Mining tax in Kazakhstan

[zasad@]

https://coinspot.io/law/asia-and-africa/minenergo-kazahstana-prokommentirovalo-zakon-o-nalogooblozhenii-majnerov/

"We are talking about an additional payment in the amount of 1 tenge for 1 kW of consumed electricity. The law will come into effect next year."

1 tenge = 0.0023 dollars

In this interview it was said that the price of 1 kilowatt of electricity in Kazakhstan: " In some regions there are rates of $ 0.03-0.04, influential people are able to get a price of $ 0.02."
https://bitcointalk.org/index.php?topic=5313966

I think this is a very small tax.

[jackg]

This might even be just them trying to look like they're doing something to anyone looking in. Unless they're selling electricity at a loss, there's not really an economic reason for doing something like this (there might be a political one to make it look like they're against crypto mining). Constant electricity usage (for example by running mining hardware) is much cheaper to supply than fluctuating usage - that's why some countries make off peak/night and holidays electricity cheaper if they can track it.

[zasad@]

If the topic is interesting, then we can prepare questions and contact Apytioh.

About 70% of electricity in Kazakhstan is generated from coal, 14.6% from hydro resources, 10.6% from gas and 4.9% from oil. (data from wikipedia)

All large energy industries became the property of Kazakhstan after the collapse of the Soviet Union. Therefore, everything depends on the policy of the state.

[SFR10]

Luckily, it's just a negligible amount, and I expected this to happen a lot sooner ^{[AFAICR, mining operations aren't a new thing in Kazakhstan; at least in the past couple of years]}.
^{- In my current location, the government charges slightly higher rates from "legal" miners as opposed to the rate they'd give to normal consumers.}

[stompix]

This might even be just them trying to look like they're doing something to anyone looking in. Unless they're selling electricity at a loss, there's not really an economic reason for doing something like this (there might be a political one to make it look like they're against crypto mining).

Well, they know there are hundreds of miners looking for cheaper electric energy all over the world and they know they have very few little places to go, so hiking up the prices by what, 1% will bring more money in their coffers and it's clear no miner will try to pack his bags over that and they will pay up. Both sides know that so probably that's what miners are worried about, this time is 1% next might be 10%, some might feel like being trapped there.
https://coingape.com/kazakhstan-could-soon-introduce-a-tax-on-crypto-mining-operations/

And people wondered why some choose the US...

Constant electricity usage (for example by running mining hardware) is much cheaper to supply than fluctuating usage - that's why some countries make off peak/night and holidays electricity cheaper if they can track it.

But at the same time, it has disadvantages, everyone would love to see energy consumed at night when a lot gets wasted but at the same time, you don't like seeing it added to the peak hours, pushing the grid to the max. Fortunately and ironically a bit also, there is enough power coming from gas, and gas turbines can be easily put online in under an hour to match peak demand then shut down. Coal powerplants suck at this.

[dkbit98]

This is still a lot lower than taxes would be charged in United States or other western countries, and Kazakhstan have much cheaper electricity than rest of the world including China.

Kazakhstan government probably wants to earn some extra profits and that is fine if they can provide stable flow of electricity for miners, but I would not be surprised to see this tax being increased later.

[zasad@]

This is still a lot lower than taxes would be charged in United States or other western countries, and Kazakhstan have much cheaper electricity than rest of the world including China.

Kazakhstan government probably wants to earn some extra profits and that is fine if they can provide stable flow of electricity for miners, but I would not be surprised to see this tax being increased later.

I don't understand why the US tax is lower?
Electricity is more expensive there, there are high taxes on profits and tax on incomes.
I sometimes read the communication of miners, and small miners do not pay taxes in Russia, Kazakhstan, Ukraine ..
But I am very interested to see which country will have more miners in 6-12 months.

[dkbit98]

I don't understand why the US tax is lower?

Read correctly, I said that all those taxes in Kazakhstan are LOWER than in US and other western countries, but taxes in Texas are probably lower than in other US states.

[zasad@]

I don't understand why the US tax is lower?

Read correctly, I said that all those taxes in Kazakhstan are LOWER than in US and other western countries, but taxes in Texas are probably lower than in other US states.

And what is the tax on mining in Texas and other states in the United States?
For example, I understand that if I want to work in Russia or Kazakhstan, then in addition to all taxes, I will have to pay bribes so that the regulatory authorities do not interfere with doing business.
In the US, do miners only need to pay taxes?

