capital has become less restricted and more mobile. Technology has also allowed new business models to evolve that have substantially changed the way businesses and consumers interact. New ways of transacting, including crypto-currencies such as bitcoin, were not contemplated when the current tax system was designed.’
The statement is true. And it highlights that the government has no idea about bitcoin. They still can’t figure it out.
The current tax system can’t handle bitcoin. That’s because bitcoin is not supposed to fit into any tax system.
This is where the government trips over their own feet. They continue to take the same approach to bitcoin as they would to the cash that sits in your bank account.
They look at it like existing monetary instruments. But it’s not. Bitcoin is like nothing else. It’s a revolution in economics.
And the Aussie government can’t see it.
Bitcoin has no borders. It is not a company. It doesn’t ‘exist’ in a region or a country. And it most definitely does not fit any tax system.
Yet the government wants their slice of the pie from bitcoin. They must find a way to extract taxes from it. It’s imperative they control it. And while they don’t understand the tech, they can at least regulate against it.
This mentality of punishment is exactly why the current government will always be behind the eight ball. They must take a proactive approach to new technology.
You can’t tax bitcoin. It’s not even worth trying. Archaic, narrow minded tax laws don’t work on a 21st Century technology. Fighting it will simply drive it underground. And that’s the worst outcome for the government.
The only way to benefit from revenues in something like bitcoin is to not tax it at all. Sounds strange right? Let me explain.
Get rid of the tax system, use the blockchain
Australia should be pro-bitcoin, encourage bitcoin companies to come to Australia, support its development, and encourage its use. Australia should be a world leader in cryptocurrency.
Maybe even look at an Aussie issued cryptocurrency…
This kind of support could see Australia attract a whole new industry. It could see the country be world leaders in future technology.
What happens long term if cryptocurrency succeeds? What if we live in a world of cryptocurrency? What happens when there is no income tax revenue because there’s no ‘traditional income’?
What if we got rid of the income tax system completely? That would see $241 billion in income tax revenue disappear. It would also destabilise the entire government.
That’s where this all gets tricky. Government is nothing without monetary control. That’s why they want to tax and control cryptocurrency.
Of course, maybe government is as out-dated as the tax system they try to reform.
And what if we were able to wrest power away from government through use of the ultimate laissez faire system?
What happens then? Who pays for public services? Without government, will the world survive?
Of course it will.
Maybe in the future, government will simply be an authority on social rules and conventions. But when it comes to governance, the economy and the monetary system, the power sits with the network, the community, and the blockchain.
You see, it’s possible to charge a tiny transaction fee on bitcoin transactions. This goes to miners who solve transaction blocks, as a reward.
Currently, daily bitcoin transaction fees are about 15 BTC. In terms of AUD, that’s about $4,740. Over a year, that’s about $1.7 million in transaction fees.
That’s not exactly $241 billion.
But what if all Australians used the bitcoin system? Imagine if there were 1,000x more transactions. What if the bitcoin system was 1,000x times larger?
Suddenly, you’d be looking at transaction fees per year of $1.7 billion. That’s a bit closer isn’t it? Still not exactly the size of the income tax system, but it’s on the right track.
My point is these transaction fees could be used for public services and utilities.
The blockchain can regulate itself. It would be free from monetary control. Free from intervention. Yet there’s still the potential to use it for the good of a civilisation.
In a cryptocurrency world, it’s possible that every transaction has a fee attached. Not a large fee, minutely small in fact. Not enough to even make a dent in your crypto savings or crypto wages.
With billions of transactions every year, it adds up fast. It adds up to revenues for roads, hospitals and schools. It’s a bit like a GST. But in this sense, it’s a system-generated revenue that doesn’t flow into the coffers of a misguided government
Of course, this is a reasonably simplistic look at the impact a crypto economy could have. The bigger picture includes automated allocation of funding and community (peer to peer) networks of decision makers.
It means the very concept of governance that we’ve used to for centuries gets an overhaul. And maybe that’s the real issue here. It’s not just the tax system that needs reform. Perhaps it’s the whole government.
Or as I said before. Maybe not reform, but a revolution.
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