Can governments find a way to tax Bitcoin?

[GreenBits]

@GreenBits   So basically they can only tax it once the bitcoins are sold for fiat? There's no way for them to tax it if the bitcoins are mined or if the payments made in btc.

You are right, but you would be tax evading if you failed to report the capital gain that would be mining bitcoin, or acquiring bitcoin through trade. The literal definition of a 'capital gain'. Not worth it in my opinion. And seeing how they are trying to audit Coinbase for this very reason, I don't see it a stretch that they would eventually figure out they could audit pools as well. And unless you have a cash buyer for a living Income's worth of bitcoin, you are going to need to see an exchange that will require AML/KYC. That will be associated to your identity, and reported to the IRS as a matter of law.

You really can't avoid it. And if you do, it's obvious, and they don't look kindly on it.

[carlfebz2]

I read recently in an article about Ecuador introducing its own digital money. Known as ‘Ecuador's Sistema de Dinero Electrónico’, it gave Ecuador the opportunity to control the cryptocurrencies market, in its own country, by enforcing regulations against Bitcoin. I was thinking about this new breakthrough, and I think it can be used to enforce a tax on Bitcoin if other countries adopted it. Of course, they can’t ban the usage of Bitcoin to enforce such a tax, but this method is plausible. Will it work? And if it does what does it mean for the future of Bitcoin?

You cant directly get taxes on bitcoin itself but its possible to get tax to those bitcoin users which government can really monitor bitcoin users transactions specially when they do have their own centralized local wallet or any other platforms which they would make it as a compulsory thing for its citizens but if not then you can easily avoid this such taxation.

[Reid]

File it as your income then they can tax you now.
But if you dont they won't have any idea that you owned something like a crypto currency.
Maybe in the future they will find a way but for now they cant.
That is why it is better to have it now than later for they dont have any means to trace it or if they do it will be hard and they will use a lot of money for that kind of project to be sustained.

[Weatherby]

I think government did't find ways to collect tax in bitcoin. Why? bitcoin is not a fiat and it is unpredictable. This is a cryptocurrency that used in electronic payment. And most of the country in this world, bitcoin didn't accepted as fiat.

Lets see how things can work here,a government has the authority to impose tax if you convert your bitcoins to fiat,they could not do anything if you are holding your assets in bitcoin and they really cannot monitor the asset as long as you did not disclose your assets and no government will impose a tax when it is still a liquid asset.

[noictib]

Since there is no lack of the technology and also no lack of the mastermind in this world  , so here I will say that everything is possible if that country want to do openly .
Here every transaction are open source and anyone can see the transactions of the other people , so easily they can track the earnings and will implement the tax amount according to the earning limits .
But I think instead to develop anything, the government of that country should develop own Bitcoin wallet and ordered to the every people of the country that they are restricted to use that wallet and if they want use blockchain then they can use single address only that should be mentioned by the person to the government .
In this way the country can easily apply the taxation over the Bitcoin and can grow the economic conditions of the country with Bitcoin in fully legal way .

[Cofee.BLUE]

No,it is different from fiat.The goverment cant even see the balance of our account or even our own transactions because bitcoin is anonymous.So it is very impossible for the goverment to find a way to tax our bitcoins.The only thing that they can do is to ban it but they cant even track it.

[jeraldskie11]

Government can only gain taxes on bitcoin if they cashout it or if you convert it into legal money because they cannot gain taxes through bitcoin to bitcoin transaction. I don't think so if they find another way to get bitcoin taxes.

[krishnapramod]

Bitcoin is not banned by most countries, simply because you are liable to pay bitcoin taxes.

Exchanges (trading) charge government levied service tax or sales tax.

VAT (value added tax) on trading bitcoin as a commodity.

Income taxes on purchase of goods (e-commerce) or services.

Payroll taxes if you are getting your salary in bitcoins.

Different countries have different tax regulations on bitcoins, but one way or other you are paying taxes on bitcoins.

