Taxable activity in open money and LETSystems

Many activities for which payment is made are subject to taxation by a government, and it makes no difference at all whether the payment is made in legal tender (the government's own money) or in a local currency. In either case, the payment must be made using legal tender because that is what is accepted by the government's taxation body (whatever it may be). This is why the local currency used in such a situation must be metrically equivalent to the legal tender in use in the same location.

Whatever service is provided to manage the payments and accounting in such a local currency, the responsibility for the declaration of taxable activity lies entirely with the agent (account holder) receiving the payment. It is in no way the responsibility of either the stewards of the local currency or the providers of the payment and accounting service used. In fact, the stewards of such a local currency would generally regard its account holders' activities as none of their business; they simply provide a service to those account holders.

Should potentially taxable activity come to the attention of the relevant authority without having been declared, it is the responsibility of the account holder to settle any valid claim using the evidence provided by the payment and accounting service. There is generally no reason for such an event ever to come to the attention of the payment and accounting service (the stewards of the local currency used).

However, in the event of an account holder attempting to deflect blame on to the payment and accounting service provider (whether the local currency's stewards or the system administrators managing the service at a lower level), or claiming ignorance, or claiming to have lost the relevant information, the latter must be in a position to defend its reputation and integrity. In this case, the stewards need only extract the relevant transaction records from the archives and pass these, in confidence, to both the account holder and the contacting agent of the tax authority involved.

Furthermore, where a greater burden of responsibility is imposed by the local jurisdiction (for example, AML standards), the stewards of the local currency in use must accommodate this. Whoever chooses to provide an open money payment and accounting service will necessarily require the stewards of any local currency affected to make known to all account holders that reporting obligations apply and will be observed.

Where the local jurisdiction requires proactive reporting of potentially taxable activity, it may be impossible to avoid requiring account holders to provide whatever unique identification code is recognized by the tax authority. In the UK, for example, this would be the NI (National Insurance) number.