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Autonomous Taxation Using The Blockchain

By Nicholas Brown.

I’ve been thinking about an autonomous taxation idea using a cryptocurrency implementation. It is a developing idea, so please share your thoughts.

The objective is to implement a democratically-chosen tax policy in a general-purpose cryptocurrency so that the people can essentially hold a majority vote on taxes and the network could take a small cut (percentage voted on by users) out of each transaction.

Coins could be take out of each transaction as a percentage of the transaction’s value and paid into government wallets. Although, there is always the possibility that there are better ways to implement this.

If taxation is automated, then the cost and complexity of learning new tax codes could be avoided by many people (as tax policy info wouldn’t be buried in PDF files and require many calls to your region’s tax office. see goal #5). Maybe tax rates or policies could be voted on more often based on the current economic situation.

Everyone would need to own a node (although the implementation of this has yet to be figured out) and could vote on tax policy.

The goals of this concept are:
1. Greater transparency and (the opportunity to provide greater) simplicity, as everything would be visible on the blockchain and you wouldn’t have to report every little trade if you were in the U.S., for example. The blockchain network could just do your taxes for you.
2. The people would actually get the tax policy they vote for, as opposed to voting for a politician and getting a bastardized version of their campaign promises.
3. Increased fairness (which ties into issue #2, as it’s about getting the majority what they really want).
4. In the more distant future, maybe an algorithm could be implemented that adjusts tax rates in real time based on the current situation to alleviate economic strain. The algorithm would of course be in the report mentioned as part of #5’s goal, and voted on by the people.
5. Generate a concise tax datasheet with all current tax rates and rules after the vote so that websites can just load them from the blockchain.

A few of the challenges include:
– Handling deductions for expenses, etc. Although this doesn’t have to be done autonomously.
– Handling region-specific tax codes: Maybe wallet apps could help with this by ascertaining the users’ location via their ISP/GPS?
– Maintaining an acceptable level of decentralization to ensure that a handful of large miners won’t have more voting power than everyone else. This might entail implementing a node-based voting system instead of letting miners vote.

A potential bonus is that people will develop a better understanding of economics as they will be more involved in making economic decisions.

There are a number of other things to figure out, but I hope this could morph into a viable idea one day.

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