[stompix]

In the US, do miners only need to pay taxes?

Yeah, and not only in the US in much of the western world 
Unless you plan on trying to dodge completely taxation or bypass regulation you don't have to bribe everyone with a government ID that shows up at your door and demands some money because he feels like you're breaking law number 123456789 
I live in the eastern part of Europe and we used to have a lot of the health inspectors and veterinaries show up at our farm in the '90 just to take some bribe, especially before Christmas, one piglet, some 10-20 kilos of meant but it's been like 10 years since my father last told me such things. Nobody is risking anymore with all the cameras, all the microphones everything, besides wages are high enough to make it now worth it.

But things get more complicated than that, taxation only happens when you turn a profit, you set up an LLC and you're entitled to deductions, and if you have a good lawyer or accountant even depreciation deductions, which mean a lot especially with bitcoin mining gear. So the standard level of taxation might mean zero when you put all of those in balance.

Saying look, standard tax in Kazakhstan is 16% and in Texas 30% does;t always mean a certain business will pay more in Texas.
When a Chinese company pays 30 million to expand a data center capacity in Texas they have probably done their homework, don't you think?

[zasad@]

In the US, do miners only need to pay taxes?

Yeah, and not only in the US in much of the western world 
Unless you plan on trying to dodge completely taxation or bypass regulation you don't have to bribe everyone with a government ID that shows up at your door and demands some money because he feels like you're breaking law number 123456789 
I live in the eastern part of Europe and we used to have a lot of the health inspectors and veterinaries show up at our farm in the '90 just to take some bribe, especially before Christmas, one piglet, some 10-20 kilos of meant but it's been like 10 years since my father last told me such things. Nobody is risking anymore with all the cameras, all the microphones everything, besides wages are high enough to make it now worth it.

But things get more complicated than that, taxation only happens when you turn a profit, you set up an LLC and you're entitled to deductions, and if you have a good lawyer or accountant even depreciation deductions, which mean a lot especially with bitcoin mining gear. So the standard level of taxation might mean zero when you put all of those in balance.

Saying look, standard tax in Kazakhstan is 16% and in Texas 30% does;t always mean a certain business will pay more in Texas.
When a Chinese company pays 30 million to expand a data center capacity in Texas they have probably done their homework, don't you think?

We live in different realities of life.
If your business is profitable in Russia, there will be many hunters who will want to take it over.
Therefore, only the most cunning businessmen survive in Russia.
In Kazakhstan, I heard even worse, because the entire main business is divided between family clans.

[teosanru]

https://coinspot.io/law/asia-and-africa/minenergo-kazahstana-prokommentirovalo-zakon-o-nalogooblozhenii-majnerov/

"We are talking about an additional payment in the amount of 1 tenge for 1 kW of consumed electricity. The law will come into effect next year."

1 tenge = 0.0023 dollars

In this interview it was said that the price of 1 kilowatt of electricity in Kazakhstan: " In some regions there are rates of $ 0.03-0.04, influential people are able to get a price of $ 0.02."
https://bitcointalk.org/index.php?topic=5313966

I think this is a very small tax.

Governments way of earning something extra from miners. Lol. Also considering that electricity rates in Kazakhastan are pretty cheap I don't think there would be a lot of problems for any miner there. This extra cost would just hit their P&L a bit but this won't harm the industry overall a lot. Also shifting your mining setup out of a country is a hefty cost in itself. I am sure this small amount of tax will cause anyone to take up the decision of moving out as it'll never justify the cost involved in moving your whole setup. But yes I am not sure about the cost of Mining Rigs in Kazakhstan, so for some who had thought of breaking even, their break-even points might shift ahead by some time.

[zasad@]

https://bitcointalk.org/index.php?topic=5313734.msg57431412#msg57431412
This is an interview with a person who has good experience in the crypto business of Kazakhstan.
The interview is in Russian and there is slang in the interview.
Later I will make the translation and post the link.
If you are interested in getting information not from articles and news, then use a translator.

[yhiaali3]

I think that this is a really small tax and it will not affect the profits of the miners because if the price of electricity is 0.04$ there will be a good profit for the miners after deducting the cost of electricity and the tax.
If we assume that the price of a watt of electricity is $0.04 and $0.0023 is added, the total will be 0.0423, and the cost of electricity and the net profit can be easily calculated through the website https://www.nicehash.com/mining-hardware

First:
For ASIC devices, the cost of electricity per day will be about $2-4 and profit about 28-37$ per day, as shown in the picture:



Second:
For the GPU, the electricity cost will be from 0.2-0.24$ and profit about 3-10$ per day, as shown in the picture:



I think that the cost is very cheap compared to the profits expected to be obtained on a daily basis through mining, whether by ASC or GPU hardware.

