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Comment by carlob | Hacker News Reader

Here in Italy the big issue is that many business will just not declare cash transactions. It's pretty common not to be given a receipt when buying a coffee and often when you visit a doctor they'll say: do you want the invoice or a discount?

A couple of friends got married recently and I found out they paid over half of what the owed in cash to get pretty decent discount.

So before we talk privacy and company let's remember that this kind of hidden economy has a huge cost for society and it's very widespread in southern Europe.

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Taiwan is mostly cash and they use a receipt lottery to encourage people to buy from vendors who give receipts. Each receipt has a number and there's a lottery at the end of the month with cash prizes.

Also, people here know they can report a business for not giving out receipts. They might get a share of recovered taxes for that.

I don't know all the pros and cons of that setup but it seems there are ways to maintain a cash based system and still collect taxes.

China has something similar as well, called the Fapiao: http://www.china-briefing.com/news/2013/08/13/understanding-...

Though as I understand it, it requires a dot matrix printer to populate these receipts (or writing them by hand).

Hmm I don't remember receiving many receipts in China. I spent 3 months there over two occasions a couple years ago. Taiwan's implementation appears more successful to me. Fapiao means receipt, so that makes sense. There is some required hardware or software but doesn't seem any more cumbersome than a credit card machine and printer. Nearly every shop has them in TW.

Edit: reading further I see China is rolling out their lottery in more areas the last few years

That's because you have to actively ask for it. If you don't, they never (almost) give it to you, as business buy those fapiaos from gov.

We asked for them quite often and they gave them each time. Total, we won 2 cans of Coke and maybe 10 yuan :)

Fun fact - fapiaos you get might be fake. Once I got fake fapiao, printed from fake printer, in fake taxi. I know it's fake because I tried to validate it online (there's service for that) after I noticed I got fake bill :/

Ah okay. That's not so surprising I guess. Sometimes I feel TW has some advantage over China in being small. Like a startup, it can implement and pivot easily.

Taiwanese confirmed here. Basically we use a lot of cash in our daily lives. The "hidden economy" still exists in some places, like some outdoor vendors or night markets.

Is this game-able by buying lots of things for a penny each from your own store, that kind of thing?

Somewhat but I imagine you'd risk getting caught =)

One thing I wonder is if you have an increased likelihood of winning if you buy more. Does a $1 purchase give you the same chance to win $100 as a $20 purchase? I don't really know. Over 100 receipts you usually win like $5

Make the winnings be a multiplier of the tax paid on the receipt.

Maybe they could make each receipt give you a block of numbers in proportion to how much you spent.

I was familiar with the lotteries (didn't participate -- I just put my receipts in the charity buckets or the trash) but had NO IDEA this was why. I just assumed it was because the culture is just much more amenable to gambling (which I think is also true, but might not be the reason it's tied to receipts).

If this is truly the reason for the lotteries, is the government / tax agency giving out the prizes? I never bothered to look closely but it always seemed something run by those businesses.

> If this is truly the reason for the lotteries, is the government / tax agency giving out the prizes?

Yes of course. Every country has trouble collecting taxes. In Taiwan they memorialize the day when the police were too heavy handed with a woman selling untaxed cigarettes. A citizen died in the skirmish.

This day is 2/28 and largely remembered as the beginning of a 40 year period of martial law in Taiwan. I recommend visiting the 228 museum in Taipei's peace park. Even though the current government, KMT, revised the history in this museum to downplay the fact that 20,000 people went missing in Taiwan during this period, the museum still tells a great story. It's great because the story wouldn't exist at all in a place without free speech, such as China.

When this kind of tax evasion becomes widespread, that should be a clear indicator that the tax rate is too high.

In a cashless society, it becomes possible (if not inevitable) the enforcement of that taxation will become even more onerous.

$20 from grandma for your birthday? Gift tax.

You and your co-workers decide to split a large lunch? Temporary incorporation tax.

Your friend buys a 50 pack of DVD-Rs and you split them by reimbursing him half of the cost? Sales tax, again.

Sell an old comic book to a friend for more money than you paid for it? Capital gains tax.

Cash acts as an inhibitor to the impulse to tax everything or to tax it too greatly. It's understood that if you make a tax too burdensome, people will avoid and evade it.

> tax rate is too high

It's not that simple. Scandinavia has a higher tax rate than Italy (and Russia), but much less tax evasion.

"Too high" is not an objective measure.

If the people of Scandinavia feel that what they're getting in return is worth it, they'll pay the taxes.

People in Scandinavian countries have a higher amount of trust in their governments too. I'm sure that has a lot to with it.

Someone who believes that their tax money is going to be used for the legitimate(In his or her mind) needs of society has a greater incentive to pay them than the person who believes that their tax money is going to be used to pay kickbacks to the political allies of the people in charge.

That's wishful thinking. It's really matter of how the culture has evolved.

Exactly this, trust. People give money to churches willingly when they trust the Church will use those funds to do good work. People pay taxes willingly when they see that they are being spent on things that help the community.

