Governments should be focusing their taxes and revenue on tangible things that cannot be hidden or evaded, like property. This would solve so many problems in places like London or Vancouver where foreign money floods the market. Why waste time tracking endless trails of shell companies when you can just tax the wealth when it appears in public?
Plus I see income and revenue as non-zero sum, one man or company making more money doesn't preclude someone else from creating wealth. Taxes on this are just a friction on the economy. But property is zero sum, every piece of coastline bought up by rich people as 4th or 5th homes means entire neighborhoods of normal families can only see water when they are on their 2 weeks of vacation.
In contrast, with income taxes, the person who produces a lot for society will pay high taxes.
It's well accepted by economists that a consumption tax is the least distortionary tax.
There are notions of fairness that aren't premised on the idea that tax rates aren't a point score system for rating people, and it can be rational to accept some degree of distortion so long as it's not so powerful that it prevents the economy from serving its purpose (and so long as that distortion is buying us something).
The other is the normative one. My premise is that people should pay in proportion to the benefit they receive from society. Do you disagree with this claim?
I don't think I agree with your normative claim. I think ceteris paribus that it's a virtue of a tax system if people pay in proportion to the value they get out of society. It sounds like you think that virtue is controlling. I think there are other virtues as well.
Income Tax taxes value provided, Consumption Tax taxes value consumed.
-- Consumption taxes can also be scaled/slabbed with the amount consumed, they don't have to be regressive.
The remainder are things money can't buy. A beautiful woman who is broke has most of them - should we impose the same taxes on her?
(Actually, there's even an economic benefit to a land tax, as the tax encourages more efficient use. A _negative_ deadweight loss.)
Because the wealth should be taxed in the place (country state, region etc.) where it was made (and whose resources were used in the process) and not where it appears in public.
The IRS has no discretion in this matter; they just deliver the bill.
That's the key part. I don't know the exact legalese, but you probably still qualified as a Canadian resident.
Once you're no longer regarded as a Canadian resident, you no longer owe Revenue Canada anything. It's a clean break.
In the US, no matter how long you live outside the country, as a citizen you still need to file a return and pay taxes on foreign income.
I live in rental apartment and probably will keep doing this (where I live and work I can't afford to buy, and won't for various reasons). By your logic, I should be taxed to hell just because you don't like seeing foreign capital buying off properties in London or some other location you want to buy property in? No, thank you. I've lived through communism, resemblance is striking.
From the exchange's database's perspective, it'll be a credit to their CNY account and a debit to their USD account. No BTC needed to be moved.
Thus the BTC volume isn't a valid measure of the total value of transactions done in BTC.
1. I wire 4000 CNY to the BTC exchange.
2. BTC exchange receives my CNY, and shows that I have 4000 CNY in my account.
3. I buy 1 BTC with my 4000 CNY; exchange shows that I have 1 BTC in my account.
4. Later on, I trade that 1 BTC for 600 USD; exchange shows that I have 600 USD in my account.
5. I transfer the 600 USD into my US bank account.
In step 3, since I never took possession of the BTC, it never leaves the exchange, and thus no blockchain transaction took place. If no blockchain transaction took place, then anyone observing the blockchain would be oblivious to my fiat to BTC trades.
If I go to BTCe with a $50mm USD deposit, but they only have $25mm BTC equivalent deposited there, and "buy" an equivalent amount of BTC, will they not be required to obtain $25mmUSD equivalent more BTC from the blockchain?
Furthermore, do the exchanges take a position either long or short? If I then liquidate my $50mm worth of BTC, how do they get the fiat to wire to me, if they don't transact with somebody else?
I just fail to see how the major shifts in supply/demand are totally absorbed by the exchanges and never show up on the blockchain. Do the exchanges have an inter exchange market off of the blockchain or something? I agree with you, technically, that for small sums, there's no need for this and so the blockchain volume may not represent total size of the market, but at the scales we are talking about (see how much HSBC laundered for a single drug gang alone), how does this not show up, or rather, how does it never hit the blockchain? Particularly when somebody eventually wants to liquidate back to fiat?