[zasad@]

https://bitcointalk.org/index.php?topic=5313966.msg57444208#msg57444208
This is a translation of an interview with a representative of a crypto business from Kazakhstan into English.
I hope you understand how business works in Kazakhstan and don’t believe the beautiful articles from online magazines.

I am not familiar with US taxes, but so far mining in Kazakhstan is much more profitable.

[dothebeats]

It's an okay tax, as it still give miners an okay amount of profits per kW of electricity consumed. It is better for Kazakhstan to tax miners this way so as to attract more of them in the country and realize more profits from taxes. I'm not entirely sure how much power reserves does Kazakhstan have, but if they are not experiencing power outages across the country, then they would be able to accommodate more miners, tax them, and be a haven for miners that were displaced from other countries or that are already having a hard time getting profits due to expensive taxation and electricity costs.

[dansus021]

in my opinion miner tax is the way for the country to not banning the crypto industry since the government itself will get the part.


i totally agree when gov do tax for mining, so government must think twice before banning the crypto since it become source of money

[stompix]

I'm not entirely sure how much power reserves does Kazakhstan have, but if they are not experiencing power outages across the country, then they would be able to accommodate more miners, tax them, and be a haven for miners that were displaced from other countries or that are already having a hard time getting profits due to expensive taxation and electricity costs.

By capacity, they claim they have an available capacity is 20078,6 MW.
If we assume 100%, which is impossible and never achieved anywhere in the world,  that would translate in 175 TWh with an annual consumption of 107TWh.
If we assume the average 80% it will just fit the normal consumption.
They have a slight export of 0.9 TWh, but that balance is pretty fragile.

So it will all come to a math problem, is more efficient to sell that coal or to burn it to produce energy and sell that energy to miners?
And the other being that Kazasthan has seen an energy consumption increase of 2.0%, and we're talking of a country that still tries to accelerate its economy so that will only grow.

Probably they could accommodate 20-30% of the former global hashrate but anywhere above that and the numbers start giving errors.

I am not familiar with US taxes, but so far mining in Kazakhstan is much more profitable.

Why?
From your article:

The cost of electricity varies. Depends on the region, in the north it is cheaper, the west and east are more expensive, the highest tariffs are in the south. But on average it is 4-5 cents per kW. Major players most likely found options for 3 cents.

vs

Marathon will pay $0.028/kWh for the energy, which is about a quarter of the average US domestic rate of around $0.11/kWh.

The cost is the same for power, I seriously doubt you have even a single deduction in Kazahstan (might be wrong), while in the US:
 

Jan 6, 2021 – The Section 179 deduction for 2021 is $1,050,000 (up from $1,040,000 in 2020). This means U.S. companies can deduct the full price of qualified equipment purchases, up to $1,050,000, with a “total equipment purchase” limit of $2.62 million (up from $2.59 million in 2020). The deduction includes both new and used qualified equipment.
In addition, businesses can take advantage of 100% bonus depreciation on both new and used equipment for the entirety of 2021.

[zeuner]

https://coinspot.io/law/asia-and-africa/minenergo-kazahstana-prokommentirovalo-zakon-o-nalogooblozhenii-majnerov/

"We are talking about an additional payment in the amount of 1 tenge for 1 kW of consumed electricity. The law will come into effect next year."

1 tenge = 0.0023 dollars

In this interview it was said that the price of 1 kilowatt of electricity in Kazakhstan: " In some regions there are rates of $ 0.03-0.04, influential people are able to get a price of $ 0.02."
https://bitcointalk.org/index.php?topic=5313966

I think this is a very small tax.

I think it's a reasonable step in order to nudge people towards reducing energy consumption.

I don't see a reason why other energy-hungry businesses should be privileged by being excluded from the energy tax.

[Kyraishi]

I don't think that's a cheap rate at all.

Mining is already a very small profit margin business that needs a ton of scale to even be profitable in the first place. To add a 5-10% tax on gross expenditures could be a death sentence for a lot of small mining businesses that have just started up.

Not sure what their intentions/plan is to be honest. What are they even trying to achieve? If it's revenue collection I'm sure they can find better ways than targeting this niche market.