When that trust erodes, through government sinecures and throwing too much money at a brother-in-law's construction firm to build infrastructure, etc. Then people are unwilling to fund that activity and limit their tax payments as much as they can. And when they really lose faith as they did in Greece it seems, well not paying taxes seems to be more common than paying taxes and the whole thing breaks down.

> In a cashless society, it becomes possible (if not inevitable) the enforcement of that taxation will become even more onerous.

Automation

> cost for society

You meant "cost for government," right?

It sounds like the slice of society that gets the cash discount is benefiting greatly from this "hidden economy." Saving 50% on a venue is a big win for the newlywed's pocketbook, leaving more money in their pocket to buy goods for their new household.

True. If you don't believe the government has any role to play in, say, paving roads, maintaining bridges, etc, then there's no "cost for society".

Well, until the bridges start falling down, anyway...

Ah, the tried-and-true roads & bridges argument.

No, I don't believe the government is necessary to do those things.

But if you look at actual government spending, these sorts of infrastructure projects are dwarfed by things like military spending, which could use a reduction.

Let's keep in mind we're talking about Italy here. So the knee-jerk "BUT DRONES" response is probably less accurate than if we were talking about the US or the UK or something.

Yes, let's indeed keep in mind that we're talking about Italy here.

http://www.voxeu.org/article/public-sector-inefficiency-and-...

"No, I don't believe the government is necessary to do those things."

I live on a very long (two miles) private road that I jointly build and maintain with an association, etc. There is no government role whatsoever, and we even have bridges.

So it would appear that my experience validates your libertarian fantasy world. Look - we're actually doing it!

I've got sour news for you. Even a wealthy, well educated collection of fair minded and well intentioned people find it very difficult to maintain a dirt/gravel road to an acceptable condition. It's very difficult and costly. We are right on the edge of success or failure in this maintenance.

Further, if we were to actually pave the road (a true fantasy) it would be completely, totally unthinkable with regard to cost. Asphalt is paid for by the square foot and it isn't cheap. When you drive by a very quick section of asphalt road being resurfaced ... say 200-400 meters or something - very short ... understand that that is millions of dollars in asphalt work. Millions.

Can you build some roads and bridges without the government ? Sure, of course you can. Will they approach, in any category, even the bare minimum acceptable standard that you hold ? No.

Hm. I understood that freeway (one of the most expensive roads in the world) was $1000 per foot. $5M per mile. I would expect asphalt to be much less.

Here's a link: http://www.dot.state.fl.us/planning/policy/costs/costs-D7.pd...

Florida says 2-lane roadway is $3.3M per mile. So a few hundred feed, costing millions? Nonsense.

> So a few hundred feed, costing millions? Nonsense.

1. Your parent actually actively maintains a private road, and has probably done their research...

2. It costs them so much because they just have a single road, so they can't amortize the cost over an entire city or country of roadway. Public utilities tend toward monopoly for exactly this reason -- providing the utility to any small fraction of society is enormously expensive.

Make no mistake, natural monopoly is what happens when you privatize utilities. Ever met a Comcast customer who feels anything short of contempt toward Comcast? Now imagine dealing with Comcast any time you need to drive to the grocery store. Or even leave your house.

3. Parent's numbers actually make sense when compared to Florida's, once you realize Florida has an entire state over which it can amortize costs.

The Govt doesn't actually pave anything. Roads are a commodity. There are a half-dozen pavers in my small community of 50,000. If the costs are in the $100K per thousand feet, they are that for everybody.

Again, $M for a few hundred feet is nonsense.

Parent said METERS, not feet. So parent is saying maybe 8mil for a mile. Not insane to assume low volume work in a presumably remote area will be double or triple the price that the entire state of Florida can get.

Especially for a previously unpaved roadway with bridges that probably also needs widening, leveling, etc. That isn't patch work cleaning up existing paved road...

The number is high but not unfathomably so...

Anyways, either parent is telling the truth or not. But I find it hard to believe parent helps maintain a 2 mile private road and also you know better than him the cost of paving that particular road.

As has been said, road paving is a commodity business, so the reason why this particular road might be that expensive is probably that it's a remote road on difficult terrain.

Which raises the question: should this very expensive road, which is primarily used by members of this specific and admittedly wealthy community, be subsidized by the rest of (relatively) poor taxpayers of that state?

Yes. That's called infrastructure. Whenever America has 'subsidized' infrastructure, the nation has seen many fold return. Whether it was rural electrification, or secondary roads, or rural mail delivery, having it a given for everybody means anybody can assume a certain level of service. Commerce thrives on that.

I see the level of service argument. But, if an argument applies to roads or mail delivery, or landline phones, why does it not apply to fast internet service or cellular coverage or many other things, which have been doing just fine without centrally funded infrastructure?

Also, shifting the cost of such roads to everyone encourages even more construction in remote areas, which doesn't seem like a good thing to promote...

