Bitcoin and paying Tax

[deisik]

I was wondering, if crypto-currency takes off, and a large percentage of the world use it and then decide to stop declaring all income and stop pay taxes, how will governments build roads, support public schools etc? Won't this action raise taxes for the few that pays it and cause total havoc?

It seems that you should first ask yourself whether there will be a government at all if (when) Bitcoin (or some other cryptocurrency) takes off for real. I think government (something centralized) and Bitcoin (something decentralized) are mutually exclusive. Gold was decentralized too, but some claim that it got in the way of government and was replaced with centralized money (fiat), though this is debatable. On the other hand, if government got decentralized somehow, the issue of maintaining social infrastructure could be decentralized as well...

In this way, the problem of taxes and other involuntary payments might go away on its own

[varyspro]

Bitcoin do not pay tax because bitcoin is not approved by any government and i think if bitcoin approve by government then i am sure it will be pay tax on bitcoin and then i am sure we can be use bitcoin as payment method.

Yes as of now, most government does not consider bitcoin as a money. But government is doing anything to regulate bitcoin and finally taxed it. As of now, the effects of bitcoin is not felt the those government but  when most transaction is on bitcoin, the government is losing and they will do all they can to get hold and control  bitcoin.

Bitkoints already caused great damage to the state authorities. If he will become even more popular, the government will take measures. And the only thing it can do - is to impose a tax

[kolos]

The government can put sniffers on Tor exits and find bitcoin owners and force them to pay tax.

[deisik]

The government can put sniffers on Tor exits and find bitcoin owners and force them to pay tax.

It doesn't make much sense trying to catch all bitcoiners that are looking for tax evasion. First of all, going after every bitcoiner would require a lot of resources, thereby rendering any such attempt prohibitively expensive. Second, catching a few individuals seeking tax evasion big-time and publicly punishing them would allegedly make more sense, but it still boils down to the question of expenses vs potential benefits vs public opinion risks...

And last but not least, every government is interested that their citizens paid taxes voluntarily, willingly, and by their own free choice

[virusasog]

Once Bitcoin usage becomes widespread, the tracking mechanisms will increase too.
Plus most tax is collected from corporations, who wouldn't want to be on the wrong side of the law.

However we need to pay a fees for bitcoin. As I know its a kind of the taxes. As you said tac seems to collected for the each and every product in our country. Bitcoin adoption will change the tax setup to the different way.

[ekoice]

In some countries like Germany Bitcoin is already acknowledged as an asset. That means if you transfer Bitcoin to fiat money in a legal way then you have to pay taxes. However, if you buy or get Bitcoins and hold it at least one year, then it is completely tax-free.

Other Countries like Spain want to go a different way. They plan to tax the miners, too.

    I heard that in italy, they have decided to tax bitcoin earnings.See in future, it is the only way that governments can adapt.Either try to ban bitcoin and when it seems impossible, just try to impose tax on bitcoin earnings.

[deisik]

In some countries like Germany Bitcoin is already acknowledged as an asset. That means if you transfer Bitcoin to fiat money in a legal way then you have to pay taxes. However, if you buy or get Bitcoins and hold it at least one year, then it is completely tax-free.

Other Countries like Spain want to go a different way. They plan to tax the miners, too.

    I heard that in italy, they have decided to tax bitcoin earnings.See in future, it is the only way that governments can adapt.Either try to ban bitcoin and when it seems impossible, just try to impose tax on bitcoin earnings.

As I understand it, in the majority of jurisdictions you (the government) don't need to think up something to levy taxes on Bitcoin earnings. If you get profits, you should pay an income tax (under whatever name), and it doesn't matter whether you get this income from Bitcoin operations or something else. It is your duty, responsibility and obligation. At least, this is what governments think. On the other hand, if Bitcoin itself is in gray zone (that is, neither directly banned nor officially allowed), you can't probably be prosecuted for wilful tax evasion as such...

This is what has been the case in Russia, for example

[RodeoX]

the government is going to take his taxes even with force, it doesn't matter what currency you are using for your business. as long as you are running a business in a country you have to abide by law, you can't just say i stop paying taxes because i am using bitcoin!

I totally agree. The idea of tax free bitcoin is completely false. I am not aware of any law on the planet that allows for a loophole when using crypto-currency.  The tools which will allow anyone to audit the blockchain are soon to be usable by governments around the world. They will simply throw you in jail for not paying. Asking if bitcoins are taxable is exactly the same question as "Is money taxable"? Yes, yes it most certainly is.

[deisik]

the government is going to take his taxes even with force, it doesn't matter what currency you are using for your business. as long as you are running a business in a country you have to abide by law, you can't just say i stop paying taxes because i am using bitcoin!