"HSBC was accused of failing to monitor more than $670 billion in wire transfers and more than $9.4 billion in purchases of U.S. currency from HSBC Mexico, allowing for money laundering, prosecutors said."
That is one subset of the problem. BTC has what, $12mm/day volume? This one subset is over 2 years worth of all the BTC volume. Honest question, is off blockchain BTC trading really that big?
1. The state wants it done because the intelligence is immensely valuable, not just from a law enforcement perspective but also from an international realpolitik / Great Game perspective (e.g. think tracking Putin's billions for the US, understanding flow of US Treasuries). This means the state tends to punish missing even a single money laundering lapse severely (which has the side benefit of lining their coffers).
2. Banks and other businesses don't want to do it because it's entirely a cost center to them. This incentivizes them to do the bare minimum to give the appearance of compliance to avoid prosecution while rarely doing the work effectively in practice. Business AML departments also have the problem of often working at cross purpose with the firm's other, frequently more prestigious and connected coworkers (think Goldman's main guy in Asia pushing through the 1MDB transactions).
3. The law pertaining to cooperation across institutions, section 314(b) of the USA PATRIOT Act, is voluntary. Money laundering almost always occurs across multiple institutions and frequently across multiple jurisdictions, many of which are stingy with intelligence or even purposeully opaque (Panama, Singapore, the Caymans, etc). This results in fragmentary and incomplete investigations and intelligence gathering, leading to an enormous amount of wasted and duplicated effort.
If the countries of the world were serious about money laundering, they would focus on real cooperation and beneficial ownership requirements. Unfortunately the world's intelligence services all work against each other at one level or another, and they benefit from financial nontransparency (funding operations, obscuring flow of funds e.g. the US Treasury refusing until recently to publish info on Saudi ownership of Treasury bonds). Businesses are swept up in the game and even the few that genuinely seem to want to do the right thing find it impossible to overcome the hypocrisy of the game. As many commenters have noted below, money laundering is not a victimless crime. It aids human traffickers, arms dealers, and drug lords. Unfortunately it also benefits states, and businesses get caught in the crossfire.
Many honest people will not tolerate total financial surveillance and automated techniques like those in the article make honest people intentionally engage in structuring even though they have "nothing to hide"
Financial privacy is like clothing. Yes, clothing can be used to conceal contraband and further illicit activity that is almost universally regarded as bad, but that doesn't mean the entire world is willing to be strip searched.
Punishing the 99.5% of good actors to sometimes discover the 0.5% of bad actors seems exactly like forcing people to prove their innocence as all are presumed guilty.
More generally: no western government recognizes a "fundamental right to commerce" such that restrictions on commerce require the existence of "bad" conduct worthy of punishment.[1] There is nothing "bad" about not implementing money laundering controls, just as there is nothing "bad" about talking a left turn on Constitution Ave between 9-5 on a weekday. But the government doesn't need to show its "bad" to implement the regulation.
[1] Though we kind of tried that in the U.S. under the concept of economic due process.
That's very interesting. I'm not going to argue with your claim, because I assume you know more about it than I do. But it's a very strange idea, because in many ways commerce is more fundamental than anything in the Constitution or its amendments. Take away everything in the Bill of Rights, all the freedoms defined in the Constitution and our heritage of common law, take it all away and you can still have a society. It would be a terrible, awful society that no one would choose to live in (probably something like the DPRK) but it would still be a society. But without commerce, it is simply not possible to even have a society. I would go even further and say that a vanishingly small percentage of people would even be able to survive without commerce. So in a certain sense it's just as important as air, food, and water.
You can argue that government isn't necessary to enable commerce. That you could have a world that has commerce without government. But even if that were true, in the world we do have, commerce is built upon the infrastructure provided by government. Just like the road system. And the government is thus entitled to regulate commerce just like it regulates left-hand turns on roads.