Ah, cell towers seem to benefit from some govt protection. We live in the country. The cell companies have to find land to place their towers on. They make an argument that, for emergency services, they're required to build the towers. So its inevitable, and we've just got to decide where they go up. Not whether they go up.

And actually, here in the country, there are many cell networks that do very poorly. Houses still have land lines mostly because connectivity can be very spotty. A govt-mandated tower utility would help that.

Lastly, its not about subsidizing. E.g. REC was not subsidized, just a protected class of business that was mandated to provide service to everyone in their area. Subscribers pay the whole freight. Its like insurance; those near the generation plant are kind of subsidizing those far away, but everybody gets service.

Warm mixed asphalt roads should cost about $1M per mile. It's expensive, but it's not ludicrously expensive. If well done, in a warm environment, of low traffic, no truck levels, then you won't have to repave for upwards of a decade.

Source:

Maintenance a private road outside the USA. Labour is cheaper, however, everything else is more expensive so it balances out vs US numbers last time I checked.

(parent here)

Again, I was giving my own anecdotes about my own road, but then mid-comment switched to a hypothetical "stretch of road" that someone might drive by, being maintained, and in my mind I was thinking of a four-lane highway. It was unclear.

I will say, however, that with all due respect - things are more expensive here in California than they are in FL, so while 400 meters of four-lane @ the Florida rate posted above comes out to ~1.2 Million, it's probably a fair amount more in California.

It's expensive.

(parent here)

"Florida says 2-lane roadway is $3.3M per mile. So a few hundred feed, costing millions? Nonsense."

I was thinking of a stretch of highway or freeway - four lanes - when I asked the reader to "think of a stretch of road being worked on". Sorry - wasn't clear.

Also, I was measuring in meters. So, 400 meters of four-lane @ 6.6M per mile ... that's ~1.2M, give or take.

It's expensive.

> It's very difficult and costly. We are right on the edge of success or failure in this maintenance. Further, if we were to actually pave the road (a true fantasy) it would be completely, totally unthinkable with regard to cost. Asphalt is paid for by the square foot and it isn't cheap. When you drive by a very quick section of asphalt road being resurfaced ... say 200-400 meters or something - very short ... understand that that is millions of dollars in asphalt work. Millions. Can you build some roads and bridges without the government ? Sure, of course you can. Will they approach, in any category, even the bare minimum acceptable standard that you hold ? No.

1) If it's expensive to do for the private sector, it's expensive to do for the government, no part of the cost equation changes.

2) It only seems "cheaper" b/c the private sector would have to ask for money by providing enough value enough for you to part with your money, while government doesn't, and raises money by pointing guns at people. However, to avoid the free-rider problem, you can use assurance contracts to raise the construction money and tolls to pay for maintenance, similar to what governments would do anyways.

3) American infrastructure was rated a D+ by the ASCE, so in what way is having government the sole provider of infrastructure a guarantee of quality?

4) slightly unrelated, but do you really think we'd have the same level of urban sprawl, needing a car to get anywhere in suburbia and such a heavy reliance on fossil fuels if roads were built through market forces rather than government subsidy?

> 3) American infrastructure was rated a D+ by the ASCE, so in what way is having government the sole provider of infrastructure a guarantee of quality?

The same thing is true in most other parts of the world (i.e. who is financially responsible for building and maintaining the roads). In general you will find that the milder the climate is, the nicer the roads are.

> 4) slightly unrelated, but do you really think we'd have the same level of urban sprawl, needing a car to get anywhere in suburbia and such a heavy reliance on fossil fuels if roads were built through market forces rather than government subsidy?

It is already mostly financed through market forces by local governments and via various use taxes (e.g. fuel tax, property tax, etc)

Roads and bridges are fine. 700 hammers for the military maybe not.

I worked as project manager for a contractor doing public works at one point. The government (at least in the US and probably everywhere) wastes a staggering amount of money.

Not saying the government doesn't need funding. They do. But they could certainly do a lot more with less.

They need better internal auditors. If you just cut their budget alone, it doesn't decrease waste or fraud. To change the percentage of waste requires accountability for wasting.

Accountability must come from outside government for it to be effective.

Not necessarily, you just need the internal auditors to have independence and the right incentives.

And actually-enforced penalties for individuals in government who stonewall the auditors because they know an honest auditor would want to reduce their budget.

Also I absolutely hate how people think cutting government income is a good way to cut wasteful spending because it is immediately obvious it doesn't work. It can't work.

We cheered when that scumbag Reagan talked about starving the beast. It was clear that even George HW Bush, Reagan's running mate knew it was a stupid idea. The problem that neocons won't talk about is that we don't have a single preferential way of allocating budget. Imagine we shrunk government income by one trillion dollars. That's the easy part but where will we cut our expenses? We haven't dealt with the difficult problem at all.

Remember that every dollar "wasted" goes to someone. If they are loud and influential, they will probably get to keep their money/credit. So basically the rebalancing brought upon by starving the beast is nothing more than a cash grab by the more powerful more influential over those less so.

