Cambridge dictionary defines the tax as “(an amount of) money paid to the government that is based on your income or the cost of goods or services you have bought”. It is obligatory and now it will apply to crypto as well.
Governments around the world have different approaches to this emerging asset class. Either they do not know what to do with it and hastily apply reactionary laws or they keep on debating.
Let’s take a look at some of the recent examples:
“The tax code is now nine times longer than the Bible, and not nearly as interesting” — Rob Portman, American Politician
In the American taxation system, cryptocurrency is treated as property. However, calculation of the tax is quite complicated, and no it is not because of the imperial or metric system differences. There are also some investors who decided not to mention their gains based on crypto to the authorities.
Lawmakers are playing hot potato and IRS (Internal Revenue Services) is under pressure. Now IRS needs to come up with a better plan to simplify crypto taxation.
Nevermind that crypto is the most sophisticated phenomena of our century, like all the other governments Uncle Sam needs his cut, too. In the most simple words — ‘we don’t know exactly how much we want, but we want it’.
“Gain is delusion, loss is enlightenment” — Kōdō Sawaki, Zen Priest
In Japan, gains from mining or crypto are categorized as miscellaneous income and that’s a whopping 55%. So in Japan, you really live for the good of the nation. Enlightenment it is, then.
The only problem is simplifying the tax filing process for crypto assets. At the moment it is complicated and Japan’s National Tax Agency (NTA) is trying to find a better way.
Japanese investors are waiting for a software-powered automatic tax calculator for their crypto assets. The bad news is that the categorization is not going to change even if the simplification measures are introduced.
“We contend that for a nation to try to tax itself into prosperity is like a man standing in a bucket and trying to lift himself up by the handle” ― Winston S. Churchill
In the U.K. Treasury, Financial Conduct Authority, and Bank of England officials came together and established the Cryptoassets Taskforce, a group to investigate all matters related to crypto.
While Parliament considered crypto as ‘wild west’, Taskforce reviewed the crypto world and decided that they needed a bigger boat, recommending to update governing laws.
At the moment crypto matters are bound by the old laws which are not ideal and open to debates. Guidance is needed, more than that, laws need to be made by the people who really understand what crypto is, so it might take time.
“When plunder becomes a way of life for a group of men in a society, over the course of time they create for themselves a legal system that authorizes it and a moral code that glorifies it” — Frédéric Bastiat, French economist
In France, crypto tax is working and next year they are planning to reduce is from 36% to $30.
French politicians were remarkably active this year in order to create an efficient legal framework for crypto, mainly led by the French Minister of Economy, Bruno Le Maire. This January he announced the creation of a working group that will develop mechanisms for regulating cryptocurrencies.
Now in France the crypto tax is calculated individually for various types of transactions and mining activities. They plan to change it to a flat tax as well.
Crypto revenues are rising, so does the interest of governments to tax them. While this year we saw some activity for regulative measures, it looks like governments are more willing to create laws for taxation than proper crypto, ICO, and blockchain regulations.
When asked about completing his income tax form, even Albert Einstein said: “This is a question too difficult for a mathematician. It should be asked of a philosopher".
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