Of course, this is just an argument that regulation of monetary transactions is consistent with the assumptions underlying our institutions. I have no opinion on whether money-laundering controls are a good idea or not.
People still bartered, which is recognized and taxed as commerce by the US government. They did not build or repair their own tools, for example - the village blacksmith was usually the most important man in town (or the region). You could argue that once they had a set of tools and land, people could be self-sufficient, but they still engaged in trade. And they would not have been able to be self-sufficient without trading beforehand - how else would you get a horse?
https://en.wikipedia.org/wiki/Silent_trade
Realistically, in Colonial America, reputation systems and the like were probably used far more than courts.
In fact, even today, extra-legal systems are widely used. My company buys SAAS services primarily from the US and Australia, but we have little ability to use the courts in either of those countries. How do we know Atlassian or Cloudflare won't take our rupees and run?
"But even if that were true, in the world we do have, commerce is built upon the infrastructure provided by government. Just like the road system. And the government is thus entitled to regulate commerce just like it regulates left-hand turns on roads."
So by this argument, if the first amendment didn't exist, the government would have the right to regulate speech that uses public infrastructure (anything on public airwaves, the internet, delivered via the mail system, etc)? To make things more concrete, could the US government make a law "No one shall manufacture or sell a wallet"? (to pick the first thing that I saw).
Note that I personally am kind of ok with this, because the whole point of being sovereign is that you can do what you want; but I'm interested in exploring the justifications used to get people to buy into the system.
Common law contract and tort principles were well-developed back then, and indeed were created for situations like ordering horseshoes from the village blacksmith, or ordering a new axle for your windmill.[1]
> So by this argument, if the first amendment didn't exist, the government would have the right to regulate speech that uses public infrastructure (anything on public airwaves, the internet, delivered via the mail system, etc)?
No, because the first amendment does not create the right to free speech, but recognizes a right to free speech that already existed. But if that wasn't the case, then I think the answer would be yes.
> So by this argument, if the first amendment didn't exist, the government would have the right to regulate speech that uses public infrastructure (anything on public airwaves, the internet, delivered via the mail system, etc)?
Quite contrary, only money is laundered if it comes from illegal practices, which tend to have victims.
Also, what do you think happens if you relax money laundering regulation?
Sex slavery? Arguably rationally wrong for all time and space.
Drugs and prostitution? Debatable.
For example, regulating drugs and treating addiction as a medical problem is probably much cheaper than waging an unwinnable drug war PLUS trying to find all the laundered money coming from it PLUS forcing all the "good actors" (non drug industry people) to comply with the regulations at no trivial expense.
This is true for every economy that refuses to go away despite being wholly illegal. In those cases it is (IMHO) best to just regulate it... Same as what happened with alcohol after Prohibition. Nobody's making moonshine and killing bootlegger opponents anymore, and alcoholism is a manageable medical problem.
Certain laws are truly silly, however. I am allowed to maintain that opinion. I may also be anti-authoritarian in general, and do not believe in the vast majority of consensual crimes.
I'd presume there is a deterrent as well as a direct effect on reducing money laundering; I'd expect to see more money laundering if there were no checks.
Quite how it would be measured is another question.
Yet detecting crime through its laundering of proceeds is probably the most powerful Single idea we have - imagine a world where you could only commit crime in cash or for free.
We talk about a poverty free world. A crime free world is also possible. Just make sure it does not pay.
Even fictional post-scarcity utopias have crimes of passion. You cannot get anywhere near crime free without one of the following options: a) absolute coercion and perfect preemptive law enforcement, b) no laws to speak off (including no prohibitions against murder), c) radical departures from human nature as we know it.
That said, I agree with your broader point: sometimes it is worth it to be able to detect and stop crime based on its financial footprint, even if you don't gain economically from doing so.