Bitcoin tax makes no sense

[Oshosondy]

This is according to Cata Institute. You can read the reason Cata Institute said about the reasons bitcoin tax makes no sense:

First, capital gains tax rates are structured to incentivize long-term holding. This policy distorts the market by incentivizing buying and selling solely to mitigate tax losses. However, it’s especially distortionary in the context of money, given that long-term holding policies discourage what is generally considered “currency use.”

Second, the complexity of administering the tax creates an additional burden on users of alternative currencies, including Bitcoin and other cryptocurrencies. Where a sales tax is usually a flat percentage added on to the bill, capital gains taxes require you to tell the Internal Revenue Service the date you got the Bitcoin, the date you paid for something with it, what you originally paid for the Bitcoin, and the gain or loss for each transaction. All of these details must be recorded on Form 8949 and compiled on Schedule D of Form 1040 to calculate the tax owed for each purchase of goods and services.

Third, with a process this complicated, there’s always the looming threat of an audit and penalty should you make a mistake (innocent or not). That threat alone can deter anyone interested in trying something new.

These are my own reasons:
If fiat can be in bank and no tax for spending it, I also think taxing crypto is making any sense. Another thing is that if someone is losing money from crypto, why do the government not pay the person the tax gained from people that make money from crypto? I always think that they governments are only looking for all possible means to earn money from citizens through taxes.

What is your opinion about this?

[Bastketsrus]

This is according to Cata Institute. You can read the reason Cata Institute said about the reasons bitcoin tax makes no sense:

First, capital gains tax rates are structured to incentivize long-term holding. This policy distorts the market by incentivizing buying and selling solely to mitigate tax losses. However, it’s especially distortionary in the context of money, given that long-term holding policies discourage what is generally considered “currency use.”

Second, the complexity of administering the tax creates an additional burden on users of alternative currencies, including Bitcoin and other cryptocurrencies. Where a sales tax is usually a flat percentage added on to the bill, capital gains taxes require you to tell the Internal Revenue Service the date you got the Bitcoin, the date you paid for something with it, what you originally paid for the Bitcoin, and the gain or loss for each transaction. All of these details must be recorded on Form 8949 and compiled on Schedule D of Form 1040 to calculate the tax owed for each purchase of goods and services.

Third, with a process this complicated, there’s always the looming threat of an audit and penalty should you make a mistake (innocent or not). That threat alone can deter anyone interested in trying something new.

If fiat can be in bank and no tax for spending it, I also think taxing crypto is making any sense. Another thing is that if someone is losing money from crypto, why do the government not pay the person the tax gained from people that make money from crypto? I always think that they governments are only looking for all possible means to earn money from citizens through taxes.

What is your opinion about this?

Yeah I agree, crypto taxes feel too complicated and a bit unfair compared to fiat. Treating it like an asset just makes everyday use harder.

[SamReomo]

I always think that they governments are only looking for all possible means to earn money from citizens through taxes.

That's what they're doing, and they'll continue doing that. The taxes aren't there for extreme rich because they know the tactics to not pay any taxes but the ones who earn money by investing or by selling something will have to pay taxes.

I believe the taxes in general aren't for the elite class as they know all the ways to not pay any taxes. Now, it doesn't make sense to pay taxes for your Bitcoin that you're holding or the Bitcoin that you use to buy/sell goods. But what else we can expect from the governments?

[Smartprofit]

In most countries, the circulation of funds (both cash and non-cash) is not subject to VAT or income tax. However, governments and institutional players are not yet ready to recognize Bitcoin as a fully-fledged monetary instrument.🙋

Tax laws in various countries typically treat Bitcoin as either a financial asset or property. This raises the question of whether Bitcoin should be taxed. However, even if Bitcoin is recognized as a financial asset, in my opinion, it is much more logical to levy income tax at the time of sale. This should take into account both the taxpayer's income and expenses (i.e., the cost of purchasing Bitcoin). From a tax fairness perspective, it would also be appropriate to include losses from the sale (which arose in previous years).

