16th August 2017
This author raised concerns about government regulation of cryptocurrencies.
I’m coming to the view that such regulation is not only necessary but will be extremely beneficial both for the market and for governments. [See my comments here].
Cryptocurrency has two qualities in one: asset (store of large amounts of value) + money (being easily transferred in extremely small quantities).
While no taxation can be imposed on the money component, there is a huge taxation opportunity for the asset component, given that many cryptocurrencies are skyrocketing at 1000 or more per year.
Some governments are already starting to regulate cryptos. Such regulations will massively increase the legitimacy of cryptos in the eyes of the sceptical masses, who will then jump on (finally) into the bandwagon, thereby massively increasing the price of these currencies.
Governments should get a share of the profits from cryptos to plough that money into infrastructure and public goods. It will only be a really stupid government that kills the chicken that lays a golden egg.
Having myself made a small paper profit (currently a notional profit of $4000 AUD on my small investment), I see no reason why government should not be able to apply the following taxes on crypto transactions:
The tax would need to be very small on tiny trades (such as for a cup of coffee), but it could be incrementally larger for larger trades.
A tax of up to 0.05 per cent on crypto trades will harvest significant gain for governments.
Of course, traders will then shop jurisdictions and move to exchanges in countries that do not charge such a tax. Or the exchanges will go off-line (peer-to-peer).
a) at the standard GST rate (possibly at BOTH ends of the transaction).
b) as capital gains tax at the end of the transaction (this, of course, also would allow investors the option to track any capital losses).
What about the ability of crypto-owners to move their conversion to a different jurisdiction?
Yes, they can. For instance, a number of exchanges now offer USD debit cards that can be used anywhere in the world. So I can transfer funds to a US exchange, then convert to cryptocurrency, then buy a world-cruise from USA which will totally short-circuit the Australian system.
But if I wish to convert my crytpo-money into AUD (to be drawn as cash or deposited into my bank account), then generally only an Australian exchange will do so. The Australian government could require all Australian exchanges to charge a GST on such conversions. It could alternatively require me to track all my crypto investments and report on any capital gains.
Of course, there remains the option of peer-to-peer exchange in which I can find someone in Melbourne who wants bitcoin and get sell it to him in exchange for cash. This will be entirely off the record keeping system and will evade any tax.
It is not my job to think on behalf of governments about how they can tax cryptos. But this is clear: they can’t avoid cryptos. These are here to stay. The only choice they have is to work out how to benefit from cryptos, which are essentially a great productivity enhancing device.
BTW, I agree with commentator Andrew Robbins here:
If a government starts to heavily regulate Cryptocurrencies they give themselves a massive disadvantage compared to other governments who don’t. We’re already starting to see this with ICOs preventing U.S. based IPs from participating. You do this too much, and people will eventually leave your country.
So, any government that regulates/ taxes will need to be keenly aware of competitive issues of this sort.
1st August 2017
This is a placeholder post for keeping a tab on India’s crown joker. (See my previous post on him).
Amitabh Kant does, sometimes, surprise with his apparent support for liberty. For instance, “Hand over schools, colleges, jails to private sector: Amitabh Kant“.
But we have to remember that if a monkey hits typewriter keys at random for an infinite amount of time it will create everything, including works of William Shakespeare.
Does Amitabh even know what he just said? Can anyone show me any book he has written on the logic that might underpin this? And does he know that the Modi government is one of the most socialist and Luddite governments we have ever had?
But in the same breath (in the same news report) he says:
“Private sector has performed very badly. Private sector in India is most irrational, insensitive I have seen”.
Actually, India’s private sector is one of the best in the world, operating in conditions where there is total chaos and lawlessness – created by arrogant statist IAS officers like Amitabh and by ultra-corrupt Ministers across the country.
But Amitabh has numerous other rants to his credit. For instance:
I challenge any other country to show they are more open than India [Source: India Is The Most Open Economy In The World: Amitabh Kant]
He is happy for government to squander crores of rupees on his interventionist ideas:
He added that the government was going to spend Rs 340 crore in next few months’ time to promote digital transaction.
