If a company accepts payments only in cryptocurrency and has a team that is spread around the world, where should that company exist (what country) and who should it pay taxes too?
Imagine the following company structure
- Company ownership is in a smart contract in Ethereum.
- Employees are all over the world.
- Investors can only buy ownership via the contract.
- Company only accepts crypto as payment.
- Employees paid via crypto.
- All profits are paid out in crypto as a dividend to all owners via a smart contract (you own 10%, you get 10% of profits).
Where should this company exist?
What country should this company exist in? Where should it register itself? And more importantly (to the gov’t), who should it pay taxes to?
There are no clear answers to these questions.
The country with the most owners? You can’t know this in advance. The country with the most customers? You can’t know this in advance. The country with the most employees? You can’t know this in advance and if you based it off initial team, it could be equally split between X countries.
Then another question comes up:
Why register with any country?
There is almost no benefit for the company to register with a specific country. It’s just more paperwork and regulation.
But again… what about taxes??
I’ve thought a lot about this and I’m making the assumption that the countries really only care about taxes.
One possibility is to just tax personal income, no corporate taxes. If the company pays an employee or pays out a dividend to investors, that payment is taxed. This could either be up to the company or each individual receiving the payments. The simpler way would be to to have the company do it, but since that company might not have any repercussions, it could be better to have each individual submit their taxes since they will have to follow their own countries tax rules.
Another possibility would be a tax on consumption, like the FairTax. If you can’t control where companies operate and do business, you can control what people are buying.
How can governments govern this?
Governments could collect these taxes via smart contracts if they got on board the crypto wagon (which they will have to eventually). When the company pays an employee or dividend, they send it via a government blockchain contract that would take their share of the payment and pass along the rest to the payee. Each country can have their own contracts with their own tax rates built in.
Imagine that? An automated tax system, no IRS required.
