Acceptance of Bitcoin and Crypto in New Zealand: A Curious Case

[NeuroticFish]

The crypto-assets being paid can be converted directly into a fiat currency (on an exchange); and either:
– a significant purpose of the crypto-asset is to function like a currency; or
– the value of the crypto-asset is pegged to one or more fiat currencies.

OK, after getting scared that for whatever odd reasons they allow only stable coins, this turns out to be a good news.
Bitcoin and the main altcoins are clearly on the list.

I'm curious (but I don't want to push our look) what's their stance about privacy coins. I mean that at least Monero and Dash are clearly designed to work as currencies.

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[o_e_l_e_o]

I'm curious (but I don't want to push our look) what's their stance about privacy coins. I mean that at least Monero and Dash are clearly designed to work as currencies.

They make no mention of privacy coins, either for or against. I don't see how Monero wouldn't fit their definition of a currency coin though, especially since they are including trash coins like bitcoin gold.

Given that they will be taxing crypto through the PAYE system, and this generally works by the employer reporting to the tax service what they are paying each employee, as opposed to the tax service monitoring what each employee is receiving, there should theoretically be no difference between being paid in bitcoin or in Monero.

[kryptqnick]

Here is the actual quote from bulletin released by New Zealand's Inland Revenue Department (available here: https://www.classic.ird.govt.nz/resources/1/c/1c6029d0-611c-4a15-9cbf-b712129ab76c/tib-vol31-no7.pdf). Emphasis mine:

The crypto-assets being paid can be converted directly into a fiat currency (on an exchange); and either:
– a significant purpose of the crypto-asset is to function like a currency; or
– the value of the crypto-asset is pegged to one or more fiat currencies.

Thanks for clarifying this one, because this pegged to fiat thing is not very clear. So, I guess it means that Bitcoin is definitely accepted and salary can officially be paid in it in New Zealand. This is great since it must mean that a person who obtains Bitcoin in a legal way can state it as a source of income when necessary. I also want to mention that it would only be fair if the taxes are the same for fiat and crypto salaries. Otherwise, it puts cryptos at a disadvantage, discouraging both employers and their employees to use them. However, from what I read, it seems that there is no difference, and if crypto is 'money-like', the income tax is not different from the one for fiat, right?

[jerrison]

I've known countries where Bitcoin and crypto in general are legal. In some, it is legal in the sense that it is not illegal; meaning, there are no existing laws which Bitcoin violates, nor laws which are deliberately crafted to make it illegal. While other countries consider Bitcoin legal, it is never accepted as a currency. It may be a security, an asset, a commodity, and so on but never a currency. It may be used as a medium of exchange in selected countries but these countries do not have an explicit law that backs up such set-up.

And then here comes New Zealand. Starting September 1, companies in the country are allowed to pay their employees in Bitcoin or other cryptocurrencies. There are corresponding tax laws on this as well. But here's the condition which I find amazing and encouraging. These cryptocurrencies should be a currency, meaning, that they function as such. It should be, for all its intents and purposes, a money. This is a huge step in mainstreaming the use of Bitcoin and other cryptos in the country.

Sources:
https://www.ft.com/content/54dd4854-bd06-11e9-b350-db00d509634e
https://thenextweb.com/hardfork/2019/08/12/new-zealand-bitcoin-salary-regulation-bad-idea/
https://cointelegraph.com/news/new-zealand-rules-receiving-income-in-bitcoin-is-legal-taxable

I applaud the New zealand for this laudible effort in encouraging the massive adoption of the blockchain technology as it has also officially made the sectors unders its watch and terrain to pay in crypto as startups will have a to spring up from the New Zealand, leveraging on the support of the government by this official announcement.

[Artemis3]

I'm still curious as to which companies will actually use crypto to pay for their workers. Most probably companies which operates around cryptocurrencies? I'm not sure if a supermarket wants to buy 10 BTC and then use that just to paid their workers.

Does the employer gets to decide this? Isn't the employee right?

[javadsalehi]

I read the articles. The second one claim that it's a bad idea. Because the value of the salary must be fixed at the time salaries are paid. In the next day, the value of your salaries might be decreased.
But in my opinion, it's a very good idea. Those who accept to receive their salary in bitcoin is accepting risk. losing money can be also happened for the person who buy bitcoin. People can also pay their salary in fiat.

[rodel caling]

This is great step from new zealand that they allowed legally employees to receive salaries through bitcoin or any crypto currency coins.
About the taxes collection laws implement by the n ws zealand government is possible that all employees can only one local wallet using kyc registration and control by government or monitor how to collect taxes from the holders.

[Finestream]

This is great step from new zealand that they allowed legally employees to receive salaries through bitcoin or any crypto currency coins.
About the taxes collection laws implement by the n ws zealand government is possible that all employees can only one local wallet using kyc registration and control by government or monitor how to collect taxes from the holders.