If India legalises bitcoins they would impose FEMA.

Nevada Becomes First US State to Ban Blockchain Taxes

http://www.coindesk.com/nevada-first-us-state-ban-blockchain-taxes/

[dinofelis]

I don't think governments will ever consider taxing digital assets *directly*, and will most probably not use systematic ledger analysis.  However, they can simply oblige you to report all your holdings, your gains, and your spendings in digital assets.  As long as you are only having digital assets, you can avoid doing that, but from the moment that you will want to USE those assets to buy/sell something to a *legal partner*, you will be in trouble if you're doing this with coins you didn't report earlier, because the legal partner will report what he received from you/paid to you.

In other words, if you're mining coins, as long as you are just keeping those coins in a wallet, you can avoid reporting them.  But if you want to send them to an exchange, the exchange will have to report what you send them, and they can see that you didn't report them, so where did they come from ?   If you want to buy goods from a legal store, that store will have to report that you bought these goods with those coins ; and again, if you didn't report mining them, where did they come from ?

Once there is a legal system that obliges you to report all coins you will ever use on a legal business, whether it is a store, an exchange, or another citizen, the coins you don't report can never "surface" in legal businesses.

This is why wanting bitcoin and crypto to be "legalized" kills its purpose of bringing economic freedom.  The legal circuit (including law-abiding citizens) will be completely separated from the dark markets, and you won't be able to transact coins in one circuit to the other, without it being obvious.   And this has nothing to do with cryptographically protected ledgers or anything.  If you pay an internet service in bitcoin, you will have to declare that this has been done with previously declared bitcoins you had, or you will have to explain how you obtained these coins and why you didn't declare them (in other words, plead guilty for fraud).  Because the service provider will report that it got coins from you if it is a legal business.

If you buy bitcoin on localbitcoins, the citizen from whom you bought them, will report that he sold to YOU X BTC for the amount reported.  If you do not do the corresponding reporting that you bought them from that citizen, you are a detectable fraudster.

[coynedterm]

Ofcourse government of any country can apply the tax system easily and also they can monitor everyone for such things to use .
Here ip address is sufficient to tell that who is making how much and where where transaction .
Because everything is open source for everyone to see and ip address will tell that people from which which places in the country are using Bitcoin and other cryptocurrency .
So it may be possible for government to easy handle this job , but still I am thinking that the people of the countries can pay the tax honestly without any warning by the government , because many people in my country are paying tax to the government for the Bitcoin earnings and using Bitcoin legally .

[pmstalk]

if some country want tax bitcoin
the first must regulation bitcoin, without regulation is never tax
can follow japan, in there bitcoin user can tax fee, every transaction in exchanger another trade fee , charge tax fee too

I think it will be benificial to govt tax on btc transation because once they made source of income followed by regulations
will assist to promote btc in business & ecomonic of country.

[DOGE12321]

I read recently in an article about Ecuador introducing its own digital money. Known as ‘Ecuador's Sistema de Dinero Electrónico’, it gave Ecuador the opportunity to control the cryptocurrencies market, in its own country, by enforcing regulations against Bitcoin. I was thinking about this new breakthrough, and I think it can be used to enforce a tax on Bitcoin if other countries adopted it. Of course, they can’t ban the usage of Bitcoin to enforce such a tax, but this method is plausible. Will it work? And if it does what does it mean for the future of Bitcoin?

Can you post the article link?

Sure here is the article link:

https://news.bitcoin.com/use-bitcoin-ecuador-grow-government-ban/

[DOGE12321]

Governments can really tax bitcoin when you decide to convert to fiat or buy real world stuff. otherwise they have no control over taxes on the blockchain.

Take Ecuador for an instance. Once they have set up their own cryptocurrency, I am quite sure that it would be fairly easy to set up an exchange. By monitoring internet activity they can then understand how much Bitcoin one possess. Once this is done, they can tax it by requesting you to convert the Bitcoin to their own cryptocurrency.