Is Taxing Bitcoins Possible?

[HasHe]

I have been thinking of this for long and the reason being that a lot of bitcoin transaction is going online everyday in many countries and i think government can generate IGR from this if possible. I am not a programmer and i have a little knowledge about bitcoin technologies but i just want to know if it is possible.

Unless people try to convert their bitcoins via exchanges,bitcoins could not be taxed.If bitcoins were kept in the wallet unused,then the governments would not be able to tax it.

That's why,china also laid strict regulations over bitcoin exchanges to follow KYC so that it could know the actual users and tax them for their bitcoins.

[1715210107]

1715210107

[fo0tman]

I think taxing can be possible but not worth the huge effort, at least now. If, in the future, BTC is a worldwide used method of payment for daily life services, goods, etc., then yes.

[3gon]

I have been thinking of this for long and the reason being that a lot of bitcoin transaction is going online everyday in many countries and i think government can generate IGR from this if possible. I am not a programmer and i have a little knowledge about bitcoin technologies but i just want to know if it is possible.

They cannot tax it because they do not know to whom will they give the tax. It will only be taxed if the cryptocurrency market is decentralized.

[asdlolciterquit]

well, yes.

But to tax btc inself governments need to cooperate with exchanges like they do right now with banks.

I don't know how soon this will happen..

[Dulanjaya]

I think that Bitcoin is not taxable that is not because of anything else because of bitcoin is running on decentralized network .So, any government cannot controlled the bitcoin’s taxes. If bitcoin can be controlled by centralized authority in future then bitcoin will be taxable.

[Catch-22]

If the government regulates bitcoin, then yes.  They will need those exchanges to declare their income which will be the basis of the taxes they have to pay.  In return, those exchanges will add those taxes to their users transaction fees.

[mOgliE]

It is possible.. under certain conditions.

For example, in most European countries, the government determines the amount of taxaton due by the individuals according to their banking records. Well, in reality, they ask the employer to state the wage of all employees, then they ask each employee to state their wage (and other resources as well) and with these, they determine the amount to take.

Yet, in some cases, divergences appear between all the statements. Therefore, in such cases, the State can ask the bank to see the record of all transactions. In such a situation, if someone has changed bitcoin for euros and put it on their bank account, it will appear as a resource. And thus, will be submitted to taxation.

But indeed, this case is very specific. And I guess most of the time, gain from bitcoin are just hidden by inidividuals and ignored by governments. Just because for the moment it will be more costly to try to find those owning bitcoin than the gain the State would make with the taxation of such operations.

As you guys, I am not an expert. Maybe there is already a dedicated branch for that but... I bet there isn't!

[pogiparin]

If governments recognize the use bitcoins then definitely it will be taxed. The whole idea of taxation is getting a bit of money from a person's revenue in order to provide social welfare. If bitcoin becomes a big success, then government would start to notice eventually having it taxed.

[diguyo]

Specifically bitcoin, no. However, capital gains tax for sure. I don't know how it works outside the UK, but you have to declare when you make profits on interest/investment over I think it's 11k. If you don't you'll be in trouble if they find out...which they probably will if you're withdrawing a lump sum greater than that.

That tax here would be 28%. There are ways to get this lower though, but you'll probably need an accountant for that. Feel free to drop me a PM if anyone in the UK needs one - I can get good rates with a friend of mine.

[FrueGreads]

I have been thinking of this for long and the reason being that a lot of bitcoin transaction is going online everyday in many countries and i think government can generate IGR from this if possible. I am not a programmer and i have a little knowledge about bitcoin technologies but i just want to know if it is possible.

I would say it depends on how you "use" your addresses. If you deposit on a normal exchange that asks for KYC verification, then of course governments can charge taxes over bitcoin, since they can easily know how much profit you are making from trading crypto. In theory they will also be able to track the address you used to deposit on the exchange, so if you use that address for anything else they will know what you are doing.

In the future, if you use bitcoin to purchase goods in a store, and you pay with bitcoin and ask for a receipt, then that address will also get associated to you, so again the government will be able to know how you are using the funds in that address. Don't forget that everything is kept public in the blockchain, so as long a an address gets associated to you, you every move with that address can be tracked.

I think the LN will also help here, and there are some mixing services that could probably help, but I still don't have a lot of information about this.