Yes.This is a great start for New Zealand to acknowledged bitcoin and other cryptos to be legal and definitely having it as a salary.This will probably makes the transaction more convenient on the side of the employer and on the employees too.With this achievement for bitcoin and the rest of the cryptos,surely the government will provide fair taxes on it just like what they did with fiat currency.

[Nellayar]

From the 2nd link: "According to the bulletin, salaries must be paid in a crypto-asset that functions like a currency. In other words, the primary function of the coin must be as a replacement for fiat – this should prevent companies from paying employees in illiquid or otherwise small-time altcoins."

So basically it narrows down the options to BTC, BCH, LTC? As those three are the ones in the top 10 that has decent trading volume and are actually made as a currency. Anyway, sounds great then. Though the demand might not be that big, it's still a good start.

That is a good news! Australia is a continent. Therefore, it is amazing for them to accept cryptocurrency as a means of payment or salary. I think this news will pull up btc as well as other cryptocurrency on top. The gradual development and acceptance of cryptocurrency will help the industry to be successful. I hope more news regarding with this will come.

[o_e_l_e_o]

However, from what I read, it seems that there is no difference, and if crypto is 'money-like', the income tax is not different from the one for fiat, right?

Right. The PAYE tax calculation is based in the fiat value of your paycheck at the time it is paid to you, regardless of how much of it is paid in bitcoin or other crypto. For example, let's say your gross pay was $2000 and 0.1 BTC, and were taxed at 20%. Your net pay would then be $1600 and 0.08 BTC.

I read the articles. The second one claim that it's a bad idea. Because the value of the salary must be fixed at the time salaries are paid. In the next day, the value of your salaries might be decreased.

There is also the option if being paid a salary which is fixed in fiat value, despite some of it being in bitcoin. For example, you might be paid $3000, with $2000 being fiat and $1000 being bitcoin. Some months you might take home 0.2 BTC, some months you might take home 0.1 BTC.

[NeuroticFish]

They make no mention of privacy coins, either for or against. I don't see how Monero wouldn't fit their definition of a currency coin though, especially since they are including trash coins like bitcoin gold.

With Japan and lately Coinbase UK making steps against privacy coins, this acceptance would be an interesting new direction. That's the cause of my concerns...

Given that they will be taxing crypto through the PAYE system, and this generally works by the employer reporting to the tax service what they are paying each employee, as opposed to the tax service monitoring what each employee is receiving, there should theoretically be no difference between being paid in bitcoin or in Monero.

Well.. in my country a common practice was (and in some places probably still is) to under report the money paid to the employees, "saving" (cheating) at tax.
In the same way the difference was/is paid in cash here, privacy coins can do the same.

In the world of money and taxes there are always some that don't play fair.

[o_e_l_e_o]

Well.. in my country a common practice was (and in some places probably still is) to under report the money paid to the employees, "saving" (cheating) at tax.
In the same way the difference was/is paid in cash here, privacy coins can do the same.

This happens across the world with traders and other retailers offering lower fees to those willing to pay in cash, so as to save both of them money by not paying tax. The same is achievable with privacy coins, sure, but it is also achievable with bitcoin if you are careful. If you pay me to a freshly made bitcoin address, I can spend that in many places, trade it peer-to-peer, convert it to a privacy coin myself, etc. without ever linking my real identity to that address or those coins. Realistically, the only way the government would ever find out* is if you report me to them, but that is just as possible with cash.

It will certainly be interesting to see if they allow Monero, but as the bulletin makes no mention of it, I guess we will have to wait until someone tries.


*Provided I don't slip up and link those coins to my identity, deposit them somewhere linked to me, combine them with other coins linked to me, etc. I very much doubt the IRS (or your country's equivalent) would ever go to the lengths where you would require running your own Monero node via Tor to evade them - there are far easier targets for them to go after unless you are using this to evade millions in tax.

[NeuroticFish]

*Provided I don't slip up and link those coins to my identity, deposit them somewhere linked to me, combine them with other coins linked to me, etc. I very much doubt the IRS (or your country's equivalent) would ever go to the lengths where you would require running your own Monero node via Tor to evade them - there are far easier targets for them to go after unless you are using this to evade millions in tax.

That's clear, although I wouldn't trust the recipient/payee be extra careful...
And you are 100% right about IRS.

However, such small things make governments go against privacy coins. Again, it's a nice surprise New Zealand has not issue with them.

[stompix]

Well.. in my country a common practice was (and in some places probably still is) to under report the money paid to the employees, "saving" (cheating) at tax.
In the same way the difference was/is paid in cash here, privacy coins can do the same.

In the world of money and taxes there are always some that don't play fair.

It depends pretty much on the taxation model if the employer must also pay taxes then it would certainly benefit him to declare on a thing and pay under the table, but in case all the taxes are your obligation, less will take the risks, especially if the penalties for under-reporting are high.

