Bitcoin Forum

Most governments get their money from taxes. If these become impossible to collect, how will the government support itself? They would no longer have control over any currency. Would BTC taxes have to be enforced? Should an alternative be sought? How can a government survive without money?

I'd like to see people's opinions on anything related to this, as I feel that most forum members are better versed in such themes than I am, and I'm open to what everyone has to say.

Most governments get their money from taxes.

If these become impossible to collect, how will the government support itself?

Well when the government dont get their income from taxes anymore they will just find another way.
I think we dont know half the things they probably have in mind to get the money.
When there is a will, there is a way.

It is as hard to collect tax from Bitcoin as from physical cash, so I dont see a big problem here.

It is as hard to collect tax from Bitcoin as from physical cash, so I dont see a big problem here.

Ok, great answers. Now let's see the other side of it. What would governments do without tax money to keep control over the people? Would it be supported by voluntary contributions or such?

Most governments get their money from taxes. If these become impossible to collect, how will the government support itself?

They would send men in blue shirts to your house to collect tax.

There are today in the world countries where governments don't control their currencies, and that doesn't prevent them to tax plenty of things. The government can tax properties, vehicles and every good which it says require to be registered. The government also control borders, so it's easy to tax anything coming in.

Several third world countries have their local currency pegged to the U.S. dollar, all for the better, because that helps investors believing in them.

I expect the gov to tag us with a chip and be able to track us using bitcoin this way.  They will regulate bitcoin even more this way.  Satoshi started the new world order.

bitcoin can't take over. if it were that dangerous to the establishment, they'd do everything in their power to stop it.

Yes, they will still have ways of controlling it and people, in fact i think bitcoin is beneficial to them, they know fiat money failed, and bitcoin is the perfect solution.

What happens in the government if Bitcoin takes over?

And what happens to Bitcoin if the goverment takes it over and starts controlling it?

Evidently, they would drop it in favor of fiat... 8)

or bastardise it to the point that it might as well just be fiat.

A sales tax would make sense. Businesses collect when you make a purchase and send it to the government just like a lot of states do right now.

Your right, if government can't tax bitcoin than will tax the goods and the  services you purchase with bitcoin.At this point,government won't have any issue to get the money from tax,but in the future, if probably will exist only virtual currency’s they will come out with ways to tax/collect money.

Most governments get their money from taxes. If these become impossible to collect, how will the government support itself? They would no longer have control over any currency. Would BTC taxes have to be enforced? Should an alternative be sought? How can a government survive without money?

I'd like to see people's opinions on anything related to this, as I feel that most forum members are better versed in such themes than I am, and I'm open to what everyone has to say.

Please let me know why would taxes become impossible to collect with bitcoin..

How are you going to avoid paying property tax or vat with bitcoin?

It would only make it a bit hard for them to collect taxes but not impossible

Just look back at the Governments, music and film industries reactions to torrents. So just replace 'music and film industries' with 'Banks', and you pretty much have your answer.

What ways could they have up their sleeve? That is what I'm mostly concerned about.

At this point the U.S. Federal Reserve is well aware of Bitcoin, including all of its advantages and disadvantages. The Federal Advisory Council, which regularly consults with the Board of Governors of the Federal Reserve, held a meeting on May 9 where the banking industry representatives discussed whether Bitcoin poses a threat to the traditional financial system and regular consumers.
The verdict: Bitcoin is potentially risky only for people who buy it, but as these risks are addressed over time, the digital currency could drastically change the world’s finances for the better.
First of all, the FAC’s report notes that “Bitcoin’s nascency makes it more curiosity than threat” and it only accounts for a “fraction of today’s global fund flows.” In other words, Bitcoin is still in its adolescent stages with plenty of room to grow. In fact, the FAC sees the possibility of Bitcoin having a great impact in the long term as “the network self-refines and adoption increases, requiring traditional payment processors to adapt and respond.”
Greater Financial Inclusion

The FAC’s meeting report lists several of Bitcoin’s most popular advantages, including lower transaction fees for merchants than credit cards. In addition, the report notes that digital currency “enables cheap international remittance to the developing world and the developed world’s ‘unbanked,’ expanding financial inclusion.” Essentially the FAC is acknowledging that the vast majority of people on Earth don’t have access to a bank, and that Bitcoin could give them more power over their money.
The Federal Reserve even sees a scenario where traditional banks join the cryptocurrency fun and “participate increasingly in Bitcoin fund flows,” an idea that is supported by the fact that more people are using accounts with multiple currencies. It appears that the Fed sees nothing intrinsically wrong with financial institutions dealing in cryptocurrency.
Consumer Protection