As for capital gains tax (regarding Bitcoin ownership), this measure, in my opinion, represents direct aggression by the state against Bitcoin owners.  If your country has a capital gains tax, it's a safe bet the government wants to stop this technology from developing.🤷

[PrivacyG]

I hate taxes.  But there are some things that do make sense.  I have never honestly explored if there even is a way to have an economy where no taxes are necessary so I will assume that they are a necessity, at least for the way the economy currently works.

Second, the complexity of administering the tax creates an additional burden on users of alternative currencies, including Bitcoin and other cryptocurrencies.

I always thought a lot of the ways they chose to tax Bitcoin were intentionally a burden on users.  If this was not their intent then the closest thing would be that the law makers do not even know what Bitcoin is, how it works, how volatile it actually is and how some of these laws are so difficult they actually make the users want to AVOID taxes rather than pay their obligations.

Second, the complexity of administering the tax creates an additional burden on users of alternative currencies, including Bitcoin and other cryptocurrencies. Where a sales tax is usually a flat percentage added on to the bill, capital gains taxes require you to tell the Internal Revenue Service the date you got the Bitcoin, the date you paid for something with it, what you originally paid for the Bitcoin, and the gain or loss for each transaction. All of these details must be recorded on Form 8949 and compiled on Schedule D of Form 1040 to calculate the tax owed for each purchase of goods and services.

Here I believe that the taxes do make sense.  There are two kinds of Bitcoin tax described,

Record and share with the State every single thing you have done with your Bitcoin and pay for capital gains or pay for ANY Transaction without having to record all the rest of the information.  The second kind of tax may sound better.  In theory.  But then I have seen some people on this Forum complain a lot about it because they end up paying way too much tax as it accumulates to a much larger total sum than having to pay ONLY for the profit they make.

For example.  If it is a flat sales tax and you want to swap back and forth between Monero and Bitcoin, each of these transactions are a sale and are therefore supposedly taxed a flat rate.  Set a 1 percent flat rate, swap 1,000 Dollars back and forth 5 times and you end up paying a lot more and you may even end up losing money than paying part of what PROFIT you made.

The capital gains tax is not bad at all until you realize how much effort you have to make to record EVERY SINGLE THING and as far as I know, some of the countries where you pay capital gains tax actually make you relay all this effort directly to the tax authority.  Which puts every Cryptocurrency user in clear discomfort, considering they have a clear ledger they can run 100 different equations on to check if you missed one transaction or so.  Not to mention Privacy aspects of it.  If this was a thing you should have on you IF they need more proof, it would be different.

Another thing is that if someone is losing money from crypto, why do the government not pay the person the tax gained from people that make money from crypto?

If you were incentivized every time you lost, we would all throw our money at every Shit Coin that pops up and record the transactions because we would get our losses back from the State.  There are some countries that pay a small percent to partially cover losses, but they can not do this forever.

Once again.  I hate taxes.  But some times, they do make sense.

[Ahli38]

This is according to Cata Institute. You can read the reason Cata Institute said about the reasons bitcoin tax makes no sense:

First, capital gains tax rates are structured to incentivize long-term holding. This policy distorts the market by incentivizing buying and selling solely to mitigate tax losses. However, it’s especially distortionary in the context of money, given that long-term holding policies discourage what is generally considered “currency use.”

Second, the complexity of administering the tax creates an additional burden on users of alternative currencies, including Bitcoin and other cryptocurrencies. Where a sales tax is usually a flat percentage added on to the bill, capital gains taxes require you to tell the Internal Revenue Service the date you got the Bitcoin, the date you paid for something with it, what you originally paid for the Bitcoin, and the gain or loss for each transaction. All of these details must be recorded on Form 8949 and compiled on Schedule D of Form 1040 to calculate the tax owed for each purchase of goods and services.

Third, with a process this complicated, there’s always the looming threat of an audit and penalty should you make a mistake (innocent or not). That threat alone can deter anyone interested in trying something new.

