[wsfii-discuss] CCs and taxes

[Richard Kay]

On Fri, Oct 07, 2005 at 09:10:17AM +0100, Mike Ryan wrote:
> 
> Just curious, but how do you account for taxation in these systems? ie, if 
> the
> pizza shop sold a pizza for 2 limes and that pizza was eaten on thre 
> premises,
> then he owes 17.5% vat on transaction, plus a potential %age of any profits 
> in
> corporation tax at the end of the year. How do these systems interact with 
> the
> govt revenue collection systems?

If income is earned within a regular line of business, taxes in
legal tender are payable, and I think this would include
Limes income. Due to their parity with pounds accounting for these
is very straightforward.

Within many small-scale LETSystems, the goods and services
on offer are mainly post tax, in the sense that additional 
enjoyment and wealth resulting from hobby activities
and occasional social favours are not normally taxable. 
However, a business carrying out a regular trade receiving
part of their income in LETS would have to declare this and
pay conventional taxes. So if I repair a bicycle for
LETS I would not pay taxes because this is not my regular
trade or business (which is teaching). If I ran a bicycle
repair shop as my regular trade I would have to pay tax
on LETS earnings in legal tender - and this reality has, in 
my understanding, prevented LETS from being able to grow 
outside the person to person economy within the UK. My view 
is supported by the reported experience of a cafe owner 
in Stroud who had to stop taking LETS because of the way 
the tax system affected her. (Based on a conversation circa
1996. Interestingly enough, LETS enabled her to establish
this business in the first place).

So much for current rules. If you want new ones which
remove this particular constraint and which enable CC to go 
outside the current P2P ghetto and serve the business, government 
and personal sector, please read my modest proposal:
http://copsewood.net/writings/kaytax.html 
The Kay Tax
Richard Kay - 1998
How a small tax change
enabling greater use of
account-based community currencies
could initiate economic transformation.

Best regards,
Richard.