I’ve requested this internally as a feature of the implementation, at least. We’ll see how it goes.
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John
Will it be well indicated before you process the minting of your maturity if you will have an extra 5% or be penalize 5% for the new minted ICP?
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The best that can be reported in the UI is an estimate, since there is a required 7 days of uncertainty. This period of unknown volatility will induce a range of possible values, and I’m hoping the UI will report that range, so that you know which size dice you’re rolling.
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Don’t you think it would be much preferable to establish the exact amount at the start of the process, before the 7 days delay to eliminate uncertainty?
I can imagine an investor starting the process thinking he is in the good + 5% slot and then end up with a 5% lost after the irreversible 7 days waiting time.
That would generate a 10% difference, wich is quiet important.
Can we make a suggestion for this?
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There is a formula documented in the original post. My interpretation is that the majority of the modulation is determined from past trends, which means that it won’t swing from one extreme to the other. So while we won’t know the exact modulation amount, it seems we will have a decent idea.
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The reason the modulation exists at all is to induce uncertainty in the amount received. If it could be known in advance, there would be no reason for it.
Is there a solution for people like me who believe the maturity is taxable and want to declare their rewards properly and precisely (establishing a value every day for the rewards), and report each year?
Any chance to keep the actual system too and have people decide to opt-in the new one?
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I have asked for functionality to be added to make this opt-in, but the decision is not yet made. Since it was not part of the proposal, I can’t guarantee it will happen.
It would be great if the existing Merge Maturity functionality (perhaps better described as “Mint and Merge Maturity”) could be retained in the new system.
The conservative approach for neuron holders in the US is to treat daily maturity as a taxable event. If you want to compound your voting rewards under the new system, the built-in option is Stake Maturity, which does not mint ICP and is essentially incompatible with paying taxes on daily maturity. If you’re playing it safe and paying taxes on daily maturity and you also want to compound your rewards, Merge Maturity is a much better option because:
- Merge Maturity wouldn’t be subject to the +/- 5% modulation, so you’d know exactly how much to pay taxes on.
- The minting happens in the same year you pay taxes on the rewards (and your cost basis on those rewards is set).
To simulate Merge Maturity in the new system, the best you can do is to Disburse Maturity, wait 7 days for the +/- 5% disbursal, and then stake that ICP back into the neuron. Then you’d need to modulate the daily maturity that you’re paying taxes on by the +/- 5% of the disbursal. That’s doable, but it’s a lot of hoops to jump through for someone who just wants to play it safe regarding taxes.
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What if there was more than one type of neuron, and you could create a neuron that did away with the whole concept of maturity? Daily rewards are in minted ICP. Rewards ICP can be auto-merged daily, manually merged, disbursed, or just sit in the neuron as unstaked ICP. Rewards would function just like bank account interest or stock dividends.
That’s probably not popular for a number of reasons, but it might align better with tax laws/guidance than either the old system or the new system, and would work for those who pay taxes on daily maturity.
I realize this proposal has already passed and the time for debate may be over, it just seems unfortunate to implement a system that doesn’t include easy options for people who are just trying to follow the current tax laws/guidance.
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Just so that you know, here is the request I put into the system:
Since the modulation feature is for tax regimes where it could help the “imminent domain” argument, what about countries where it is definitely not needed for taxation purposes at all? Should those users bear the modulation risk since they don’t need that functionality?
In those cases it would useful to be able to turn modulation off at neuron creation time, such as splitting off stake into a neuron where the feature is off.
In cases where one splits off a neuron that changes the modulation flag, no maturity would be split. If the modulation flag remains unchanged, however, then both stake and maturity will be split. Whether or not the modulation flag is enabled for existing neurons should be an “opt-in” decision.
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If we can all accurately assess the maturity of ICP generation +5% and -5%, when the ICP generation does not balance, does this ICP need to come from inflation? Or does it come from further curtailment of voting returns?
A series of proposals will be soon send to NNS in regards with this thread. I am asking Dfinity to delay the implementation until the first vote.
The first vote will indeed be on delaying the implementation of the new feature
There is too many uncertainty with the new rewards system. As an example, still, too (if not all) many people do not understand how the +5% or -5% works exactly.
There was no rush to proceed with the vote because those changes do not slow in any way the growth of the IC ecosystem. In fact, the complication of the new system may even cool off investors (especially those who want to diligently pay their due taxes every year) from locking up their ICP.