Various incentive schemes were announced to promote digital payments such as ‘Lucky Grahak Yojana’ and ‘Digi Dhan Vyapari Yojna’, he said, while assuring that the merchants would not be harassed by tax official by way of scrutiny of the previous years of books of accounts. [Source]
And he is apparently a “futurist” greater than Kurzweil:
Note that he is not talking here about cryptocurrency, either. If he knew anything about cryptocurrency, I could have excused him. But this is just one more of his half-baked rants.
He has numerous other pearls of wisdom on “smart cities” and many other things, such as his mindless defence of demonetisation. I’ll add them when I find time. But if you have time, please share them in the comments section.
THE MAN CANNOT BE TAKEN SERIOUSLY.
31st July 2017
Key comments from my FB post here. The “good people” theory of governance is the most obvious sign of someone’s ignorance about basic economics and governance. This theory is typical not only of the socialists but of the thousands of half-baked “economists” and “liberals”.
India’s problem is the design of its governance system and policies. If people don’t understand this point, they can be as honest as they like and they will totally fail to change anything.
Half baked ideas continue to flourish. No takers for serious work, that will involve a lot of thinking and understanding.
It takes ENORMOUS intelligence to create good institutions, which neither you have a clue about nor most Indians. I’ve not seen one single writing of yours which shows how to create good institutions in India.
Hence the delusion that “good” people can do anything good for the country.
Just like LKY is not a “good” people alone, so also the leaders of Australia are not “good” people alone.
It takes ENORMOUS sense and competence to design good institutions. 99.99999 per cent of Indians have no policy competence or sense and hence cannot design good institutions.
You may be a “good” people yourself but will be entirely useless to India unless you understand this point that governance is a science, not some random thing that any “good” person can do.
Then you will need to start studying how good institutions in India must look like. Then work out a transitional path.
If you are interested, all this is already explained in BFN + SBP manifesto.
30th July 2017
30 July 2017 – for immediate release
Dr Sanjeev Sabhlok, an economist and the Overseas Coordinator of Swarna Bharat Party, scoffed at the Modi government’s notion that trade deficits are a matter of concern (http://bit.ly/2uIrTmQ) and said such a notion reflects the monumental ignorance of the Modi government about economics.
Chanakya, the world’s first economist, would have rapped the Modi government on its knuckles. Chanakya knew that imports are a key driver of prosperity. He wrote that “imports shall be sold in as many places as possible, merchants who bring in foreign goods by caravans or by water routes shall enjoy exemption from taxes.” Likewise, the West’s first economist, Adam Smith, wrote: “Nothing, however, can be more absurd than this whole doctrine of the balance of trade”.
Dr Sabhlok said that the only sensible trade policy for India is unilateral free trade – in all cases and without any exception; in other words, free trade even with our “enemies”. India must throw open its borders to imports regardless of whether other nations accept our exports.
He said that consumption is the only yardstick of prosperity. Access to imports makes a country richer as its citizens get more value for their money and can buy many more things with their money. It also forces domestic manufacturers to produce at lower cost. Workers are redeployed to more productive work. The necessary job losses from this policy are quickly offset through increased domestic consumer demand and more job opportunities.
Dr Sabhlok said that trade deficits are a non-issue since they are offset by FDI and other capital inflows. The US and the UK have run trade deficits for decades and yet have experienced good economic growth. The US gets FDI of around $350 billion every year and the UK $200 billion. Countries like Japan have run trade surpluses year after year but that has not prevented sustained recession.
Given its monumental ignorance about economics, the Modi government must try to hire at least one competent economist for India. Its existing “economists” and IAS officers who are busy providing useless “advice” must be fired.
Dr Sabhlok added that SBP’s manifesto holds the answer to the multitude of real problems that India faces – but not for made-up problems such as its trade deficit with China.
Notes for Editors
SBP is India’s only liberal party, committed to defending liberty and promoting prosperity.
Rahul Pandit (Hyderabad) National Working President, +91 9703425422
Sanjay Sonawani (Pune), +91 9860991205
Sanjeev Sabhlok (Melbourne), firstname.lastname@example.org