Electronic Innovation and the Government: A Review of the Co-Predatory Rule

Introduction

In his 2020 article titled “Co-Predatory Rule: International Cooperation with Respect to Cryptocurrency Taxation in Russia and Belarus,” Mignano (2020) introduces the theory of co-predation to explain international cooperation. The ideas presented are supported through an examination of how digitization, cryptocurrency, and technological innovation are influencing the relationships states have with each other (Mignano, 2020). The author observes the novel obstacles that nations are encountering as a result of cryptocurrency, such as disruptions to “conventional taxation mechanisms” (Mignano, 2020, Introduction). The core solution introduced to address this problem is The Automatic Exchange of Information (AEOI) from the Organisation for Economic Co-operation and Development (OECD), which serves as a framework for nations to cooperate to share information and fight tax evasion (Saint-Amans et al., 2016).

Electronic Innovation and the Government: A Review of the Co-Predatory Rule

The author’s core argument is that “globalization and digitization force the state to rely on international organization” (Mignano, 2020, Introduction). Mignano (2020) suggests that cryptocurrency presents challenges to states that they may not be able to handle unilaterally. The cryptocurrency case is examined in depth; however, it is also suggested that the implications may be more broadly applied to the trend of digitization (Mignano, 2020).

Three characteristics of cryptocurrency are presented as problematic for states seeking to maximize revenue through taxation: “globality, pseudonymity, and ideology” (Mignano, 2020, The Theory of Co-Predation). Mignano (2020) claims that globality and pseudonymity inhibit the flow of information that traditional systems of taxation require, while certain ideologies belonging to cryptocurrency users are associated with a non-willingness to comply with regulations.

The OECD designed the AEOI in response to member countries of the G20 requesting a global standard to address tax evasion through information sharing in 2013 (Mignano, 2020). The implementation of the AEOI began in 2017 and has been heavily adopted by member states of the United Nations. The implementation process consists of setting the legal foundation for such a framework to exist in each individual country, establishing the information technology (IT) infrastructure to process the data, and ensuring the data has appropriate safeguards in place (Saint-Amans et al., 2016).

Russia is noted as a member state that has committed to the AEOI framework, while Belarus is noted as a member state that has chosen not to commit to the framework (Mignano, 2020). The remainder of Mignano’s (2020) analysis focuses on discovering what may be the cause of this policy disparity amongst otherwise very similar countries. Mignano (2020) concludes that this disparity can be explained by a difference in perspective on the subject of cryptocurrency. Russia seems to be seeking to collect taxes on income derived from the use of cryptocurrency (Migano, 2020), while Belarus is seeking to foster the use of cryptocurrency in the country, going as far as to declare “cryptocurrency incomes tax-exempt through 2023” (Mignano, 2020, Belarus and Landlocked Offshoring).

Conclusion

The AEOI enables nations to share relevant financial information through the use of a common reporting standard and compatible IT infrastructure (Saint-Amans et al., 2016). This is critical for nations seeking to maximize tax revenue by combatting tax evasion, especially as it relates to cryptocurrency. The bulk of the article is focused on the political ideology that sets the stage for technological innovation to take place on a transnational scale. This may be an important reminder that strategic alignment with the corresponding operational unit is a crucial component of IT planning (Dent, 2015).

References

Mignano, J. (2020). Co-Predatory Rule: International Cooperation with Respect to Cryptocurrency Taxation in Russia and Belarus. Hatfield Graduate Journal of Public Affairs, 4(1). https://doi.org/10.15760/hgjpa.2020.4.1.7

Saint-Amans, P., Bhatia, M., Pross, A., & OECD Centre for Tax Policy and Administration. (2016). Automatic exchange of financial account information. https://web-archive.oecd.org/2016-01-27/238340-Automatic-Exchange-Financial-Account-Information-Brief.pdf

Dent, A. (2015). Aligning IT and business strategy: an Australian university case study. Journal of Higher Education Policy and Management, 37(5), 519–533. https://doi.org/10.1080/1360080x.2015.1079395