Topic: Can governments find a way to tax Bitcoin? (Read 1291 times)

Take Ecuador for an instance. Once they have set up their own cryptocurrency, I am quite sure that it would be fairly easy to set up an exchange. By monitoring internet activity they can then understand how much Bitcoin one possess. Once this is done, they can tax it by requesting you to convert the Bitcoin to their own cryptocurrency.

Sure here is the article link:

https://news.bitcoin.com/use-bitcoin-ecuador-grow-government-ban/

I think it will be benificial to govt tax on btc transation because once they made source of income followed by regulations
will assist to promote btc in business & ecomonic of country.

Ofcourse government of any country can apply the tax system easily and also they can monitor everyone for such things to use .
Here ip address is sufficient to tell that who is making how much and where where transaction .
Because everything is open source for everyone to see and ip address will tell that people from which which places in the country are using Bitcoin and other cryptocurrency .
So it may be possible for government to easy handle this job , but still I am thinking that the people of the countries can pay the tax honestly without any warning by the government , because many people in my country are paying tax to the government for the Bitcoin earnings and using Bitcoin legally .

I don't think governments will ever consider taxing digital assets *directly*, and will most probably not use systematic ledger analysis.  However, they can simply oblige you to report all your holdings, your gains, and your spendings in digital assets.  As long as you are only having digital assets, you can avoid doing that, but from the moment that you will want to USE those assets to buy/sell something to a *legal partner*, you will be in trouble if you're doing this with coins you didn't report earlier, because the legal partner will report what he received from you/paid to you.

In other words, if you're mining coins, as long as you are just keeping those coins in a wallet, you can avoid reporting them.  But if you want to send them to an exchange, the exchange will have to report what you send them, and they can see that you didn't report them, so where did they come from ?   If you want to buy goods from a legal store, that store will have to report that you bought these goods with those coins ; and again, if you didn't report mining them, where did they come from ?

Once there is a legal system that obliges you to report all coins you will ever use on a legal business, whether it is a store, an exchange, or another citizen, the coins you don't report can never "surface" in legal businesses.

This is why wanting bitcoin and crypto to be "legalized" kills its purpose of bringing economic freedom.  The legal circuit (including law-abiding citizens) will be completely separated from the dark markets, and you won't be able to transact coins in one circuit to the other, without it being obvious.   And this has nothing to do with cryptographically protected ledgers or anything.  If you pay an internet service in bitcoin, you will have to declare that this has been done with previously declared bitcoins you had, or you will have to explain how you obtained these coins and why you didn't declare them (in other words, plead guilty for fraud).  Because the service provider will report that it got coins from you if it is a legal business.

If you buy bitcoin on localbitcoins, the citizen from whom you bought them, will report that he sold to YOU X BTC for the amount reported.  If you do not do the corresponding reporting that you bought them from that citizen, you are a detectable fraudster.

Bitcoin is not banned by most countries, simply because you are liable to pay bitcoin taxes.

Exchanges (trading) charge government levied service tax or sales tax.

VAT (value added tax) on trading bitcoin as a commodity.

Income taxes on purchase of goods (e-commerce) or services.

Payroll taxes if you are getting your salary in bitcoins.

Different countries have different tax regulations on bitcoins, but one way or other you are paying taxes on bitcoins.

If India legalises bitcoins they would impose FEMA.

Nevada Becomes First US State to Ban Blockchain Taxes

http://www.coindesk.com/nevada-first-us-state-ban-blockchain-taxes/

Government can only gain taxes on bitcoin if they cashout it or if you convert it into legal money because they cannot gain taxes through bitcoin to bitcoin transaction. I don't think so if they find another way to get bitcoin taxes.

No,it is different from fiat.The goverment cant even see the balance of our account or even our own transactions because bitcoin is anonymous.So it is very impossible for the goverment to find a way to tax our bitcoins.The only thing that they can do is to ban it but they cant even track it.

Since there is no lack of the technology and also no lack of the mastermind in this world  , so here I will say that everything is possible if that country want to do openly .
Here every transaction are open source and anyone can see the transactions of the other people , so easily they can track the earnings and will implement the tax amount according to the earning limits .
But I think instead to develop anything, the government of that country should develop own Bitcoin wallet and ordered to the every people of the country that they are restricted to use that wallet and if they want use blockchain then they can use single address only that should be mentioned by the person to the government .
In this way the country can easily apply the taxation over the Bitcoin and can grow the economic conditions of the country with Bitcoin in fully legal way .