[Reid]

With bitcoin it is impossible.
But how are you going out?
It is still cash or fiat.
When you go out that could be the way to put a fee on you plus questions where you got the money.
If they cannot track you within then they will be waiting at the other end.
That is possible.

[tot-o]

Yes, I've been reading articles that proposal on posting tax on bitcoin had been and already submitted to congress for further study, it was observed by many that a lot of people earning a big amount of money in bitcoin without paying or contributing tax...

I think bitcoin will be having tax but not now.....

[nightxglow]

I don't really understand programming as well, and i don't know if there's a way to detect all of our transaction using bitcoin.
But if yes, it'll be possible that we will be taxed for our bitcoin income, since it's an income anyway, so we need to pay tax as a citizen.
But unfortunately, i think it'll be hard to detect and track our transact history, when and how much we sell our bitcoin, how many income we get fom this and such.
So it'll be hard to do so, but maybe in the future it will happen with technology development, who knows?

[VitKoyn]

I have been thinking of this for long and the reason being that a lot of bitcoin transaction is going online everyday in many countries and i think government can generate IGR from this if possible. I am not a programmer and i have a little knowledge about bitcoin technologies but i just want to know if it is possible.

It is possible to have tax in Bitcoin if you transact using centralized exchange that holds your identity and when you convert your Bitcoin to paper money, but I think it is impossible to put tax in all Bitcoin transactions especially if you use over the counter that is used to buy and sell massive amount of Bitcoin. There's nothing to worry about this if your country does't have a tax regulation about cryptocurrency gains but if IRS in your country declared it as an asset then you should pay your tax, and report to them every transaction you made.

[bug.lady]

If governments recognize the use bitcoins then definitely it will be taxed. The whole idea of taxation is getting a bit of money from a person's revenue in order to provide social welfare. If bitcoin becomes a big success, then government would start to notice eventually having it taxed.

oh definitely it is happening. IRS has requested exchanges to hand out the customer lists together with their transactions. So USA has it covered. And then there is this joint France and Germany proposal to regulate bitcoin (read: regulate bitcoin taxation) that is going to be raised in next G20 summit.

So I think that it is happening all over the world and it is not the question of cooperation of exchanges with governments, as some other member suggested. Rather, it will be passed as a regulation, meaning that exchanges will be obliged to pass certain information to IRS and other tax institutions.

[Notcalculator]

It is possible to tax bitcoins, but probably not on an individual level. A bitcoin specific taxation on individuals is hard to implement because whatever regulation they impose anyone could easily avoid by working under the radar. Businesses on the other hand though, they easily tax and regulate. Which translate to taxing everyone using the service of that bitcoin establishment. So yes i think it is possible but they'll be targeting businesses and miners.

[khaled0111]

It will be impossible to force every one to pay taxes. Millions of transactions are generated every day and knowing their sources is not an easy task since it can be created from an exchange that does not require ID verification, besides the use of VPSs and proxies makes it harder.
The easiest way is to control exchanges and make them pay taxes, in return they will ask their users to pay more fees.

[prix]

It's impossible. First due pseudoanonymous nature of Bitcoin, second due the impossibility of accurately establishing the economic nature of transactions (trading, sending, outputs integration, etc.).
I think it's better for the government to take the tax when fiat money withdrawing through exchange, maybe even when buying goods (taking into account the amount of fiat money entered into the system).

[Bessta]

In my country, i know in due time our government will find a way  how to tax income from bitcoin. Our government is so desperate in taxing businesses and individuals. My government is so good at finding ways to tax its people in fact recently it passed a tax law which the government claimed to be pro poor but in reality its otherwise that people from all walks of life middle earners and low earners are both feeling the bad effects of that tax law. So it is possible that bitcoins will be taxed here in my country.

[colonel_koval]

It's impossible. First due pseudoanonymous nature of Bitcoin, second due the impossibility of accurately establishing the economic nature of transactions (trading, sending, outputs integration, etc.).
I think it's better for the government to take the tax when fiat money withdrawing through exchange, maybe even when buying goods (taking into account the amount of fiat money entered into the system).

exactly that they are doing - they are applying the tax when the bitcoin is exchanged to fiat. It is called a capital gains tax. So why are you saying it is impossible in your first paragraph, if they are effectively doing it and you yourself admit it?