I totally agree. The idea of tax free bitcoin is completely false. I am not aware of any law on the planet that allows for a loophole when using crypto-currency.  The tools which will allow anyone to audit the blockchain are soon to be usable by governments around the world. They will simply throw you in jail for not paying. Asking if bitcoins are taxable is exactly the same question as "Is money taxable"? Yes, yes it most certainly is.

You will be greatly disappointed. There is no such law, but if Bitcoin itself is not allowed (or recognized as an asset), you can't possibly impose taxes on the income obtained from using it, since any operation with it will be considered as illegal. You simply can't levy taxes on something illegal, since that would instantly make it legitimate. For example, you can't collect taxes from income earned by drug trafficking or child pornography. But if it is not banned either, you essentially get your "loophole"...

And I'm not just theorizing about what might happen, since this is exactly the case with Bitcoin in Russia, as I have already said

[RodeoX]

the government is going to take his taxes even with force, it doesn't matter what currency you are using for your business. as long as you are running a business in a country you have to abide by law, you can't just say i stop paying taxes because i am using bitcoin!

I totally agree. The idea of tax free bitcoin is completely false. I am not aware of any law on the planet that allows for a loophole when using crypto-currency.  The tools which will allow anyone to audit the blockchain are soon to be usable by governments around the world. They will simply throw you in jail for not paying. Asking if bitcoins are taxable is exactly the same question as "Is money taxable"? Yes, yes it most certainly is.

You will be greatly disappointed. There is no such law, but if Bitcoin itself is not allowed (or recognized as an asset), you can't possibly impose taxes on the income obtained from using it, since any operation with it will be considered as illegal. You simply can't levy taxes on something illegal, since that would instantly make it legitimate. For example, you can't collect taxes from income earned by drug trafficking or child pornography. But if it is not banned either, you essentially get your "loophole"...

And I'm not just theorizing about what might happen, since this is exactly the case with Bitcoin in Russia, as I have already said

I guess that is a loophole, in the same way that robbing a bank is a tax loophole.
You have me wondering about the taxation on weed in Washington state. The state collects tax on it even though it is illegal according to U.S. law. Pretty weird when you think about it.

[deisik]

the government is going to take his taxes even with force, it doesn't matter what currency you are using for your business. as long as you are running a business in a country you have to abide by law, you can't just say i stop paying taxes because i am using bitcoin!

I totally agree. The idea of tax free bitcoin is completely false. I am not aware of any law on the planet that allows for a loophole when using crypto-currency.  The tools which will allow anyone to audit the blockchain are soon to be usable by governments around the world. They will simply throw you in jail for not paying. Asking if bitcoins are taxable is exactly the same question as "Is money taxable"? Yes, yes it most certainly is.

You will be greatly disappointed. There is no such law, but if Bitcoin itself is not allowed (or recognized as an asset), you can't possibly impose taxes on the income obtained from using it, since any operation with it will be considered as illegal. You simply can't levy taxes on something illegal, since that would instantly make it legitimate. For example, you can't collect taxes from income earned by drug trafficking or child pornography. But if it is not banned either, you essentially get your "loophole"...

And I'm not just theorizing about what might happen, since this is exactly the case with Bitcoin in Russia, as I have already said

I guess that is a loophole, in the same way that robbing a bank is a tax loophole.
You have me wondering about the taxation on weed in Washington state. The state collects tax on it even though it is illegal according to U.S. law. Pretty weird when you think about it.

Robbing a bank is a criminal offense, even in Russia. Holding Bitcoin is not, at least so far. See the difference? Also, I'm utterly curious why you are trying to confuse the readers. Weed is legal in Washington state, you can openly buy it if you are over 21 and are going to consume it in the state. So taxing weed is quite in line with it being legal...

As with alcohol, only those 21 and older can purchase recreational weed. Out of state residents are allowed to purchase pot, but it must be consumed in Washington. Marijuana remains illegal in neighboring states. And plan on paying with cash. While some legal establishments may be able to take debit cards, none can accept credit cards because of federal banking regulations

Think better next time

[newcoins1978]

Like every source of income, bitcoin is taxed. Either directly by VAT or indirectly with your yearly income sheet. There is no way you can run from taxes.
Every governement uses tax as a milk cow to generate income for (sometimes, bogus expenses).

[wikenpp]

Like every source of income, bitcoin is taxed. Either directly by VAT or indirectly with your yearly income sheet. There is no way you can run from taxes.
Every governement uses tax as a milk cow to generate income for (sometimes, bogus expenses).