But (if I remember correctly you're Romanian) isn't a lower wage also implying a lower pension, in the end, and far lower unemployment benefit?  Well if taxes are 50% out of your income it might still attractive to cheat the tax system but if it's less than 25% I wouldn't call it a smart move.

*Provided I don't slip up and link those coins to my identity, deposit them somewhere linked to me, combine them with other coins linked to me, etc. I very much doubt the IRS (or your country's equivalent) would ever go to the lengths where you would require running your own Monero node via Tor to evade them - there are far easier targets for them to go after unless you are using this to evade millions in tax.

Yeah, the amount is what matters in the end
You need a source for that coins, and you need to pay them in cash and ...you need them to keep their mouths shut.
The thing is that the longer the chain grows so do the chances someone will make a bad move and the entire thing will be exposed.

For a seasonal 2h/day fruit picking job yeah, it will work flawlessly.
When you need to acquire cryptos worth 200k euros a month to pay 100 workers, this is when things begin to get tricky...
 

[NeuroticFish]

But (if I remember correctly you're Romanian) isn't a lower wage also implying a lower pension, in the end, and far lower unemployment benefit?  Well if taxes are 50% out of your income it might still attractive to cheat the tax system but if it's less than 25% I wouldn't call it a smart move.

The pension *should* be smaller indeed in case of under reporting, but since the elderly people are the ones going to vote on huge numbers and since the default pension system is (95%, I think) state-financed, the pension is rising randomly, depending on the election years.
By math, now it's much cheaper (and safer!!) to under-report the income and put money in pension funds managed by private companies. This should not be affected so much by politics.

And yeah, this was happening in great amounts 15+ years ago, when the taxes were over 50%. Back then many people couldn't even get a loan because they officially didn't have almost any income. I don't know now, I don't have anymore knowledge of such cases.


PS. To make it clearer, the current politics-based pension "management" is bound to collapse (in a way or another) in the next 10-15 years, making it untrustworthy for the not-so-old people.

[Kakmakr]

New Zealand's approach to this is a bit too open ended and unfinished. It leaves a lot of room for loopholes in the regulations for employers to exploit their employees. You will soon see a lot of employers hiring developers to create their own "StableCoins" and then pre-mining those coins to create money from thin air to pay their employees. 

I like the fact that there should be "instant" conversion to Fiat currencies, because employees would be able to receive their salaries and then convert it to Fiat before the price goes down. <They can buy back bitcoins with that Fiat, when the price is lower and then sell when it is higher>

[HELLOFF]

I think that workers who can already receive their salary in cryptocurrency should be more careful about this.  The employer has never expressed a desire to do something beneficial for his employees.  I was always interested in the equivalent of the difference in salary in Fiat and in cryptocurrency.  The main thing is that the salary should be recalculated at the rate of the cryptocurrency market.

[CODE200]

I've known countries where Bitcoin and crypto in general are legal. In some, it is legal in the sense that it is not illegal; meaning, there are no existing laws which Bitcoin violates, nor laws which are deliberately crafted to make it illegal. While other countries consider Bitcoin legal, it is never accepted as a currency. It may be a security, an asset, a commodity, and so on but never a currency. It may be used as a medium of exchange in selected countries but these countries do not have an explicit law that backs up such set-up.

And then here comes New Zealand. Starting September 1, companies in the country are allowed to pay their employees in Bitcoin or other cryptocurrencies. There are corresponding tax laws on this as well. But here's the condition which I find amazing and encouraging. These cryptocurrencies should be a currency, meaning, that they function as such. It should be, for all its intents and purposes, a money. This is a huge step in mainstreaming the use of Bitcoin and other cryptos in the country.

Sources:
https://www.ft.com/content/54dd4854-bd06-11e9-b350-db00d509634e
https://thenextweb.com/hardfork/2019/08/12/new-zealand-bitcoin-salary-regulation-bad-idea/
https://cointelegraph.com/news/new-zealand-rules-receiving-income-in-bitcoin-is-legal-taxable

I think the New Zealand know the issues that are connected with bitcoin like it is used for gambling and any other bad or violence. They're just maximizing the advantages of the bitcoin and what can it do in their country.

[Dread Pirate Roberts]

Each service or company is free to accept any payment as it wishes as long as it does not violate the regulations of the country. if there are no specific rules for crypto to be used as a means of payment I think it's safe. and makes it easier for crypto users there to make transactions and can also help the development of the crypto community for the wider community who previously did not know what crypto was.

[maxreish]

The bad side of that salary thing in New Zealand is that we are experiencing and suffering from the bear market now. Since today is the end of the Month, employees will received only the equivalent of their basic salary even if the market is still at dip or the fixed rate of their salary. If ever they don't cash it out right away and the next morning the price will even decrease more, that is I am seeing to be a little problem.

Anyway, good thing they made a good step for this.