I invite anyone who talks about cutting taxes to first come up with a plan to cut government spending. If the spending cut is palatable and can survive the mobs, I am in favor of starving our babies to cut taxes for the wealthy. But we can't put the cart before the horse. No new tax cuts without at least a matching spending cut that we can keep for at least a decade or so.

"we don't have a single preferential way of allocating budget." That's a very charitable way of saying there are no priorities in Washington and there never will be.

I don't mind discussions of cutting the federal government drastically even with overblown threats of riots and unrest. Why continue to prop up a federal system that was never designed to scale up to the size it is and that is out of control? It can't be fixed by any amount of tinkering so just let it collapse back to the original limited powers concept.

U.S. state and local governments do a much better job spending taxpayer money, just revert all these poorly run federal agencies and programs back to the state level.

A major issue here is income inequality. I understand that a part of me says "well, what's wrong with differences in the quality of life between someone living in some town in state A and someone else living in some town in state B.

We can talk about our successes with independent school districts where communities proudly fund their own schools with taxes at rates that they think are the best. Or take local police and EMS or local utilities for that matter. It is glorious when it works as it creates a sense of ownership and responsibility towards a community resource.

I agree with you in broad strokes that we can and should support devolution. However, I assert that we should not do this because our federal government was not "designed" to do this but because it is the right thing to do and it is in all our best interest to do it. We should not do something or avoid doing something based solely on what the system was "designed" to do. We should be willing to make changes to the system as we learn new things. I cringe on the amount of reverence with which we hold our founding fathers. The United States is a well recognized nation throughout the world and we do not need this crutch. (:

It's not a crutch. Separation of powers is a desirable thing because it tries to prevent the concentration of too much power in a body, group, or person. The Bill of Rights and constitution specifically LIMITS the powers of the federal government. America is an experiment in government that is no longer running, but its edifice is still there - which does not scale because it was designed _not to_.

Any power or service the federal government was not designed to own is reserved for the individual states. All the wealth transfer programs, pension plans, and public services we have now federally can be delivered by the states. So yes, there is a "design" there, we're just not adhering to it.

And when it all reverts to the states, then we can have real fights over what's the "right thing" for the state to do and where the dollars go.

The problem with doing income redistribution at the state level is that citizenship is at the federal level. If Ohio decides to have a state welfare system and Michigan doesn't, Michigan's poor move to Ohio and the system collapses.

A good solution would be to create a universal basic income at the federal level funded by a no-exceptions flat tax on consumption, which keeps the federal government simple, and then let the states do everything else.

I love the idea of a no-exceptions flat tax on consumption. However, our GDP per capita is only about 53k. If we need to extract about $6.3k (a number I pulled out of my ass - this is about the current IRS standard deduction and is about $500 per month), we'd need about a 12% tax on every single financial transaction.

I am afraid this 12% tax will drive a lot of our economy underground forcing us to raise rates. How do we prevent that from happening?

https://www.google.com/search?q=us+gdp

VAT is the usual way. The total tax ends up being 12% (or whatever), but it ends up being a much smaller percentage of the total price at each stage because it's collected throughout the supply chain. And then business customers want to make sure the tax is being collected because they can't deduct the already-paid tax when the item is resold if it wasn't reported by the seller.

How does vat work in other countries? Is it one rate across the country? Do provinces and local government get any of this money? Are they banned from imposing an additional sales tax? I'd think you don't want additional sales tax if you have vat but then you'd lose some revenue for local government.

The simplest way to do it would be to add e.g. 8% to the VAT and then give that part to the state where the buyer lives to use for whatever they like. But there is no inherent reason why states couldn't keep their existing sales tax instead. I mean you never want additional any tax, but the money has to come from somewhere.

And having welfare programs in today's America draws the poor from other countries. Not sure how what you're describing is any different, just a different scale. Every year around springtime, hundreds of homeless will literally start a trek from Portland OR to Berkeley CA to get enrolled in their generous welfare programs. What you describe happens already.

You can believe that churches and governments can easily match and surpass whatever the federal government can dish out once economic power reverts to the States.

> And having welfare programs in today's America draws the poor from other countries. Not sure how what you're describing is any different, just a different scale.

The difference is, as already mentioned, citizenship. The US is under no obligation to provide welfare benefits to foreign nationals or grant them citizenship. US states have no equivalent way to prevent low income US citizens from moving there and claiming benefits.

> Every year around springtime, hundreds of homeless will literally start a trek from Portland OR to Berkeley CA to get enrolled in their generous welfare programs. What you describe happens already.

How is the fact that it actually happens supposed to disprove it?

I was just trying to allay your fears of invading hordes seeking the heavy train of benefit heavy states. Such migrations happen today, legal and not. A lot of business owners profit off of the illegals, whose presence is subsidized by government. Very wicked little underclass we maintain, not quite slavery in modern times, but still...

