# TAX Compliances

Adhering to tax compliances in CAPA DeFi Protocol is essential for economic vitality and citizen rewards. Failure to meet minimum tax requirements incurs penalties, emphasizing the protocol's commitment to an engaged and compliant community. The penalty starts at 10% for the first instance and escalates to 20%, 30%, and 50% for successive violations. The increasing penalty serves as a deterrent, encouraging citizens to stay active and compliant.

## TAX Compliances Related Q\&As :&#x20;

**Q.** **What is tax compliance in CAPA DeFi Protocol?**

Ans : Tax compliance refers to citizens meeting the minimum transaction requirements by transacting at least 10% of their CAPA tokens every 15 days, ensuring regular tax contributions.

**Q.** **What penalties are imposed in CAPA DeFi Protocol for non-compliance with tax requirements?**

Ans: Penalties start at 10% for the first instance and increase to 20%, 30%, and 50% for successive violations. The escalating penalty is designed to serve as a stronger deterrent, encouraging citizens to remain active and compliant over time.

**Q: How do the penalties benefit other active citizens in the CAPA community?**

Ans: Penalties collected contribute to the Hype Deflationary Burn mechanism, introducing deflationary pressure and potentially increasing the value of tokens for active citizens.

**Q.** **Why is tax compliance important for citizens in CAPA DeFi Protocol?**

Ans : Tax compliance ensures active participation, contributing to the economic vibrancy and potential rewards for citizens.

**Q.** **How can citizens avoid penalties in CAPA Meme Nation?**

Ans: Citizens can avoid penalties by actively participating in the protocol, transacting the minimum required tokens, and staying compliant with the established rules. Regular activity resets the wallet's inactivity timer and helps in maintaining tax compliance. Since it's coded into protocol, one can't avoid or escape penalty if they fail to comply with Rules.&#x20;
