> For the complete documentation index, see [llms.txt](https://cakepanda.gitbook.io/capa/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://cakepanda.gitbook.io/capa/capa-defi-protocol/tax-and-rewards-flow.md).

# Tax and Rewards Flow

## **Tax Flow in Cake Panda (CAPA) Meme Nation**

**Initiation:** 

* A transaction (buy, sell or transfer) occurs within the CAPA Meme Nation.
* A 6% tax is applied to the transaction.

**Tax Collection:**

The tax is collected and sent to the Reservo Chef.

**Reservo Chef Activation:**

* Value of assets in the Reservo Chef exceeds $5,000
* An "active citizen" triggers the Reservo Chef.
* Threefold allocation process begins

**Threefold Allocation:**

Assets from the Reservo Chef  are divided into three equal segments:

          i) Hype deflationary burn

          ii) Rewarding with $CAKE tokens

         iii) Funding essential activities

**Divvy Reservo Transfer:**

$CAKE tokens allocated for rewarding are transferred to the Divvy Reservo

**Spell Trigger:**

* The Spell Trigger is activated every two weeks
* Accumulated $CAKE tokens in the Divvy Reservo are distributed:

         i) 25% is immediately distributed to loyal citizens as Spell Divvy.

         ii) 75% is held in the Divvy Reservo for Era Reward.

**Era Reward Accumulation:** 

* 75% of $CAKE tokens from the Divvy Reservo are added to the Era Reward.

**Relaunch Event:** 

* Relaunch event occurs after meeting it's conditions 
* Assets from the Era Reward are redistributed to citizens
* Token supply is reset
* New cycle begins

Understanding this intricate tax flow and distribution mechanism provides insights into the governance and economic structure of the meme nation, enhancing transparency and participation for its citizens.