Bitcoin’s greatest flaw, according to the FAC report, is the risk it poses to consumers who buy the digital currency. This risk is mainly that Bitcoin is highly susceptible to theft, a problem magnified by unsecured wallets and unreliable exchanges like Mt. Gox.
However, the Fed suggests a few solutions. “Supervised risk management of Bitcoin exchanges” would ensure their solvency, and further regulations could require that the exchanges invest in appropriate cybersecurity measures to prevent hacking. These efforts would theoretically prevent another Mt. Gox from occurring in the future.

The don't need any new ways.  Not paying taxes is already a crime, whether you transact in dollars, in euros, or in something else.  If you earn bitcoin and do not pay taxes on that, they can take your car and house and/or send you to jail.

Or do you think that they cannot find out about your bitcoin income?

Dealing strictly in bitcoin would make it very difficult to sufficiently track a person's income. This is especially true for people who do a lot of "side" work as they could simply provide a different address to send payment to for each payment. A person could easily tumble their coins to hide the fact where they originally came from (a particular employer who could then trace them to the employee).

Currently it seems that, for many bitcoiners, just owning coins is all they want from life. But, in that distant future we are considering, that will be sort of passé:  people will presumably want to spend their bitcoins too.  ;)

Suppose you buy a fancy car with the bitcoins from those "side jobs".  The tax detectives will know about the payment, and will link it to you, from the dealer and other sources.  They check their databases and discover that the payment did not come from any of the addresses that you declared in your tax forms.  What then?

Mixing won't help, quite the opposite. The tax office does not need to find out where your extra coins came from; it is you who will have to explain -- and prove -- to them that you paid the tax on that extra income.

Ditto for coins from "dirty" jobs -- if the tax guys suspect that your extra coins may be related to illegal activity, they will warn the police.  Then it will be you, not the police, who will have to explain -- and prove -- that those coins came from legal activities.

Note that the government does not have to catch every single tax evader.  They only need to catch and sternly punish enough of them to scare most of the other citizens into voluntary compliance. 

So what makes you think the U.S. controls its borders?

The biggest problem for the government if BTC were to replace "official" currency would be how to run the huge budget deficit which has become the norm in most "developed" countries. If there wasn't any deficit, with a crystal-clear and balanced budget, there should be no difference for the governement between using fiat or BTC.

The deficit is not created printing more cash, but by borrowing from banks and selling treasury bonds.   I don't see why bitcoin would prevent that.  Even if bitcoin replaces the dollar, there will be banks that lend bitcoins, even 10 times more bitcoins than they do actually own.  People would still have to pay lots of taxes so that the government can pay the interest on those borrowed coins.

The deficit is not created printing more cash, but by borrowing from banks and selling treasury bonds.   I don't see why bitcoin would prevent that.  Even if bitcoin replaces the dollar, there will be banks that lend bitcoins, even 10 times more bitcoins than they do actually own.  People would still have to pay lots of taxes so that the government can pay the interest on those borrowed coins.

bitcoin could hamper that effort by making it difficult to create a deflationary environment that makes it cheaper to repay such debt.

Generally very small countries wish to replace their currency with a currency they do not control.

We have a classic case of this not happening with Scotland where even though you've got the SNP ranting on about Scottish independence they still want to keep the pound! >_< I don't think many small countries have the balls to become fully independent from empires.

LABOUR leader Johann Lamont has said that the “only logical place to go” for a currency option in an independent Scotland would be to have a separate Scottish currency. in a speech to the Scottish Trades Union Congress (STUC).

You know what? There have already been coins being set up to make it so that the developers can take a percentage of transactions and block mining and use it for their own purposes, it would actually be incredibly easy and even eliminate the need for tax collectors etc. for governments to make their own coin and take a percentage of all the currency to fund anything they want. While yes, currencies like Bitcoin will remain tax free, it could actually be incredibly easy to set up a government backed cryptocurrency. They'd just have to make it appealing, hell because of the way the blockchain works, they wouldn't even need a tax revenue department anymore because it would all be done automatically.

I have had some in depth discussions about this and am not convinced that a government could successfully do this.

It would certainly be interesting to see one or several try it and see what happened.