These are my own reasons:
If fiat can be in bank and no tax for spending it, I also think taxing crypto is making any sense. Another thing is that if someone is losing money from crypto, why do the government not pay the person the tax gained from people that make money from crypto? I always think that they governments are only looking for all possible means to earn money from citizens through taxes.

What is your opinion about this?

The government shouldn’t just focus on finding every possible way to collect money from its citizens through taxes. But they should also prioritize the well-being of its citizens. The government should be selective by requiring citizens to pay taxes only on profits without imposing taxes on those who incur losses. If the government mandates tax payments on every transaction or even the holding of Bitcoin by citizens without any consideration to alleviate the burden on taxpayers who are incurring losses then the government will be seen as greedy, where they will be seen as imposing unreasonable crypto taxes. And they will be seen as a corrupt government that is only looking for every possible way to extract money from its citizens. Government policies that place an undue burden on citizens must be criticized so that they align with the common interest of advancing the nation toward prosperity.

[YOSHIE]

I always think that they governments are only looking for all possible means to earn money from citizens through taxes.

Whether it makes sense or not, crypto users must accept it, these are the rules and laws that apply to crypto users from the government.
The crypto tax situation is the same as gambling tax, the government should be responsible for real losses that occur on gambling sites, such as hacking and so on, but the government doesn't want to know about this, Risk.

It is clear that in crypto trading, investment, transactions and so on related to crypto you are at your own risk, for this reason we often see every exchange, wallet and so on having warnings, because the government cannot control Bitcoin completely, Tax is their problem, they don't want to let go of that, they know the biggest tax turnover is in crypto, like it or not, it's up to the government, it doesn't matter. If they are prosecuted legally, the tax doesn't make sense. they will block all crypto exchanges operating in your area and will make strict rules for Bitcoin users themselves which can be detrimental to us.

[moneystery]

I voted no. Bitcoin taxes make no sense to me in any way. Governments are simply looking for any excuse to profit from Bitcoin, and imposing various taxes to make holders feel obligated to pay taxes when they don't. That's not fair to Bitcoin holders, especially individuals who already pay more taxes than they should. While Bitcoin taxes have been relaxed in some countries, imposing excessive taxes on it still feels wrong in my opinion.

[OcTradism]

These are my own reasons:
If fiat can be in bank and no tax for spending it, I also think taxing crypto is making any sense.

Are you really sure that with banks and your money in bank accounts, there is no transfer fee for your bank transfers?
Because there is bank transfer fee and for cross border transfers, fees can be very expensive so people look for alternatives like Bitcoin for cross border transactions with cheaper transaction fees.

With Bitcoin and cryptocurrencies, transaction fees don't depend on transaction values like bank transfers and bank transfer fees.

Another thing is that if someone is losing money from crypto, why do the government not pay the person the tax gained from people that make money from crypto?

It is not a logic thinking at all.

Do you think governments will use money from people who got profit in stock market to give away it to people who lost money in the same stock market?
Governments actually do not do that in stock market and it's not reasonable to ask them doing it in cryptocurrency market.

I always think that they governments are only looking for all possible means to earn money from citizens through taxes.

It's true.

[serjent05]

These are my own reasons:
If fiat can be in bank and no tax for spending it, I also think taxing crypto is making any sense. Another thing is that if someone is losing money from crypto, why do the government not pay the person the tax gained from people that make money from crypto? I always think that they governments are only looking for all possible means to earn money from citizens through taxes.

What is your opinion about this?

Taxation is the bread and butter of the government to get funds.  So it is obvious that they will do anything to put a tax on everything their citizens are doing.  May it be eating, bathing, transporting, the government put tax on every item.  So we should not be surprised to see the government eagerly put tax on any profit coming from Bitcoin.

Does it make sense?  Obviously to the one paying, it does not make sense, but to the one receiving, it makes a lot of sense. That is why the government, being the recipient, always wants to put tax on every gain their citizens make.

