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Let's say that a cult of weirdos run off and buy some land in the middle of nowhere, they establish a company to buy this land and maintain it's payment; they setup their own government, tax their members, and generally build their own little pseudo-state within an properly established nation.

At this stage, notice how what their doing is legal; the company is legally purchasing the land, and renting it to it's members. The company and people are following the law, and both are paying their taxes to the government.

Now, lets say that these people establish their own fiat currency; no matter the reason. They print bills, and auction them off in exchange for dollars, pay their public employees in this currency (let's ignore the minimum wage), and demand taxes and land payments in this fiat currency, as well as demand a minimum wage from the companies in their pseudo-governmental system, and generally establish this fiat legal tender as the currency of choice for their people, eventually stamping out the dollar.

Goods are either created in their economy and exchanged for this currency as it circulates, or are imported from outside, exchanging this currency for dollars solely to make the transaction.

From the governments perspective, if the people using this currency aren't making an income in dollars or yen or whatever the main currency is, and thus aren't being taxed for their use of this otherwise meaningless paper, would this count as a form of mass tax evasion? Or mass tax avoidance? Do governments still demand taxes in some form? If so, how? And does it vary from nation to nation?

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This answer is for the US (at least).

You're assuming that if income is not in dollars or some other national currency, then it is not taxable. That is false. "Barter" income, in which you are paid in other property or services, is taxable just as if you were paid in cash, based on the "fair market value" (in dollars) of the property or services you received in exchange. See https://www.irs.gov/publications/p525/ar02.html#en_US_2016_publink1000229343.

So the employees would be required to report the dollar value of their scrip as income. If they willfully failed to do so, or intentionally gave a dishonest estimate of its value, they could be prosecuted for tax evasion.

Obligatory: https://xkcd.com/1494/

Dale M suggests, in a comment below, that the same rule applies in all other countries. This seems plausible, but to be certain, one would have to check them all, which I haven't done.

  • OOOOOOHHHHH... Now I get it! :D – Tirous Aug 15 '17 at 0:42
  • Take out the first paragraph- every country treats non-monetary income this way AFAIK – Dale M Aug 15 '17 at 1:27

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