Since a lot of topics here in forum that discuss about regulations and taxes that will implement by the government in cryptocurrency, I made a thread that discuss about taxation. I know most of the people here in BTT are aware and have a depth understanding about how the taxes work in our economy but I want to share some of thoughts and researched about tax to other people.
Let us first define taxation.
Taxation- is the act of laying a tax. The process or means by which the sovereign through its law-making body, raises income to defray the necessary expenses of the government. It is merely a way of apportioning the cost of government among those who in some measure are priviledged to enjoy its benefits and therefore, must bear its burdens.
As a power, taxation refers to the inherent power of the state to demand enforced contributions for public purpose and purposes.
What is the purpose and scope of taxation?
1. The primary purpose of taxation on the part of government is to provide funds or poverty with which to promote the general welfare and protection of its citizen. Aside from raising revenues for governmental needs, taxation may also be exercised to attain various and economic (non revenue) objectives.
2. In its broadest and most general sense, taxation includes every imposition of charge or burden by the sovereign upon persons, property, property rights for the use and support of the government and to enable it to discharge its appropriate functions.
Meaning of taxes Taxes are the enforced proportional and pecuniary contributions from persons and property levied by the law-making body of the state having jurisdiction over the subject of the burden for the support of the government and public needs.
Essential characteristics of tax.1.
It is an enforced contribution.- A tax is not a voluntary payment or donation and its imposition is in no way dependent upon the will or assent, open or implied, of the person taxed.
2.
It is proportionate in character.- A tax is laid by some rule of apportionment according to which persons share the public burden. It is ordinarily based on ability to pay.
3. [i ]It is generally payable in money. [/i]- Unless qualified by law (e.g. backpay certificate under Sec. 2, R.A. NO. 304 as amended.), the term "taxes" or "tax" is usually understood to be a pecuniary burden - an exaction to be discharged alone in the form of
money which must be in legal tender.
4.
It is levied on persons or property. - A tax may also be imposed on acts, transactions, rights or priviledges. In each case, however, it is only a person who pays the tax. The property is resorted to for the purpose of ascertaining the amount of tax that must be paid and of enforcing payment.
5.
It is levied by the state which has the jurisdiction over the person or property. - The object to be taxed must be subject to the jurisdiction of the taxing state. This is necessary in order that the tax can be enforced. Although a state cam tax all persons subject to its jurisdiction for all their property left by them within its jurisdiction, yet its taxing power necessarily stops at the state boundary lines. It cannor reach over into another jurisdiction to seize upon person or property for purposes of taxation.
6.
It is levied by the law-making body of the state. - The power to tax is a legislative power which under the Constitution only. Congress can exercise through the enactment of statutes.
7.
It is levied for purpose and purposes. - Taxation involves, and a tax constitutes, a charge or burden imposed to provide income for public purposes - the support of the government, the administration of the law, or the payment of public expenses. For this reason, revenues derived from taxes cannot be used for purely private purposes or for the exclusive benefit of private persons.
The "public purpose or purposes" of the imposition is implied in the levy of tax.
It is also an important characteristic of most taxes that they are commonly required to be paid at regular periods or intervals every year.
Before we move to the next one, the previous definition and terms of taxes is a mandatory financial charge imposed upon a tax payer (individual or organization).
Tax has 7 essential characteristics but I think the number 3 can amend because as of now or in a near future, cryptocurrency can be used to pay our taxes.
As we go on to our discussion, I want you to answer this question; what will be the suitable types of taxes that best describe to the crypto tax?
Types of Taxes 1. Income Tax
2. Bank Tax
3. Payroll Taxes
4. Property Tax and Land Value Tax
5. Inheritance Tax
6. Expatriation Tax
7. Transfer Tax
8. Value Added Tax
9. Poll Tax
10. Consumption Tax
The Three Tax Systems 1. Proportional Tax - imposes the same percentage of taxation on everyone, regardless of income. If the percentage tax rate is constant, the average tax rate is constant, regardless of income. This means that if a person's income goes up, the percentage of total income paid in taxes doesn't change.
2. Progressive Tax - imposes a higher percentage rate of taxation on those with higher incomes. Progressive taxes use a marginal tax rate that increases as the amount of taxable income increases. Therefore, the percentage of income paid in taxes increases as income goes up.
3. Regressive Tax - which imposes a higher percentage rate of taxation on low incomes than on high incomes. For example, if the state sales tax were 5%, the person with the lower income would pay a greater percentage of their total income in sales tax.
Forms of Escape From Taxation1. Shifting - is the transfer or passing on the burder of a tax by the original payer or the one on whom the tax was assessed or imposed to another one.
2. Capitalization - the reduction in the price of the taxed object equal to capitalized value of the future taxes which the purchaser expect to be called upon to pay.
3. Transformation - the manufacturer or producer upon whom the tax has been imposed, fearing the loss of his market if he should added the tax to the price, pays the tax and endeavors to recoup himself by improving his process of production thereby turning out his units at a lower cost.
4. Tax Avoidance - Exploitation by the taxpayer of legally permissible alternative tax rates or methods of assessing taxable property or income, in order to avoid or reduce tax liability.
5. Tax Exemption - grant of immunity for particular persons or corporations of a particular class from a tax which persons and corporations generally within the same state or taxing district are obliged to pay.
6. Tax Evasion - use of taxpayer of illegal or fraudulent means to defeat or lessen the payment of tax.
Cryptocurrency is decentralized, government does not hold the crypto enthusiast, people, and investors. But it has a value and it can be used a form of illegal activities and it can be a way to escape our taxes and liability. It is good to impose taxes in cryptocurrency, it is good that cryptocurrency will regulate but not too much.
Imposing of tax and regulation contradicted the decentralization of cryptocurrency. I know some of us are unhappy with this but we need to understand the fact that tax is for future economic growth and development of oyr country.
References:
1.
http://www.socialstudieshelp.com/eco_taxation.htm2.
https://www.slideshare.net/mobile/hyunsu612/forms-of-escape-from-taxationBook: The Fundamentals of Taxation by Hector S. De Leon and Hector M. De Leon, JR
-Nellayar
