Bitcoin, taxes and the rise of the new crypto-nomad class
How a new wealthy class of crypto-nomads will reshape the global tax system and how small, agile and flexible emerging economies can gain from the inflow of crypto capitals. The new era of the citizen-customer.
Sometime between 3800 BC and 2000 BC a Sumerian, one inhabitant of ancient Mesopotamia — literally the “land between the rivers” Tigris and Euphrates — wrote the following on a clay tablet: “You can have a lord, you can have a King, but the man to fear is the tax collector”.
Wise words from over 4000 years ago.
The cat and mouse game between people and the tax collector has been going on forever, probably even before the first historical records of taxes dating back to ancient Egypt.
But in the last 20 years two epochal trends have altered the landscape: growing globalization and the digitalization. The first ones to benefit from that trend have been large corporations like Apple, Amazon, Facebook etc who have easily moved where they are taxed less. Individuals have not been able to adapt as quickly as corporations did. Tax revenues today are still largely based on the income tax which accounts for more than 50% of all tax revenues and burdens mostly individuals.
Not only they lock you up arbitrarily for months, arrest you for not wearing a mask and shut down your only source of living, but they also take in average between 40% to 50% of your income, and this does not even include indirect taxation. Italy is the worst of all. If you add indirect taxation the share of your life that the corrupted government takes is well over 60% bordering 70%. Finally add monetary inflation/debasement and you understand why people are increasingly opting out of the “system” and into cryptocurrencies. This is effectively slavery, quite close to living in North Korea or in the dystopian world wished for you by the Davos elite.
For the Davos “Illuminati” “you will own nothing and live happy” in a world where poverty will be completely eradicated by 2030 thanks to the mass expropriation of the middle classes and the establishment of a four class neo-communist system: the billionaires, the bureacratic elites, the servants of the above two and the plebs living off a free basic income paid in CBDCs and spent to rent a bed in multi shared homes (owned by the elites of course), pay for Netflix movies or takeaway food ordered from the centralized delivery hubs of the Facebook Restaurants, Google Cafes or the Amazon Groceries.
While this is no doubt the future that such illuminated crowd wish for us, the reality may hopefully be different thanks to Bitcoin. Historically, all periods of widespread human prosperity have been associated with hard highly salable money, free markets, freedom and an average taxation between 10–15%. To higher levels of taxation have corresponded lower levels of freedom and economic development.
So far nation states had a relatively easy job in collecting taxes from the physical economy. You had a job at some physical location, you lived there more than 183 days a year and paid your taxes there. The closed economic model of the physical economy has enabled that for the last two centuries.
But a revolution is underway and this time the protagonists will be the people rather than corporations.
This topic was discussed in one of my preferred crypto podcasts by Stephan Livera and British author and comedian Dominic Frisby, who was presenting his latest book “Daylight Robbery: How Tax Shaped Our Past and Will Change Our Future”. The discussion was both interesting and entertaining and had a number of issues touching upon my recent article on the business opportunities that crypto adoption can bring particularly to emerging economies.
What is going on is pretty clear, the outcome though is uncertain.
While digitalization has allowed remote working and the birth of a new class of modern day nomads, cryptocurrencies have enabled for the first time in history the transfer of wealth frictionless and without censorship nor intermediation across time and space. Then Covid-19 has accelerated the trend. Migration of digital-crypto nomads is underway from restrictive US states to more crypto and tax friendly states such as Wyoming, Texas, Florida or Puerto Rico; Europeans are moving to Malta, Portugal, South America or Caribbean states. Everywhere a mix of crypto friendly regulations, tax incentives, lack of Covid dictatorial restrictions, lower living costs and better quality of living is driving this new wealthy class away from their countries of origin and their increasingly despotic policies.
And because the strongest economical growth in the last 20 years has been driven by the internet and digitalization rather than the real economy — and it will be increasingly so in the future — countries which do not adapt to this new trend stand to lose massively.
If, how and which countries will adapt is the thousand bitcoin question.
Some will no doubt adopt restrictive measures. Like introducing capital controls to try to stem the outflow of capitals and closing the gates between fiat currencies and cryptocurrencies. Some might introduce a US style tax liability based on citizenship. Some will try to tax disproportionately crypto gains based on yearly mark to market price gains. The avenues and the creativity of the tax collector and its despotic masters are limitless.
But until there is still some semblance of a free market economy and independency left, smart nations will try to gain from the other´s mistakes. We see this happening already with Switzerland, Liechtenstein, Malta, Singapore, Wyoming, Texas, Florida and Puerto Rico, all positioning themselves as crypto friendly jurisdictions. More will join the ranks.
In this competitive race to gain the favour of this new class of wealthy people, emerging economies and smaller agile, flexible, less burocratic countries are best placed to attract a massive inflow of crypto capitals and human resources. It has been estimated that if and when bitcoin reaches the 2 US$ trillion market cap, over 50% of the billionaires will be bitcoiners. This without even considering the mass of newly made crypto millionaires who will want to relocate from their countries of origin.
The “citizen-subject” status might well soon become obsolete. We might see the rise of a new “citizen-customer” who will decide to “opt-in” a friendly nation and pay some sort of fee-tax for using the countries´ infrastructure and services. Smart nations will compete to attract not only investments but also this new class of global crypto nomads. The despotic ones will not be able to stem the outflow and will be left with their neo-communist dystopic society made of elites who own everything and plebs who “own nothing and are happy” with their basic income and mainstream media.
I bet you would rather take your chances and be “unhappy” somewhere else, right?
© www.bianconiandrea.com — 2021
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© www.bianconiandrea.com — 2021
#crypto #blockchain #bitcoin #cryptocurrencies #taxes