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May 12, 2013, 03:29:36 AM |
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They haven't actually changed anything. As it stands, BTC itself is not taxed, but the "barter" provisions in the existing tax code stipulate that when you "trade" for something of value, you have to treat it as though you received a thing with the dollar value of the subject of trade. i.e. if you trade $20 worth of BTC for $20 worth of Steam wallet codes, the barter provision dictates that you pay tax on $20. Enforcement is kind of a different matter, but those provisions have been in place for some time. All that's happened at this stage is that the Canada Revenue Agency (CRA) has made their stance on the subject known - no new rules have been made at this stage in order to specifically to accommodate or restrict Bitcoin.
The other one is the capital gains tax, which is applicable to more or less whatever commodity you pick. If you're buying soybean futures and selling them at a profit, you're looking at the same situation.
The coins THEMSELVES are not taxable, and will remain that way unless they become recognized as legal tender or more likely "foreign currency", in which case they would gain the same status as cash - officially taxable, and you are obligated to report it, but... enforcement is a tricky thing. Difference with the blockchain as opposed to cash is that the transactions are traceable forever, whereas cash can't readily be traced, only found in someone's possession.
As MaxCoins points out, all income in developed countries is generally already taxable. Arguably if you believe that Bitcoin IS a currency, then you have a moral / social obligation to pay taxes on any Bitcoins earned irrespective of whether or not you sell them. However, that would be problematic since the CRA / IRS / HMRC do not currently accept BTC in settlement of tax obligations, and since the value shifts substantially at this stage it would be impractical to pay taxes in $CAD / $ / £ on balances held in BTC. The capital gains tax / commodity treatment eliminates this by letting you hold and accumulate as much BTC as you like without a tax obligation. When you sell it, you would be obliged to pay tax on the profit above whatever you originally paid for the coins, which is essentially your capital gain on the BTC as a commodity / investment vehicle.
I'm not making a value judgement on whether or not this SHOULD happen, only pointing out that under current rules it already does in fact have to happen and that the letter referenced above does not reflect a new position or special rules for cryptocurrency. How readily all of this can be enforced in the case of BTC without substantially increased invasion of privacy is more of an open question in my view.
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