Topic: How does bitcoin affect the ability of the state to collect income tax? (Read 153 times)

The question of taxation in many countries continues to be studied, because it is quite complicated because of the digital nature of the crypto currency, its relative anonymity and large volatility. In many respects this will depend on the definition of the status of the crypto currency. However, Japan has established its own rules for the taxation of crypto-currencies and there are no special problems yet.

In my view, many countries will be thinking to pass regulatory framework for Bitcoin and cryptocurrency in general for the main purpose for collecting taxes. Many will realize that this is a burgeoning market and has the potential to contribute more for a nation's coffer. And why not...if they can have a hard time increasing their tax collection they should be welcoming what the cryptocurrency platform can contribute by recognizing it and making their countries attractive to fintech companies relative to industries supporting and utilizing cryptocurrency. We should be happy that there are now countries thinking along this line and once they are successful in generating new investments and revenues am sure that more countries will follow. Things will all boil down to economic matters.

IRS considers bitcoin a commodity and like any other commodity which has ups and downs and volatility, bitcoin also has ups and downs and they treat it the same way as anything else when it comes to taxing it. and they have been doing this for a very long time now, I believe it started nearly the early years maybe 2010 that IRS set clear rules about taxing bitcoin. if you really want to know the details of it visit their webpage and read the details there!

The price fluctuations are not a problem we need to pay the taxes jow much we earned in terms of fiat currency of our local currency ao it is little bit complicated if the price falls.But people can hide their black money in the form of bitcoin easily because there is no tax as long as we keep it as cryotocurrency.
I think it will be better to mobe this thread to legal section to get appropriate discussion.

In some countries these governments defined Bitcoin as a commodity and when a commodity is traded, you are responsible to pay the Capital Gains on your profits. When the government define it as a currency, the citizens have to pay VAT on all the transactions that are made. < All the goods bought & Services paid for >

The government will be better off defining it as a commodity, because they will then double tax it. You pay once, when you declare the profits from the trading and then you still have to pay the VAT, when you use it. Japan is currently milking their Bitcoin users, with very high taxes. 

Some countries are looking for a way to implement tax on Bitcoin but  I rather say it's unapropriate because price is volatile and tax payment is depend on how much the price of the BTC on an specific date, I thinks someone will be accused of stealing if they saw everyday the tax collected amount is changes daily because BTC price is not the same everyday.

The only reason that bitcoin or other cryptos can be hard to tax is anonymity of wallets. Because if the wallet of a person is known then what is better than an indisputable blockchain showing every transaction to identify money in money out. Its mindboggling that tax authorities around the world aren't trying to play nice and be buddy buddy with crypto communities. Cash disappears and its gone, it could legitimately be buried under a farm in Colombia, and tax authorities are meant to prefer that?

The classification of how cryptos should be taxed is a whole other kettle of fish, and something that will differ from state to state. Some have no capital gains tax, others do not tax trades on currencies. Where I live we do not have capital gains tax but we have to pay tax on unrealised gains from foreign currencies (which is bat shit insane), so I'm really hoping that it is classified as an asset and not a currency.  Price fluctuations and volumes would not come in to play if you paid tax on realised gains (Money sold - money paid), and conveniently your exchange will likely save all that information for you (hence the Coinbase IRS situation). If you have to pay tax on unrealised gains it is super lame and price fluctuations and such would play a big part because your loss/gain is constantly moving and you'd need to update your holdings every reporting period instead of just the once after sale if on realised gains.

Bitcoin can affect the economy of a country. When everyone joins Bitcoin and funds are poured into the world of cryptocurrencies, development in other areas will suffer.

If bitcoin becomes a huge gray or black underground economy where people can report income, the government will have the incentive to ban and limit the use of Bitcoin. The recent prosecution by the IRS against Coinbase, the Bitcoin exchange platform, shows that the U.S. government is paying attention and is willing to take steps to ensure that taxpayers do not use cryptocurrency fraud.

Due to lack of legal currency status within any jurisdiction, IRS treats Bitcoin as property for the purpose of collecting taxes. This determination is likely to cause difficulties, especially when Bitcoin prices fluctuate, the volume of transactions continues to grow, and other tax compliance issues are taken into account.