True you will eventually have to pay tax about your income and yes bitcoin is an form of income. If you don't tell them you will perhaps end up paying high fines. And remember even if you haven't sold your coins to fiat, even then it is income. My advice would be to play it safe and add your bitcoin revenue/income/worth to your tax return.

[bitjoin]

Like every source of income, bitcoin is taxed. Either directly by VAT or indirectly with your yearly income sheet. There is no way you can run from taxes.
Every governement uses tax as a milk cow to generate income for (sometimes, bogus expenses).

Not yet you cant avoid but do you really think that will last? Ask yourself what keeps the gov going and you should find the answer is we have no better options as yet.

[LoyceV]

I was wondering, if crypto-currency takes off, and a large percentage of the world use it and then decide to stop declaring all income and stop pay taxes

How is this different than your job paying you in cash?
Your employer has to declare it, you have to declare it, and your payslip has all the details. Government knows.
If your boss decides to pay you in Bitcoin, none of this changes.

[mirakal]

Like every source of income, bitcoin is taxed. Either directly by VAT or indirectly with your yearly income sheet. There is no way you can run from taxes.
Every governement uses tax as a milk cow to generate income for (sometimes, bogus expenses).

Not yet you cant avoid but do you really think that will last? Ask yourself what keeps the gov going and you should find the answer is we have no better options as yet.

If we wish to legalized bitcoin then that is the time it will be taxed, I think we will not fully use its benefit on that matter so we better see it this way as we can transact anonymously and we can enjoy the low cost transaction and a very fast transaction compared to other payment processors.

[X-ray]

Like every source of income, bitcoin is taxed. Either directly by VAT or indirectly with your yearly income sheet. There is no way you can run from taxes.
Every governement uses tax as a milk cow to generate income for (sometimes, bogus expenses).

Not yet you cant avoid but do you really think that will last? Ask yourself what keeps the gov going and you should find the answer is we have no better options as yet.

If we wish to legalized bitcoin then that is the time it will be taxed, I think we will not fully use its benefit on that matter so we better see it this way as we can transact anonymously and we can enjoy the low cost transaction and a very fast transaction compared to other payment processors.

the very fast transaction point is not so true otherwise if the bitcoin were taxed there must be a rule about bitcoin and some rule probably about the safety of bitcoin users that's at the end could give us benefits by paying the taxes,such a win-win solution

[Kakmakr]

Was their any stipulation in the Satoshi White paper where it states that Bitcoin was developed to assist in Tax evasion? Nope. A lot of people are using Bitcoin in a regulated environment. < Coinbase, BitPay, Circle, etc. > and these people's accounts are linked to their bank accounts. They pay their taxes and they operate within the laws of their countries. The rest, will bring the IRS onto themselves, when they are audited and it was found that they are using Bitcoin or any other Crypto currency to bypass taxes. ^smile^

Bitcoin is a P2P payment system, not a system developed to assist in tax evasion. ^hmmmm^

[deisik]

Was their any stipulation in the Satoshi White paper where it states that Bitcoin was developed to assist in Tax evasion? Nope. A lot of people are using Bitcoin in a regulated environment. < Coinbase, BitPay, Circle, etc. > and these people's accounts are linked to their bank accounts. They pay their taxes and they operate within the laws of their countries. The rest, will bring the IRS onto themselves, when they are audited and it was found that they are using Bitcoin or any other Crypto currency to bypass taxes

I'm afraid that the rest reside in China, and they would just laugh in the face of the IRS. I don't know how Bitcoin is taxed in China, if ever (everyone is welcome to chime in on this matter), but if the Russian government finally accepts Bitcoin as a foreign currency, no one will be paying taxes on it just like no one had been paying anything before. Since exchange operations with a foreign currency can be conducted only by institutions that have a Central bank license (read banks), cash and non-cash currency exchange is officially considered as an activity that can be undertaken only by banks in Russia...

But no one actually follows these rules in respect to, say, US dollars, and even less would do in respect to Bitcoin

[Blitzboy]

I was wondering, if crypto-currency takes off, and a large percentage of the world use it and then decide to stop declaring all income and stop pay taxes, how will governments build roads, support public schools etc? Won't this action raise taxes for the few that pays it and cause total havoc?
Don't get me wrong, I am totally against banks and the idea of keeping all your money in banks (if all bank customers only withdraw 3% of their savings, most banks will be bankrupt, so I am against banks) but what about government that cannot with crypto-currency determine someones income and subsequently cannot tax people to perform basic government duties?

I think what you say is hard to solve right now. If there is no solution for this problem, crypto-currency can not be accepted. In the future, if bitcoin become a world currency, there will be no government anymore, i guess