And the delay voted in this first proposal would be until the other proposals are initiated and voted.
The second vote would be to save the actual reward system as an option for investors locked already and want to calculate and pay their due taxes diligently, including the ICP selling requirement to do so. Right now, investors can calculate precisely everyday the value when they merge or mint their rewards with the daily price of ICP. If they do at noon everyday, always the same way, they obtain an accurate amount to report to their tax jurisdiction.
A third proposal would be to let investors to unlock their neurons (if the option 2 is voted NO) as there are important changes that interfere with the precise calculation of taxes. I believe Dfinity or other investors should not vote to interfere with the precise calculation of taxes, preventing investors to be crystal clear with their income tax reports. The year 2021, because of the actual system, is great in this view.
A fourth vote would possibly be done after a conversation here to define the role of Dfinity as far as programming and keep them away from taxes management programming.
Of course, if Dfinity have a way to calculate precisely the rewards value everyday (with the 5% up or down) and I missed it, they are welcome to explain to investors how to calculate and pay their taxes diligently and precisely as we could do in 2021, and until now
The ultimate goal is to not interfere with investors that want pay their taxes precisely or let them out.
All comments are welcome and hopefully we can find a solution that would suit everyone.
thank you
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Even if I am not concerned by this tax question since I am a French, I am very sensitive to this point because lastly, a taw lawyer explained to me that, as a staker, we are member of a DAO, and that we have to be very cautious with all attempt of tax avoidance, because as member of this DAO, the IRS and every tax jurisdictions from any country will come for members of the DAO. We can’t think "not my problem, Dfinity’s problem if IRS or any tax jurisdiction come for someone about some reprehensible avoidance, etc, » because EACH member of the DAO will be considered as an actor of such an avoidance. So let us be very careful, and I can only advise people to keep calculating the due tax diligently. I know that @coteclaude already spoke about this earlier, but since I have friends in this ecosystem now, I have to insist : don’t act like if the DAO was protecting you in case of tax hunt, because we became responsible; as staker, of any future reprehensible tax avoidance. So, even if you don’t merge once this new model adopted, KEEP calculating as if you were merging, applying the +5%, to not underestimate what you would have to pay eventually, even if you had not merged.
This tax lawyer is a reference, specialized in crypto : https://www.youtube.com/watch?v=Py1SnL9V5aE. If you understand French, you can listen the fifth part, titled “DAO regulations”. And he says this, whereas in France, we don’t even have to report to the IRS yet. So I would be more cautious if I were in a country where IRS already taxes this. I will translate it to you, or you can use an automatic translator. He explains this at 21m20. As he says : “we can’t think with the current state of things, my role is not applaud people for their current legitimacy, we have to anticipate what will happen in 3 years”.
And he really awoke me about my taxes responsibilities as a DAO member, and as he says, “if you do this, pray the North Star, and don’t fool yourself, you will have to explain yourself one day, because the governments have the time, they take their time, but they will do, and they will look back what did people”.
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The first proposal to delay the implementation of the reward maturity changes has been initiated. It is only asking for a delay for implementation so I believe these is no debate needed since there is no structural change, programming involved.
Another 3 proposals will be initiated with a debate in the forum
Please see the proposal and vote accordingly: Internet Computer Network Status
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Very good point, my friend. We should periodically have an educational governance proposal stating that everyone should " KEEP calculating as if you were merging, applying the +5%, to not underestimate what you would have to pay eventually…regardless of whether motion passes or not. At least we will be on record.
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You should have made a separate thread and let the community discuss a bit before creating the proposal
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I have run this by some tax lawyers and GAAP specialists at the firm I use. I have been told the revenue accrues daily regardless of this silly 5% modulation. I have a call later this week with them for how to treat this modulation to account for the penalty/or bonus.
Btw another way to look at it is that 95% is certain and that there is a possible 0-10% bonus on day 7.
Would love compensation from the DAO for making me spend money on the additional tax advisory and consulting 
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Perhaps they can build a tool that keeps NNS transaction records for each account that way people can easily calculate their taxes and report as they apply to them. I wholly support the current proposal but if there is anything that can be done to address the concerns of the people against the proposal then it should absolutely be done.
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The actual proposal is only to ask for a delay so we can discuss the other 3 proposals.
I did not see the value of discussing if we need a delay or not. It is obvious that we need one if the community and Dfinity are open to listen and discuss and find solution for all of us who believe the maturity is taxable no matter what and want to pay their taxes genuinely.
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