Perhaps when the States have to administer their own welfare programs, it will no longer be profitable for the individual states to shoulder the burdens of hosting the underclasses when neighboring states will not. Sanity might return to the immigration debate, it could be a really good thing.

> Perhaps when the States have to administer their own welfare programs, it will no longer be profitable for the individual states to shoulder the burdens of hosting the underclasses when neighboring states will not.

That was kind of my point. It isn't profitable already. Increasing the magnitude would make it unsustainable. There just wouldn't be any states offering the same level of welfare programs as the federal government currently does.

> Sanity might return to the immigration debate, it could be a really good thing.

Federal universal basic income to all citizens as a replacement for existing welfare would do the same thing. Immigrants who cut the line wouldn't get it (and all the other welfare programs would be gone), which would make living here too hard to be worth breaking the law. Then we could correspondingly increase the number of legal immigrants we accept because we'll have more capacity to integrate new legal immigrants without the people who cut the line.

> It isn't profitable already.

No? I'm glad you caught that. Illegal immigration IS profitable, that's why it continues to happen. The advocates seem to cross political lines too, everyone must be profiting from cheap labor.

I love unsustainable pants-on-fire arguments like this. Any country or state that is being overrun in a truly unsustainable way either ejects the invaders (or does worse to them) or ends up conquered.

> Federal universal basic income

It's fun to imagine how one would tinker with the system, but you're just rearranging the deck chairs on the titanic.

And the accountability ends up causing waste. A basic example I've given before is when you can't go and buy the cheapest thing because you have to prove it is the cheapest thing, which you can't do without a review (because people abused this is the past). The end result is that the cost to approve the cheapest option is so high you stick with a more expensive option that is overall worse, but currently considered the best.

Imagine a programmer who has to document what they do every quarter hour of their work day to ensure accountability to auditors looking to reduce waste. They end up wasting more time documenting what they do than you end up saving.

No one takes this argument seriously because the people who use that argument usually want the government to do so much that roads are tiny fraction of what they do, or in a lot of cases, are outright hostile to roads altogether.

> You meant "cost for government," right?

Well, depends on if you want a government capable of affording to pay for public education, roads, military, etc.

I mean if you care about none of these things and want the government completely destroyed, a 50% revenue cut might seem okay to you.

Of course I care about those things. I simply think that government is not required to provide them.

So who provides them if the government does not without falling into the tragedy of the commons and/or cutting off the poor from access to such services?

James Tooley has done fascinating work on private education for the poor around the world, putting the lie to the myths that private education is only for the wealthy and that the government must provide education.

There is an excellent EconTalk expisode[1] with Tooley, as well as a lengthy article here[2] by the author.

[1] http://www.econtalk.org/archives/2014/12/james_tooley_on.htm...

[2] http://educationnext.org/privateschoolsforthepoor/

1) What does that have to do with roads, military, etc?

2) His argument still would fundamentally function as a regressive tax burden greater than the existing tax burden [for education] on the poor.

3) A fee-for-service regressive tax burden will ultimately cut the poor off from services.

> With a minimum wage of about $33 per month in the area, monthly fees in the private unrecognized schools are thus about 12 percent of the average monthly earnings of an adult earner.

You do understand in the US the poor aren't paying 12% of their income to send their kids to school right?

https://www.nationalpriorities.org/campaigns/military-spendi...

http://taxfoundation.org/article/summary-latest-federal-inco...

The full federal tax burden for education, infrastructure, etc. on the poor is ~3%.

http://taxfoundation.org/article/state-local-tax-burden-rank...

If you factor in the state-and-local burden, the full burden is barely higher at ~13%. So for literally one service, the cost is nearly the entire tax burden for the poor.

Sounds good in theory, but practice that's silly. No business buys $5 billion bridges, like the new one being built now in NY cruising the Hudson. No business buys $5 billion airports, like Denver International, and the latest estimate to renovate LaGuardia. That requires a sovereign to borrow that much money in a way that lenders trust will be repaid.

If you want to argue governments act in part to facilitate waste and fraud, i.e. those airports and bridges don't really cost that much, I agree, but unless there's aggressive auditing attached to every project, I see no way around it. Enough people are sufficiently dishonest and greedy they will take if they can get away with it.

So the math in play here is "what are public goods? non-rival and non-excludable.

There! Done in one :)

Well, it's also a cost for private society:

Imagine you're an IT contractor that needs to bill international customers for your services. In Italy you have to pay very high taxes since being an independent worker you fall in the same category of those who can easily dodge taxes although you're not in exactly the same position: the government treats you as a thief by default and puts you up to a taxation level that makes sense only once that it's assumed that you will only declare about half of your revenue.

This is actually a big problem and has severe repercussions on the ability to spawn new businesses in Italy.

You can't have "privacy, but".

Either you have privacy and accept that sometimes, some people are going to use that privacy to commit crimes (such as dodging taxes), or you don't have privacy. If there can be an exception to privacy because tax, then there can also be an exception to privacy because terrorism.