[Zoomic]

Bitcoin and crypto taxation has been controversial for so long, which is the reason some countries don't even know how to go about it.
A scenario where someone invested their savings in crypto and later wants to withdraw it and the whole fund is taxed (Capital + profit) is not a good development.

But if crypto is left untaxed, it will be a escape route for tax evaders, that is why the government must find an honest way to tax crypto earnings only. Crypto taxing is the most difficult type of taxation for government to track. That is why in some countries, they decided to ban crypto totally, not because they hate bitcoin but because they don't have the adequate framework to monitor the taxation.

[Charles-Tim]

As for capital gains tax (regarding Bitcoin ownership), this measure, in my opinion, represents direct aggression by the state against Bitcoin owners.  If your country has a capital gains tax, it's a safe bet the government wants to stop this technology from developing.🤷

There is nothing that can stop bitcoin to be developed in my own perspective. Tax can only make some people just to be more private. Instead of using exchanges, they will prefer to use noncustodial wallets. If the government are collecting tax, bitcoin will continue to grow. Although, I do not like the reason the government like to tax bitcoin. If bitcoin is a currency, why taxing it. It will only encourage people to hold than necessary.

[sunsilk]

That logic is true. If we're in our losses, if our portfolio doesn't do well, we shouldn't pay them the taxes for the losses that we're having.

But if we're in profit, we pay them the taxes for the gains that we've got from our capital.

So, we're in both sides. We lose, we still pay taxes, we win and profit still we pay them taxes. This now gives the idea that the government treats Bitcoin or crypto gains the same as the stocks gains and so they also tax it.

[SilverCryptoBullet]

There is nothing that can stop bitcoin to be developed in my own perspective. Tax can only make some people just to be more private. Instead of using exchanges, they will prefer to use noncustodial wallets. If the government are collecting tax, bitcoin will continue to grow. Although, I do not like the reason the government like to tax bitcoin. If bitcoin is a currency, why taxing it. It will only encourage people to hold than necessary.

Tax or no tax, Bitcoin is Bitcoin and it gives people full control of their coins that can be stored in non custodial wallets, traded on either centralized or decentralized exchanges.

Bitcoin has good potential to grow up more in adoption, value and price so people as Bitcoin investors will possibly get very good profit with Bitcoin investment, hence it's fair enough if they spend small part of their profit for tax. It's not like for satisfying governments but it's fair enough as people who got profit, improved their wealth use some of their profit for contribution to their nations and societies through tax. It's also because people can not avoid taxation from governments, and it's risky if they want to break national laws.

[Alpha Marine]

If fiat can be in bank and no tax for spending it, I also think taxing crypto is making any sense.

Interest earned from savings in the bank can be taxed. It is the same thing as capital gains tax. Bitcoin is an asset, so is fiat. The principal amount you deposit in the bank is not taxed, it's the interest/profit you made from that principal amount that is taxed. It is the same with Bitcoin. The actual amount of bitcoin you bought is not tax, it's the profit gotten from that bitcoin holding that is tax.
For example, if your country has a 10% flat rate in capital gains tax, and you buy Bitcoin worth $10k, if teh worth of the bitcoin increased to $12k after a year, that means you have made a profit of $2k. So it is that $2k that the tax would be taken from.
However, the authorities won't tax you if you don't take profit. The logic behind this is that if they tax you from that $2k and the price of bitcoin dips, you would be at a loss, when you have already paid taxes.

It is assumed that you haven't actually made profit, if you havent taken it because the asset can still dip and you might be at a loss. But if you take profit, ether by converting the bitcoin to cash, or by using it to purchase goods/services, or even swap it for another coin, then it can be taxed, because it would be assumed you have taken profiit. So the tax would be 10% of that $2k you made off the bitcoin you bought. The 10% won't be from the whole $12k, but from only the $2k profit.

Another thing is that if someone is losing money from crypto, why do the government not pay the person the tax gained from people that make money from crypto?

That's because they don't tax your wholw money, they tax only your profit/interest. A business that is not making any profit does ot pay taxes. A financial asset that has made no profit cannot be tax. Capital gains tax is paid from only profit made.