Lets see how things can work here,a government has the authority to impose tax if you convert your bitcoins to fiat,they could not do anything if you are holding your assets in bitcoin and they really cannot monitor the asset as long as you did not disclose your assets and no government will impose a tax when it is still a liquid asset.

File it as your income then they can tax you now.
But if you dont they won't have any idea that you owned something like a crypto currency.
Maybe in the future they will find a way but for now they cant.
That is why it is better to have it now than later for they dont have any means to trace it or if they do it will be hard and they will use a lot of money for that kind of project to be sustained.

You cant directly get taxes on bitcoin itself but its possible to get tax to those bitcoin users which government can really monitor bitcoin users transactions specially when they do have their own centralized local wallet or any other platforms which they would make it as a compulsory thing for its citizens but if not then you can easily avoid this such taxation.

You are right, but you would be tax evading if you failed to report the capital gain that would be mining bitcoin, or acquiring bitcoin through trade. The literal definition of a 'capital gain'. Not worth it in my opinion. And seeing how they are trying to audit Coinbase for this very reason, I don't see it a stretch that they would eventually figure out they could audit pools as well. And unless you have a cash buyer for a living Income's worth of bitcoin, you are going to need to see an exchange that will require AML/KYC. That will be associated to your identity, and reported to the IRS as a matter of law.

You really can't avoid it. And if you do, it's obvious, and they don't look kindly on it.

There is very little they can do to track bitcoin transactions much less tracking each person if they have bitcoin. Maybe they can still tax the items you buy using bitcoin but put like an income tax on bitcoin, that will be a stretch.

The difference here is we are talking about Ecuador and not the US, the US with its great technology and economic power can enforce all the laws they pass but a third world country where even some of the most basics laws are not observed will never be able to enforce laws like that since it will be very costly to try to make people comply.

@GreenBits   So basically they can only tax it once the bitcoins are sold for fiat? There's no way for them to tax it if the bitcoins are mined or if the payments made in btc.

I think most of us know that our governments will do and tax what it wants. If there is money to be made the government will find a way to gain $$ from tax payers. So, yes..I believe they will eventually fully tax what is becoming a source of income for some people.

But I already thought bitcoin was being taxed? At least by my government, the US. Its called capital gains tax, and it's one of the reason they made bitcoin property instead of money:

https://www.forbes.com/sites/greatspeculations/2017/02/21/if-you-traded-bitcoin-you-should-report-capital-gains-to-the-irs/

The IRS considers cryptocurrencies, including Bitcoin, to be “intangible property.” Investors and traders holding cryptocurrency as a capital asset should use capital gain or loss tax treatment on sales and exchanges, with the realization method. For example, if you buy Bitcoins with U.S. dollars and later sell them for U.S. dollars, a capital gain or loss needs to be reported on that transaction.

Americans also trade Bitcoins or leveraged Bitcoin contracts on Bitcoin exchanges, and they should report realized capital gains and losses on each trade, even if the trader doesn’t convert underlying Bitcoin back into U.S. dollars.

It’s similar to having a foreign-based brokerage account, denominated in a foreign currency (i.e., Euros), where a trader buys and sells European equities held in Euros, and does not convert Euros back to U.S. dollars during the year. Two choices for tax reporting: Convert Bitcoin to U.S. dollars on each purchase and sale transaction using the Bitcoin market price that day denominated in U.S. dollars, or use Bitcoin as a functional currency, using an average Bitcoin vs. U.S. dollar conversion rate for the tax year.

So BTC careful! (See what I did there? )

Those fees are not for governments but governments want to tax for the money you earned from your investment profits. Usually, a tax will be paid only for the profits you earned from any investments but I don't know how governments will track at what price one bought bitcoins and whether they made profit or loss? If they can able to track these details then only they can ask to pay the tax otherwise it will be difficult to do it.

for me it is depend on the government on how they implement the rules and regulation to tax bitcoin in there country.
for us bitcoin earner we already paid the tax that added to the fee on every exchange or transaction we made.