GOBANKNOTELESS

JAN-FEB 2013|BY GEORGE OIKONOMIDIS, CIVIL ENGINEER, NTUA
If we abolish the existence of banknotes we take a decisive step toward eliminating tax fraud and corruption.

The current economic crisis has generated a lot of conversation regarding tax fraud and tax avoidance, and the problems they pose for public finances. All parties agree that, regardless of the crisis’s deeper causes, better revenue collection would improve the state’s ability to pay its debts, as well as face major social problems such as poverty and unemployment.

The following is a proposal to deal with all these obstacles, and help the country address its severe social problems. This may seem somewhat unbelievable, even impossible, at first glance. In fact, such a solution couldn’t have been discussed even a few years ago. However, with technological progress, such solutions lie within our reach, and the time is now to implement them.

My Proposal: How To Abolish Banknotes

Imagine that, after taking all necessary legislative procedures at the European level, on 01/01/201X the 500€ and 200€ banknotes are removed from circulation. On 01/07/201X the same happens for the 100 € and 50 €. Finally, on 01/01/201X+1 the 20€, 10 € and 5€ are pulled. On this day, a new 5€ coin is introduced.

The tiered time frame will help the public gradually adjust to the changes, and allow the necessary equipment and infrastructure to be installed. It will also provide time for depositing money in circulation at the banks. All transactions thereafter, excluding those of very small value, will be carried out by credit or debit cards, or via internet or mobile banking.

What I Am Not Proposing

This idea, in various forms, has been around for some years now, but usually calls for a totally cashless society. My plan instead calls for the abolition only of notes, not coins, because the downsides of a currency are primarily associated with notes.

This proposal is often confused with another idea, namely the use of alternative transaction units (among them bitcoin). This proposal does not replace the Euro as the official currency with any other form of currency. Instead, the proposal replaces only paper money with information transfers.

Immediate Results

  1. Abolishing banknotes allows European countries to fully supervise their economic and financial activity, allowing them to assess the entire tax base for direct (income) or indirect (VAT) taxation.
  2. The increase in public sector revenues can provide for increased GDP growth and economic recovery.
  3. Higher tax compliance allows for reduced tax rates and, thus, further enhances development.
  4. The government can realize great savings by not issuing banknotes, especially with regard to transportation and security (estimated at 85 billion Euros for the Eurozone alone).

Indirect Effects – Perhaps the Most Important!

  1. This proposal would sharply reduce crime because, simply put, crime wouldn’t pay!
  2. With banknotes removed from circulation, there would be no ground for drug dealing, human trafficking, gun smuggling, abductions, extortion, bribing—not even illegal gambling!
  3. The proposal would reduce the risk of robberies, burglaries, thefts, kidnappings, as well as bribery, corruption, and blackmail.
  4. This would release the potential of the state due to a massive reduction in the workload for a range of public services (courts, police, prisons).

The Response to Common Objections

Many say, “this cannot happen.” In fact, until now, this could not happen because the necessary technology, mainly mobile telephony coverage, did not exist. Now, such a proposal can be immediately implemented.

At the same time, the system of treasury bonds, as well as real estate property (land registries), show us that it is possible to eliminate the violent crime associated with values, provided such values are not immediately tangible and portable.

Why Keep Coins?

Coins serve the small financial transactions of the population (newspaper, bread, candles in church, charity), for which, logically, it would be inconvenient to require any electronic action. Such small amounts obviously do not offer significant value to criminal activity.

Who Will Oppose This Idea?

Organized crime will be strongly opposed to this development. Tax-evaders will also be upset. However, they too will enjoy the benefits of a better and richer society.

Privacy Concerns

Those who raise the issue of surveillance and personal data security should take into consideration that the state can already monitor anyone for whom it has a reason. Also, confidentiality provisions of transactions can be strictly enforced. The system of blind digital signature ensures the total anonymity of the payer, while the payee cannot hide the income.

Extent of Implementation

The proposed transformation can be applied in any country having its own currency. An ideal candidate, the Eurozone may find the solution to be a catalyst for economic and social development, and to help solve the problem of illegal immigration (only legal immigrants would have the means to trade and therefore there will be no incentive for others to enter the market).

Last But Not Least: A Systemic Remark

The proposal does not affect the capitalist system; it can continue functioning undisturbed. At the same time, it ensures liquidity for banks, since all the money will be deposited there. Banks will also benefit from cost savings on safety, and cash transportation. This proposal is a simple but effective tool that functions independent of politics. In any given country, it will promote better state economics and a safer society.

What could be better than this?

A full description of this proposal with a detailed explanation of its functionality, can be found at gobanknoteless.wordpress.com

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