Yes. But our society have had so much freedom for so long they can't imagine that they need to make an active effort so that it remains that way. It's not limited to freedom. Ecology is the same. Resource managment is the same. Weigh loss is the same.

When one is quite ok right now and that he/she needs to spend energy and think, and take responsability, for what's going to happen way later, it's rarely done.

So "privacy but" are going to win. Because it takes thinking and effort to fight it. And what for? Righ now, i'm alrigh.

Lets put that theory to the test, lets imagine a world where each transaction is added to companies and private citizens total tax record, and then all details are imminently deleted. At the end of the day, you get the same total sums as if you had all the individual transactions, but you can't derive any additional information. Would this be an acceptable deal for introducing a cashless society? My conclusions is that the banks would not accept it, and the government would not accept it. By default, cash would thus continue.

Banks would not accept this deal, as they need the customer data for data analyzes and market research. It is also a resource to be sold in some places or to be "shared" by "partners" like insurance companies and marketing firms.

Government would not accept it, since if the tax department get this then a dozen other department also want it. Police, secret police, and prosecutors want to dig for dirt, and has a long history of ignoring anything that would benefit a defense. Social security want to dig through it in order to skip doing a real assessment of a person (having dept is a good sign, and a buffer is a sign that the person should be denied help). Political parties and political research wants to analyze it and draw conclusions without having to talk to people and do polls.

I do not want someone else to analyze my transaction, and if they have to, I want safeguards that prevent incorrect conclusions to be drawn. As it stand, there isn't any, and its barely even recognized that I am a stake holder with any rights over the data.

Exactly the same thing happens in Greece. It used to be very common for shop-owners to "forget" to give you the receipt. After the crisis broke up though people are way more likely to ask for receipts as there are some incentives to do so (minor tax cuts for a specific amount of receipts etc.). Credit/debit card transactions have also tripled since 2008 or so which is good I guess. Things are different with doctors, lawyers etc. though, since virtually noone accepts cards and sometimes you might even need to argue with them to actually print you one. Thus you have some ridiculous incidents of doctors with apparent annual income of 9000 euros which is ridiculously low even for lower class standards. It's getting better, but it's a whole culture that needs to change for these incidents to cease. People using credit/debit cards is a step to the correct direction. In our case a cashless world might even be good.

Does the government not prosecute obvious cases of tax evasion (9000 euros example)? That's what would likely happen in the U.S.

It should but it doesn't (or didn't). Up to recently there was practically no investigation on such cases and tax evasion on such circles was rampant. You drive a BMW, run a private clinic in an expensive area in Athens and your annual income is 10k euros. That's OK, I mean why would you lie to me? OK, I'm probably exaggerating but you get an idea. Since 2013 or so there is some effort to audit professionals with such declared incomes but it is practically impossible to check a backlog of 20+ years of cases especially with the glacial pace that the revenue services move.

Skipping taxes and using cash is only a problem if it's too widespread and the government really has genuine trouble collecting money even for the most basic needs of the society. Luckily, using cash to evade taxes is practically only possible for small entrepreneurs who can manage maintaining both the real income flow and the official income flow, and these people are also those who benefit from it the most.

It's the big businesses who practically need to log all sales and transactions by the book. Companies which have lots of employees and locations can't possibly maintain such double books in practice, not to mention keep it secret. (They can try smart "tax planning" via remote jurisdictions and tax havens though, which on the other hand isn't generally available for the local entrepreneurs.)

However, if you buy a lunch or pay your barber with cash, is it right that he gets your cash and the government gets nothing? Wrong. The minute the bistro owner or barber goes buy food from a chain store or fills up at the petrol station, VAT and other taxes will be paid and the money will re-enter the official circulation.

At best the money will bounce a few times between a few local entrepreneurs until it eventually becomes taxed again. How much effort is worth spending trying to chase these pennies?

What if efficient taxation reduces the amount of transactions? This happens all the time, and then both the tax man and the entrepreneurs lose.

What if all that unaccounted local cash flow actually lubricates the economy, making better and more efficient use of money, and thus generates larger total taxable flow of money?

The percentage of untaxed cash flow also serves as an indicator of how aligned people are with the government taxation level. If people are willing to make lengthy efforts to avoid taxes repeatedly, then maybe taxes are too high. If they only do it when it's convenient or for local shops, then maybe everything is close to fine.

It's not so black and white whether it's a "huge cost for society" as it's also "beneficial to society". The question is about trade-offs which need to be balanced, not overruled.

The downside is not simply in the value of the missed taxes; it's the fact that the best business is now determined by tax evasion capability.

Instead of "the most dominant market players are the ones with the best products", we get "the most dominant market players are the ones who have some combined aptitude in product value and tax evasion". That is, some resources are wastefully diverted to tax evasion instead of to making better products.

A smart dude who could have been working towards self driving cars is instead finding ever-cleverer ways to hide money or game the tax code.

