Bitcoin Forum

As many of us already know El Salvador sits on $84M dollar unrealised profit from holding since September 2021, A government that completely supports and encourages BTC got me thinking how it is going to work in Long-Term? Dropping the tax on Crpyto from 30% to 0% is just beyond me. Keep in mind that El Selvador is not a First world country, It is a Third World developing country. How are they going to develop infrastructure and invest lots of money into education and health sectors? Everyone now living there is going to choose crypto over their local currency which is gonna make the whole country decentralised.

That is not what has happened over there, people in El Salvador are not using BTC as much as you think, and so many of them who downloaded the Chivo Wallet probably did so because of the $30 bonus they were to earn. Take note that no country can be 'decentralized', i don't know how you think that can happen, because there has to be a government that is the central authority in charge.
El Salvador is a small, poor and insecure country, and they are struggling economically and are in serious debt, i don't know how they are going to come out of all this, but it is surely not through BTC as some people think.

Their long-term strategy is to attract many investors and business owners and show them that El Salvador is a crypto heaven country. To my mind they are trying to copy Ireland. Ireland is a tax haven because of its taxation and economic policies. El Salvador is doing the same but instead of fiat, they do it on Bitcoin. Since they don't have competitors in Bitcoin, it's really going to help them, especially now that Bitcoin and cryptocurrencies are booming. Being first is the key to success. I think that Bukele did a very smart step in helping his country becoming developed country in a short time. It's very hard for as dangerous country as El Salvador to become a normal country and he is doing everything well.
Btw crypto is not going to make El Salvador decentralized because I believe they still need to use centralized system.

You need to be more accurate, it's not the El Salvadorian will enjoy the 0% tax, but it's for foreign investors. Bukele want to invite the rich to invest in El Salvador and the money can be used to build infrastructure etc, they might not earn from tax, but they could use this as long term prospect.

Probably they will add the tax when they think there are already a lot investors.

I think we have the wrong mindset in the beginning here, I assumed that the OP is just thinking that El Salvador only rely on their Bitcoin investment. They have trade partners like US, and their Top 3 Exported Goods (2021): Apparel: Knit, Plastics, and Paper, and their top industries: Food Processing; Beverages; Petroleum; Chemicals

https://globaledge.msu.edu/countries/el-salvador/economy

So don't be mislead that Bukele is just going full blown 100% on Bitcoin as their main source. So even if it drops, their economy is going to continue and so they could have other sources to improved their infrastracture and health care. Removed their Bitcoin investment they will still going to survived. Their Bitcoin investment is just a plus for them.

For countries, imposing taxes at 0% does not mean that they are not profitable. The flow of money to the state, increasing tourism revenues, moving the economic wheel, and other things will increase the gross domestic product per capita, which will reflect positively on the state, either in the form of direct taxes on sectors other than the cryptocurrency sector, or in saving... Its currency is foreign to the country, as most of us did not hear about El Salvador until it adopted Bitcoin as a legal tender.

I think there's a need for you to read this, also maybe you would have gone over the El-Salvador thread in mkaing this post instead of creating another related discussion on it.



A according to what i heard, they are only reducing the rate and not that they are dropping the whole thing to zero, you may have to confirm this as well.

If that is so it may be a more good thing for El Salvador's Economy. This change may interact with the interest of foreign investors to come and invest in their country and in this way, they may have more stronger economy. Actually, I came to know about this news yesterday but I did not know this change would be applied to the abroad investors.

Well, on the other hand, OP El Salvador people using Cryptocurrency for paying their bills from a long time as I had seen some of the videos circulating on social media where kids were paying their bills using Bitcoin Payment. These kinds of things may motivate other countries to adopt cryptocurrency as a payment gateway which makes the crypto space even more popular. I don't know if someone of you guys know about this or not Fararri has started to accept dogecoin as their accepting payment gateway. on the other hand, Elon Musk also has announced he will also start to accept the doge meme coin as the payment-accepting gateway. this kind of action of announcement makes the crypto space even more popular. 

The biggest thing this country can do which would turn El Salvador into a true Bitcoin Haven is to start attracting big bitcoin related businesses into their soil by offering them good regulations and small taxes. For example a centralized bitcoin and/or altcoin exchange located in El Salvador which is a friendly country to bitcoin with low taxes (on the business) could give them a very good revenue while providing a good CEX service to people around the world (less KYC nonsense and accounts shutting down with silly reasons like receiving "tainted" coins).

Making cryptos tax-free can still help boost the economy. The idea is that it'll drive businesses into the country, as well as foster innovation within the country. Then these projects will create new jobs, so people will get paid, and then they'll spend the money, once again, inside the country on some goods and services. An influx of activity, jobs and finances can have a very beneficial impact, even without direct taxation. That being said, the data is coming from El Salvador pretty slow, and for now there doesn't seem to be a significant positive economic impact, directly attributable to crypto adoption.

These are simple things! Government doesn't always make money out of Direct taxation. Moving tax rate to zero percent, has its own benefits. This way El Salvador will be able to attract foreign investments to setup businesses around cryptocurrency. You need to understand that El-Salvador is a very small country. In order to bring jobs for the educated youths, zero taxation works like a charm.

We are yet to see the benefits here. But when it comes to zero taxation, it is usually done to attract investments to setup business.

No government will be so deliberate about something as to encourage all of its citizens to follow suit without reaping the benefits. It may not be clear to everyone what Bukele is getting at by making bitcoin legal tender and imposing a 0% tax rate on all bitcoin owners. The government is a smart investment concept that is constantly looking at the big benefits of a project that it is currently developing or investing in. I don't think El Salvador would be yet to have an actualized prospect for this, but I'm sure they do and will go to any length to make it a reality someday.

Yeah sure good luck trying to run a country exporting plastic and paper. Any country that encourage Bitcoin as one of their primary currency they are doomed, Especially a third world country like EL Salvador. You are a fool if you think Bukele is smart, The day Bitcoins value drop rest of the world will be fine but El Salvador will be in Deep Sh*t. You can't just Gamble your chance with the whole country like that.

Investment in Bitcoin is not the major source of revenue of the government of El Salvador. The country also earn money from agriculture, services and industrial activities. Bitcoin is just part of the investment of the country spearheaded by its president Nayid Bukele.

Reducing the tax on Bitcoin is an economic strategy to attract crypto investors as well as tourists to the country. The government knows that if more businesses are established employment opportunities will increase and other sectors such as housing, hospitality, educational, etc would also enjoy the positive effect of these businesses. It is true that the country needs money to provide infastructure but these crypto friendly polices are veritable tools to expand the economy and speed up development.

El Salvador has one of the lowest crime or murder rate in America, second to only Canada. The rate of homicide reduced by 70% last year due to the reforms of the current administration. Before now the country was plagued with violent gang crimes. So it might not be wrong to state that the country is safe to a large extent.