The LETSystem Design Manual

4.2 Taxation

Some observers have noted that LETSystems can be used to evade taxation and some have drawn unwarranted conclusions. There is a prevalent perception that government is in some way separate from its community. Most people regret or resent the taxation of their production and few are satisfied that tax revenues are well spent. Government in turn seems to wage war on the community to extract its revenue. Hence we perpetuate a "them and us" scenario without hope of resolution.

Landsman Community Services Ltd. deplores the practice of tax evasion and will not knowingly lend support to persons who are thus defrauding their community. It will continue to recommend to LETSystem administrators that they clearly advise its membership that local currency in no way differs from national currency in matters of taxation, and that persons incurring tax liabilities through local currency trading are advised to make appropriate provision.

Certainly, there are ways to set up systems that effectively avoid tax. Some of these ways are quite legitimate. However, such systems will equally be avoided by business, and as such will only have a limited and indirect relevance to the mainstream.

We don't argue that such systems are therefore useless, or risky, or unethical - although some approaches do score 3 out of 3; just that fighting battles against governments, for whatever justification, should not obstruct or obscure other approaches that make the best of the current rules.

Certainly, we should work to change tax laws, but it would be a mistake to commit all our eggs just to that basket. Fortunately we don't have to; we can establish as many systems as we like.

We will have our cake - a sensible tax structure - in the end, but we can also eat it and like it right now. "I never yet turned down earnings just because of the tax I would have to pay. I can live with cash taxes on local currency trading better than I can handle taxes with no local currency".

It is in addition considerably more difficult to deal responsibly with issues of welfare and other social services - which are much more immediately relevant to the growth of a LETSystem - if we are seen to be resisting paying tax.

Advice to government

LETSystems are founded on the basis of community self-help and personal empowerment. Problems within the community are addressed by the community. Intervention by local and national governments will be necessary rarely, if at all. Since this approach is different from many other current initiatives, some guidelines are suggested:

Governments SHOULD

  • study - local currencies are going to change dramatically almost all aspects of government action - revenues, budgets and programs - so government has a high need-to-know.
  • inform internally/externally - in addition to becoming aware of the situation and the possibilities, governments can and should play a role in informing the general population, much as they do in matters of public safety, health care etc.
  • co-operate, facilitate - in general terms, in any appropriate social change process, the government role should be to help it along.
  • underwrite, guarantee loans - financial support can legitimately be provided through programs of loan guarantees, in support of system development, but NOT system operation; conventional lenders (banks etc) have not yet shown much interest in supporting these ideas.
  • exempt (partially) earnings of welfare claimants - present social security arrangements discriminate against claimants who participate in local currencies, in that they generally lose a £ of benefit for every £ they earn; sliding scales should be implemented, relating on a local basis to the extent to which "local" earnings can actually be spent to meet statutory needs.
  • participate - governments are obliged to perform their function efficiently, using the tools available; local currencies are available
  • accept taxes - no good reason not to.
  • internalize - the interactions of different departments within any organization, private or public, can be supported by internal currency system
  • plan - draw up capital budgets for infrastructure, respond with changes in ongoing program financing.
  • issue bonds - government may not directly issue money, but, much as they borrow "normal" money, they can in some circumstances borrow local currency
  • review economic development and trade strategy - governments should reappraise their position on "growth-and-export-or-die" policies. The "lean and mean competitive global market" is a dangerous solution to the current problems. There are better ways to go.

Governments SHOULD NOT

  • panic - the first response in crisis
  • overlook - “if we don't think about it it isn't there”.
  • resist, fight - quite useless, if you are surrounded.
  • remain ignorant - very expensive, much more so than getting informed.


  • start systems - it isn't appropriate to get involved, and direct action will likely be viewed with great suspicion.
  • make grants, subsidise - LETSystems are inherently profitable, if properly operated, and it does not serve to support inefficiency; there are better ways to provide financial support..
  • commit - governments may NOT issue local money, since they are, in all relevant respects, "irresponsible" institutions (no-one can guarantee to keep their promises)
  • dominate - government accounts could easily become the highest volume traders in any system and might thus tend to skew and destabilize; the prohibition against commitment by government will reduce this risk, as they can only spend what they are given, but even with this limitation, LETSystem stewards must be wary.

Landsman Community Services Ltd Paper No.4.2 Version No 1.3 17 August 94
Written by Michael Linton of Landsman Community Services Ltd. and Angus Soutar of Robert Soutar Ltd.
Compiled 10-01-95 by Andy Blunt and Adrian Steele of LETSgo Manchester
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