G7 Global Tax & BTC Legal Tender

G7 Global Tax & BTC Legal Tender

Dear Readers,

As the developed world gets back to normalcy, leaders and policymakers around the world have once again decided to focus on global cooperation after focusing internally to get through one of the worst crises in the past year. One of the biggest news pieces that have been reported in the past few months, and are now an ongoing agreement, is to increase tax rates around the world to compensate for the monetary and fiscal policies that almost every country in the world had to do, to withstand the economic downside of COVID-19.

In April, it was reported that the US is pushing the G20 to adopt a global minimum corporate tax. US Treasury Secretary Janet Yellen voiced the fact that having an international standard should theoretically end the "race to the bottom" on taxation. Fast forward to June 15, the G7 summit ended with an agreement on global minimum tax, as the world leaders promised to do an overhaul of international tax laws to stop multinational corporations from seeking out tax-havens. However, the G7 effort must face its first challenge from the US, as the US Congress will need to approve changes to the tax code.

In retrospect, the aforementioned tax initiative shouldn’t be shocking. Historically, the US has always been playing catch-and-mouse with regard to its tax policies as administration changes. This time, it can’t be denied that countries around the world do require additional capital to make up for the cash that they spent in the past year. The key here would be on whether other countries would act if the US Congress can’t pass the tax code changes.

What is Money?

Interestingly, at the same time that all of the above happened. El Salvador has decided to acknowledge Bitcoin as legal tender. A move that has many institutions, countries, and finance/tax professionals both excited and confused.

Using the number one platform that world leaders voice their opinions on, Twitter, the President of El Salvador stated that "there will be no capital gains tax for Bitcoin since it will be a legal currency and legal tender". As one would have easily expected, this comment sparked debates all over the world on how Bitcoin should be treated. In this issue, we’re not claiming that we know how things would play out

The more interesting story here is how countries with weaker financial institutions/systems have started to see the power that Bitcoin has to transmit value. When we’re discussing financial independence and how the transfer of value works in emerging markets, Americans often can’t comprehend, or we simply take for granted how good we have it here when it comes down to the strength of our financial system and the level of consumer protection that we have.

If central banks around the world, especially the developed world, continue to do quantitative easing and its equivalent little brothers and sisters, we would see more creativity from emerging economies as they find ways to stay as far away from the dollar system as they possibly can.

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