Ok, so that gives us two options:

1) make taxes impossible to avoid. Problem: tax code is written not by the few tax-evading small businesses, but by the many tax-evading large businesses, who won't be spending less on getting loophole-filled laws written. So this plan won't work.

2) force people to pay less taxes, such that they cost of evading is higher than the cost of paying them.

There's a super easy fix for that, if the people have the will to demand it: require receipts for all transactions, allow consumers to report business who do not give receipts, and have large fines for businesses who still don't. Offer cash rewards to consumers who report businesses that are repeat offenders.

Italy does that. You are fined if you cannot show a receipt as a customer. People still want discounts.

> You are fined if you cannot show a receipt as a customer.

Italy fines the customer rather than the shop keeper, or did I misunderstand what you said?

> if the people have the will to demand it

I think Mitch Hedberg put it best: I give you a dollar, you give me a donut. End of transaction.

What's a consumer's interest in asking for a receipt? Especially when you can get a discount instead?

> require receipts for all transactions, allow consumers to report business who do not give receipts

You incentivize compliance through monetary awards for reporting offenders.

So I guess I'm curious about how Italy's system works then? It's an empirical question, how much money would I have to be offered to turn on a system of convenience and perhaps monetary discounts? (I'm not considering the downside of off the book transactions as a consumer, I realize).

I'm assuming for it to work in Italy, you would have to make the reward for reporting non-compliance higher than any discount a business owner could offer.

It would presumably need to be several orders of magnitude higher as I would probably buy more donuts than I would submit non-compliance reports. And let's not forget it's the government that's running this - they don't necessarily need to turn a huge (or any) profit to make this work in the long term.

  Donut with receipt:    $  1.49
  Donut without receipt: $  1.00

  Taxable reward from
  gov't for reporting
  non-compliance:        $500.00

The government would also have to worry very little about profit because the fine for not giving customers receipts could be higher than the reward for reporting non-compliance, which makes the system self-funding.

If I find dead insects in my donut, I'd like to have evidence that I actually bought a donut from them.

What are you going to do with that evidence that walking back to the shop won't accomplish? If I'm too far away, I'll throw the donut in the trash. If I'm nearby with nothing better to do, I'll stop back and ask for a refund.

Nothing about that practically requires a receipt. If I'm denied a refund when I go back with an insect-laden donut, I can make enough ruckus in the shop to get my entertainment value's worth. I don't really need the $0.75 anymore than I need the donut...

Actually I would send it and a photo of the donut to the local health and safety regulators. I don't care about how much I spent; I care about not having it happen again.

>What's a consumer's interest in asking for a receipt? Especially when you can get a discount instead?

Because some people need an alibi. Patrice Oneal put it best: https://youtu.be/RrBPmoIAyts?t=100

"There's a super easy fix for that, if the people have the will to demand it: require receipts for all transactions, allow consumers to report business who do not give receipts, and have large fines for businesses who still don't. Offer cash rewards to consumers who report businesses that are repeat offenders."

This already exists and is in wide use in China. It's quite interesting.

If you go to a restaurant in Shenzhen, for instance, you are issued a stack of scrip whose denomination matches (to the nearest ten, IIRC) your total bill.

Those little paper slips are lottery tickets which award real cash prizes:

http://engineerinshenzhen.com/chinas-receipt-lottery/

> Here in Italy the big issue is that many business will just not declare cash transactions. It's pretty common not to be given a receipt when buying a coffee and often when you visit a doctor they'll say: do you want the invoice or a discount?

1) Require receipts for all transactions.

2) Offer 10% of recovered cash for anyone you report who doesn't follow #1. Add the penalty on top of any recovery [e.g. Current Fines + 10%]

3) https://www.irs.gov/pub/irs-utl/cashchapter4_210632.pdf

4) Taiwan-style receipt lottery [ http://www.tealit.com/article_categories.php?section=living&... ]

Portugal has implemented 4) a couple years ago.

It seems to me the most unscrupulous businesses in the United States all do their business by the books. No need to fudge it by failing to declare revenue. They just don't pay taxes, and it's all legal.

Cash businesses here do exist. My mechanic only takes cash, and he's a lot cheaper (and, incidentally, better and more honest with his customers) than other mechanics I've dealt with. I wonder how the IRS deals with that. I know that with people who get tips (waiters, hairdressers, etc.) they assume a certain percentage of income from cash tips.

So what is it then that makes this kind of fraud common in Southern Europe but practically nonexistent in Germany? (judging from my experience)

It's that nebulous thing called "cultural factors".

There are two stable equilibrium points in a society, one where most people play by the rules most of the time and one where most people ignore the rules most of the time. It's quite difficult to shift from the latter to the former; it seems to be historically associated with Protestantism, which itself could be seen as a movement to ""clean up"" religion from corruption.

Read Tacitus' writings on Germania. While the Mediterranean and Near Eastern peoples were issuing violently long-winded, and ultimately hollow, discourses on the subject of ethics, Northern peoples were holding to faithfully monogamous marriages and living in small communities in comparative peace. What the Southern peoples preached the Northern peoples lived.