I always think that they governments are only looking for all possible means to earn money from citizens through taxes.

True to an extent, but taxes are what keeps the country alive. I don't have an issue with taxes, it should just be moderate, considerable and the money gotten from taxes should be used to make the lives of the citizens better instead of being spent of things that don't really matter in the grand scheme of things.

[Lida93]

The government shouldn’t just focus on finding every possible way to collect money from its citizens through taxes. But they should also prioritize the well-being of its citizens. The government should be selective by requiring citizens to pay taxes only on profits without imposing taxes on those who incur losses. If the government mandates tax payments on every transaction or even the holding of Bitcoin by citizens without any consideration to alleviate the burden on taxpayers who are incurring losses then the government will be seen as greedy, where they will be seen as imposing unreasonable crypto taxes. And they will be seen as a corrupt government that is only looking for every possible way to extract money from its citizens. Government policies that place an undue burden on citizens must be criticized so that they align with the common interest of advancing the nation toward prosperity.

The government has being greedy right from nascent stage as an authority. What any citizens friendly government can do to help cryptocurrency investors is to create a safe environment for investors to feel secured, less manipulated or relatively scam free to bare minimum. It shouldn't just be a focus about imposing crypto tax gains on crypto investors.
As for corruption in government, there's no government that isn't corrupt IMO, it's just that some are more corrupt than others while some others are just "fantastically corrupt".

[Z-tight]

If fiat can be in bank and no tax for spending it, I also think taxing crypto is making any sense.

The authorities do not view BTC as a currency, like fiat. BTC is viewed as an asset or property and taxed accordingly. Fiat cannot also be called a speculative asset, but crypto can. That's why fiat is only taxed when you receive it as income, through income tax.

This now gives the idea that the government treats Bitcoin or crypto gains the same as the stocks gains and so they also tax it.

Yeah, the government tax crypto in the same way as stocks, because they view them as assets or property. And that is why they are both subject to capital gains tax. Some may not like it, but that's what it is and we have a duty to pay our taxes, we don't have to like it.

[rat03gopoh]

This is indeed absurd, but Bitcoin isn't the only one. It's like asking, "Why don't gamblers get the right to reimbursement for their losses from the government while winnings are taxed?"
If the state budget for investment risk insurance hasn't been regulated, you can't expect it to happen. Generally, tax revenue is prioritized for public facilities/services.

[Zaguru12]

These are my own reasons:
If fiat can be in bank and no tax for spending it, I also think taxing crypto is making any sense. Another thing is that if someone is losing money from crypto, why do the government not pay the person the tax gained from people that make money from crypto? I always think that they governments are only looking for all possible means to earn money from citizens through taxes.

The reason is clear even fiat are actually taxed base on the interest or profit gained on that capital and not the capital itself that is taxed. This usually called withhold capital tax and it is the reason why money on current accounts are not taxed because there is no interest that build on it. Same thing applies to bitcoin, according to government only the profit will be taxed, because it’s actually viewed as an asset.

But one surprising thing about how double faced the government are is that, this same government usually bring crypto and bitcoin into consideration when there is issue of tax and things like that, in my country the government hasn’t made any clear stands on bitcoin but actually got under taxable assets. More so why is bitcoin viewed under taxable assets when it was the government that say its was a Ponzi scheme.

[Shadiq]

If I don't get any kind of security or support from the government in the crypto sector, then why are we obligated to pay taxes to the government? This is a burden on crypto users that is difficult for crypto users to accept.

We regularly get decisions from the government that if regular taxes are collected, a huge part of the country's economy will be added, the government does not collect taxes from that place or the government makes laws that only target the poor or the ordinary people of the country. But the elites know all the tricks of tax evasion and the government makes tax laws for their convenience. However, the most effective strategy to protect yourself from this tax may be to try to keep yourself as decentralized as possible, although it is difficult to keep yourself completely decentralized at the present time.