Scrutiny Against Decentralized Services Continues Over Tax Evasion Concerns

Government officials are facing a hard time when it comes to working on laws to regulate decentralized services and protocols. Applying existing laws and regulations to this new breed of disruptive technology is one way to go about it, but it may not be sufficient and even have an adverse effect in the long run. But using decentralized services is not going to help consumer privacy in any way, at least not if the government has a say in the matter.

The Government Cracks Down on Tax Evasion

When it comes to online services and platforms, in general, there has always been an unwritten rule to “not earn too much money” in order to avoid further taxation of earnings. While not officially deemed a valid rule by government officials, most countries have a law in place allowing citizens to earn an additional income of a certain yearly amount that will not be taxed.

One of the reasons why our society can’t have nice things like that is because sooner or later, someone will start abusing that rule. As a result, tax evasion occurs, which is a growing problem in nearly every country around the world. And as legislators and officials try to keep up with technological development, the tax evasion problem only grows larger and more difficult to control.

Enter the era of decentralized technologies, and suddenly things accelerate at such a pace that legislators and regulators have all but given up the fight. Sitting down to talk with industry experts in the field of decentralization is a positive start, but that doesn’t fix the immediate threat of tax evasion. The only possible result is trying to apply existing rules and laws to new technology no one seems to comprehend fully. It goes without saying that this approach was destined to fail from day one.

That being said, government officials are still trying to enforce certain rules on decentralized companies in order to keep the fight against tax evasion alive. And the new area of focus seems to be on the online space, as companies such as Airbnb, Apple’s App Store, Amazon and even eBay could be facing some dire consequences very shortly.

If government officials have their way, all of the companies mentioned above will be forced to hand over user information. The main reason especially these services are being targeted is because they all make a ton of revenue online, while not “properly declaring the sum and thus evading taxes”. HM Revenue and Customs estimates that these websites alone cost the UK government 5.9 billion GBP in revenue every year.

As you would come to expect from such a ruling, the requested information will contain personal user information. Names and addresses of online sellers, app developers, and even advertisers will have to be handed over to the UK government. Additionally, all values of transactions concluded by these parties will have to be detailed as well.

At the time of publication, no official company names have been listed as “potential targets” for this broadened tax evasion investigation. However, HMRC has outlined that companies in the business of bookstores, app stores, and advertising are among the first to be contacted. A fourth category was added later on, called “reservation services.” Needless to say, Airbnb will most likely be on that list as well, as this decentralized service is causing gray hairs quite government officials around the world.

Applying Existing Regulation To New(er) Technology Does Not Work

The Internet is often referred to as the “Wild West” of activity that is not subject to governmental oversight. And even if that oversight were put in place, the Internet would find a way to snake around those obstacles and carry on like nothing happened. The reason for that is quite simple: applying existing – and mostly outdated – legal guidelines to a newer technology does not work now, nor will it ever.

Legislators and policymakers had a hard time keeping up with technological innovations once computers started becoming a mainstream commodity. But the launch of the Internet shook things up even more, as it allows people from all over the world to conduct business without being tied to a specific location. And with that online freedom come quite a few people who will abuse that freedom sooner or later.

Whereas technology has undergone several phases of evolution in the past 20 years, the laws and regulations have remained virtually unchanged. This clash of outdated ways of thinking with new and innovative technologies have been a topic of debate for many years now. And despite all of the efforts made by various industry experts, one does not simply change the existing laws and regulations.

That being said, the future is not as grim for companies operating in this wonderful era of technological innovation, even though there will be a lot of scrutiny from government officials for many years to come. The only way forward is to have industry experts sit down with policymakers and educate them on the technology most of us have been using on a regular basis. After all, the end user does not have to understand the full complexity of the technology they use, but when it comes to laws and regulations, the story is quite different.

Bitcoin’s Ongoing Struggle With Regulation

One other popular decentralized financial system – Bitcoin, even though it is about much more than finance – is facing the same scrutiny from government officials. As has been seen in the state of New York, BitLicense is not doing Bitcoin any favors at this time. The reason for that is simple: officials have applied existing regulation to a new breed of technology, and it just won’t stick.

Bitcoin, and any other type of major technological innovation have a long way to go until they are properly understood by the same group of people who have been controlling our daily lives for generations. Decentralized services and protocols want to empower the individual, and you can rest assured that most government officials will do anything they can to prevent that from happening.

Assuming industry experts can change the minds of policymakers, the outcome may be very different, though. As is the case with anything in this world, all parties have to be willing to cooperate and come to terms with what is the best course for these new technologies. Sticking to the “old ways of thinking” is not doing anyone any favors, and it hampers technological advancements.

What are your thoughts on policymakers trying to regulate decentralized technology? Let us know in the comments below!

Source: Wired UK

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