From: Sandy <72114.1712@CompuServe.COM>
Date: Wed, 12 Jan 94 10:42:10 PST
To: <cypherpunks@toad.com>
Subject: CRYPTO & TAXES
Message-ID: <940112181727_72114.1712_FHF43-1@CompuServe.COM>
MIME-Version: 1.0
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  SANDY SANDFORT               Reply to:  ssandfort@attmail.com
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C'Punks,

Hal still has his doubts about crypto and taxes.  He wrote:

    I can agree that cryptography will make some kinds of
    illegal private transactions easier.  What I doubt is
    that this will happen at a large enough scale to
    seriously threaten the ability of governments to fund
    themselves by taxes.

Government tax policies are extremely susceptible to the "tipping
factor."  Initially, non-compliance is addressed by simply hiking
up collections across the boards.  When non-compliance reaches
some critical factor, however, such techniques become counter-
productive.  Previously compliant taxpayers begin to chaff at
higher taxes and more aggressive collection.  More and more
become non-compliant as taxes go higher and higher.  Eventually,
the runaway chain reaction either causes the government to cut
back or the system undergoes a core melt-down.  Non-crypto
versions of this scenario have occurred repeatedly in countries
around the world.

Hal also have several specific examples of transactions he felt
demonstrated the difficulty of using crypto-anarchy techniques.
Perry and others have address some of these, but one or two
things should be added to round out the picture.

Hal wrote:

    Most of our transactions are done with businesses,
    generally corporations. Imagine taking $15,000 in cash
    to buy a new car anonymously.  I believe you will find
    that the car dealers will not cooperate, that government
    regulations (designed to crack down on drug dealers)
    will require them to get some ID from you.  Digicash
    would presumably be under the same restrictions.

Maybe, but the example begs the question.  You don't need to
*own* a car, to have the *use* of a car.  Imagine leasing a car
and using your cyberspace bank digital checks, digital money or
credit card to pay the monthly rent.  No audit trail, and no
asset to be seized.  Similar techniques can be used for virtually
all of your assets.  Don't like renting?  Well there are other
offshore techniques that can cure that problem as well.

    I don't fully understand Duncan's arguments for how
    taxes can be avoided through being a non-citizen.  I
    gather, though, that this would require me to either
    move to another country, or to go to work for a company
    that is in another country. . . .

I think Hal hasn't been reading Duncan or my posts very closely.
Here's a hint:  A Cayman Islands corporation is a non-US citizen
even if it is owned by an American.

You have questions?  We have answers.


 S a n d y

>>>>>>    Please send e-mail to:  ssandfort@attmail.com    <<<<<<
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