Yeah lets look back to a 2000 year old mistly fantasy document that romans used to moralise their own society for our own explaitions. That seems like a great idea. Its not like that line of thought ever had bad consequences.

I'm going to treat this like a real comment instead of a sarcastic quip.

The reason we go back to '2000 year old [not sure if 'misty' or 'mostly', both work in interestingly different ways] fantasy document[s]' is because there are universal truths about the human condition. The value of a statement is not in its newness or its antiquity; it lies in the truth of the thing being said. Brashly rejecting an idea because it is old has the same merit as rejecting an idea because it came from a woman - that is to say, none.

There will always be ways to evade taxes and the problem with Italy, Greece and other southern societies is not technical but a weak government which can't impose the already existing laws to their citizens, public workers and politicians themselves. Going cashless is not an excuse for an incompetent tax office and Ministry of Finance.

There will always be ways to evade taxes, but the harder we make it the less tax evasion there will be.

You could also say "there will always be crime, but the harder we make it the less there will be."

Technically true but useless for evaluating the cost/benefit of any specific proposal. If the question is, is it worth pervasive mass surveillance, the answer is no.

I don't know for Italy, but in France, you litteraly can't start most business without doing 20% of your money off black market.

Once you are big enough, it gets easier and you can go full legal, but to start, it's terrible.

>>let's remember that this kind of hidden economy has a huge cost for society and it's very widespread in southern Europe.

Any where, where there are cash transactions this is an issue. In India, apart from salaried people taxed at source almost anybody else rarely if ever pays taxes. Its assumed taxes are only what stupid people pay.

And since they make up for a huge vote bank, any move to introduce reforms for cashless payments are resisted. Plus contribution to political parties happens in cash so politicians themselves don't want it.

This leads to a situation where the tax burden is expected to be endlessly on the salaried middle class and they are expected to pay up unfairly all the time.

Privacy aside, the true reason is people just don't want to pay taxes.

Mostly I think that peoples support for paying taxes is proportional to the perceived value they receive from them, and how fairly they are being applied (c.f. Denmark vs. USA - and note that "perceived" is important, and subject to manipulation)

I don't know the details, but plausibly could you argue that India's real problem lies in government inefficiency and/or corruption?

>>plausibly could you argue that India's real problem lies in government inefficiency and/or corruption?

Your are assuming corruption is an phenomenon that is generated in total isolation without other factors contributing to it.

Both government inefficiency and corruption have roots in lack of accountability.

I suspect you can chase the turtles down quite a ways - and I already specified I don't know the details.

It wasn't really about India but about the idea that people somehow inherently dislike paying taxes, rather than feel like they are getting ripped off when paying them. It's a complex issue regardless of the country and culture.

> has a huge cost for society

Has a huge cost for the government, yes, but whether or not its a cost to society depends on the marginal benefit of the government having that dollar, vs the marginal benefit of keeping that dollar in public hands.

A corrupt government would be the extreme case of where that dollar is likely best kept from the tax man, but this is far from exclusive to corrupt governments.

This is exactly what happened to Greece (my in-laws are Greek). Greeks and Greek Americans are completely cash based. Consequently the government has no idea how wealthy its residents are and tax evasion is extremely rampant. I'm sure that isn't the only reason to Greece's problems but I bet it did have a huge impact.

>>I'm sure that isn't the only reason to Greece's problems but I bet it did have a huge impact.

These sort of problems run quite deep and have unintended consequences.

If money is not traceable, you also give way accountability. Opening up a door for corruption to happen easily, unchecked and unaccounted for. Rinse - Repeat for some time and you will see there are new problems due to corruption, which breed other new problems and so on..

And what about people who are only paid under the table, and the people who employ them? I'm thinking of day laborers. Regardless of anyone's legal circumstance they need to eat; under the table work serves as a safety net, regardless of the tax issues.

I don't think we have to go that far south to see these things happening. Here in Amsterdam the other day went to pick up the car from the garage I was amazed when the guy told me that I had to fork out 700 EUR cash only.

In Brazil this practice is also pretty common.

The more untrustworthy/incompetent/reckless the government is handling taxpayers' money, the more often one sees this kind of behaviour.

That are mostly the smaller companies (at least in Germany). The bigger corporations also avoid taxes, but the legal way and with electronic transactions.

First politics should do something about this!

That's not uncommon in the USA either. Restaurants, salons, convenience stores. All businesses that deal with a lot of cash and you can easily hide income from.

Why is this phenomena a cost to society? By this phenomena, real prices are able to decrease, with all the concomitant benefits of having reduced expenses.

Almost all Euro govts have >100% of their country's total revenue in debt. If prices were to go down, they're completely screwed. If prices go down because you starve the government's income ... that's incredibly bad for them.

(when prices go down you have to pay a bigger percentage of your income to serve the same debt)

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