Financial Privacy, Taxes & Residency
Money is like speech, it should be free and private, yet it currently is neither. We need to get there so how do we do it? In order to answer this question properly, one would need to explain how the world works today and how it should work tomorrow. I won't pretend I can do that, however I would like to mention some aspects that are not discussed nearly enough, yet I believe are key to answering this important question. Soon, it will be possible to make our transactions private on most blockchains. Simply put, this will solve half the problem, which is an absolutely massive progress. But what's the point of having this if at the end of the day you have to show your entire trail of transactions to an auditor, which will then be documented and if you are important and wealthy enough, end up leaked. The biggest obstacle here are taxes. I don't mind taxes, matter of fact I like them because thanks to them we can fund a lot of great things. The problem is most countries are leveraging taxes in a way that is incompatible with financial privacy. Think of income tax for example, how is the government supposed to leverage taxes on that without having to, in case of doubt pertaining to your self-reporting, auditing all of your transactions to prove that you have paid everything owned to them? That's right, it's impossible. Now you might think that if we remove all types of taxes that would potentially compromise our privacy, little money will be left for the state. It's one way to see it but it's not necessarily true. Suppose that you pay less in income tax, then you can probably afford to pay more in property or other type of privacy preserving taxes? To be clear, the end goal here isn't to pay less taxes, it is to push for taxes that are preserving privacy. The challenge here, if we want wide adoption, is that we need to prove taxation done in a privacy-preserving way can not only be sustainable, but also can be a substantial improvement over "legacy" forms of taxation. Let's separate countries in three categories of taxation to see how much work has to be done in order to reach financial privacy for their citizens [1]: * __Citizenship-based taxation__: There are two countries in this category, Eritrea and The United States of America. Given they both are leveraging taxes on anything you do from anywhere you are, it seems to me that it will be particularly difficult for their citizens to reach financial-privacy. * __Residency-based taxation__: Most countries in the world are in this category, it won't be easy to solve because these countries need a lot of money as they got in the habit to spend a lot as well. But it could be done, given enough time and effort. * __Territorial-based taxation and "No personal income taxation"__: this is where we could and should make the blockchain (and Radical Markets) magic happen, those systems are already close to being compatible with financial privacy, we just need to help them get there. You might be tempted to say most those countries with territorial-based or no personal income taxation are of no interest due to their current political or economical status where it would be difficult to imagine large-scale improvements. But 1. "most" is certainly not "all" and 2. Singapore started as a swamp and look at where it is now. So how do we push things in the right direction? The one aspect that I believe has too little attention, is how much power individuals have. The country where you choose to pay taxes makes a difference. If today you pay say 10 XAU [2] in taxes to a country that is not using that money in a way that is helping your cause, this amount is used both to strengthen the status quo AND not used to push things in the direction that you want. If conversely you move to a country that you believe is heading towards implementing the regulations you want, you would be giving them 10 XAU to help them do that and weakening your previous country economical power, by the same amount. Democracy helps making the decisions inside countries but the world itself isn't democratic for the most part, it's very much a one XAU, one vote. Whichever country you think has the most potential to propel the world in a good direction is the country where you should reside and pay taxes, if you are not doing that, you might want to consider it seriously. -- [1] https://en.wikipedia.org/wiki/International_taxation [2] Once of gold (the most neutral currency I could think of).