Avoiding taxes with local currencies

[Richard Moore]

Bcc: usual suspects

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Greetings,

In order for transactions in a local currency to be non-taxable, it seems that the local currency must be non-redeemable for dollars. That creates a problem for the credit-bank model, which makes considerable use of convertibility between dollars and credits.

I think I've got a solution that avoids redeeming per se, but accomplishes the same thing. If you see any problems with the scheme, or have other suggestions, please let me know.

New definitions:

The umbrella organization is the Community Development Cooperative, which has a board of directors. Local residents and local businesses can join the co-op as members, and each member has one vote in elections for board members. 

In order to join the co-op, you must buy one ownership share. The initial price of a share will be $1, and after that the price will vary, depending on fluctuations in the value of the dollar. The value of a share will be kept constant in terms of purchasing power, as measured by some standard basket of commodities. When the co-op has surplus income, that will be distributed to members as dividends, proportional to the number of shares they hold. 

Members can purchase additional shares at any time, at the current share price, and members can sell shares back to the co-op at the current share price. Certain discounts and fees may apply to such transactions. Members can also exchange shares with one another for goods and services, and such transactions are subject to sales tax, as shares are redeemable for dollars. 

The Credit Bank is part of the co-op. It manages the buying and selling of shares, and it also manages the Community Credit system. Credits are non-redeemable tokens that members can use in exchanging goods and services with one another. The value of a token, in terms of goods and services, is the same as the current value of one co-op share, which is defined in terms of commodities. A credit is just like a Time Dollar, in that it is non-redeemable, and its value is defined in terms of goods and services, not dollars. Hence credit exchanges should be non-taxable, just like Time Dollars.

Whenever someone buys a share in the co-op, they receive one credit on loan, interest free, for as long as they hold the share. Whenever someone sells a share back to the co-op, they must return the loaned credit associated with that share, out of their current credit balance.

Various co-op enterprises will be established, all part of the umbrella co-op. These provide goods and services that can be either purchased for dollars or exchanged for credits with co-op members. Sales tax applies to dollar sales, but not to credit exchanges.

Workers in these enterprises can have their wages paid partly in dollars and partly in co-op shares. The portion in shares has the advantage that each share comes with a credit. If the worker decides he needs more dollars than he thought, he can sell some of his shares back to the co-op. 

If a regular vendor decides he wants to sell to co-op members, he signs up as a co-op member, and then offers his goods for sale for either dollars or shares. He can trade in his share income for dollars to pay his workers and buy his raw materials. His sales for shares are subject to sales tax.

No one can sell more shares back for dollars than they have credits, as each sell-back must be accompanied by a credit.

Co-op members will prefer to shop at co-op stores, because they can use credits rather than shares, and don't need to pay sales tax. 

I think it'll work.

cheers

richard

[Mark Batten-Carew]

Richard, it seems that in your proposal, the number of credits is linked one-to-one with the number of shares, which is linked one-to-one with the number of dollars in the system.

But one of the advantages of community currencies is that the amount of credit available should be relative to the amount of resources (people, goods) available to be traded, not relative to the amount of money available.

What if you have a community with abundant resources, but no money, and all they need is a community currency to facilitate transactions.  I believe the Credit Bank must be able to issue extra credits,  independent of shares, and distribute them out to the community in some way that is fair to all (probably investing in infrastructure projects that benefit all members).

So maybe a community starts with no money, credits are issued and initially spent into circulation by the Credit Bank, and at some point community members begin to earn dollar income from outside the community.

Now the goal is to move the money from the individuals to the Credit Bank, so it is available for any community member (that needs to trade outside the community) to access.  One idea is to move to the suggested share purchase model at this point.  Members with money could buy shares (which come with credits) from the Credit Bank.  Member who need dollars could trade non-share credits for share credits (on par) and then redeem the associated shares for dollars (of course, giving up one credit for each share).

What is interesting about this is that if you consider resources to consist of people-hours, physical assets, AND dollars, then the inflow/outflow of dollars in the community should increase/decrease the credits in circulation, just as the immigration/emigration of people should affect the amount of credits in circulation.  Dollars are just being treated as one more type of resource.

Mark Batten-Carew

[Tom Wayburn]

Hello Richard and Mark,

 

I wrote the following to John Rogers at Cyfranogi yesterday:

 

Hi John,

 

I looked through your website VFP rather quickly and I did not notice anything on what the currency is to be based upon.  Is it that you expect prices to be mapped from the mainstream currency into the community currency on a one-to-one basis or is there a possibility to engender a currency that will be based upon physical reality?  I continue to be enthusiastic about an energy-based currency.  See http://www.dematerialism.net/cc1.htm and http://www.dematerialism.net/onemergy.htm for starters.  On the other hand, you have probably read these and accepted or rejected the fundamental idea of an emergy-based currency.  

 

Tom Wayburn, Houston, Texas

 

 

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Co-op members will prefer to shop at co-op stores, because they can use credits rather than shares, and don't need to pay sales tax.. 

 

I think it'll work.

 

cheers

richard

 

 

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