Tax policies from governments around the world are a hodgepodge of ideas, some good and some bad, that are leaving cryptocurrency users confused.
Recently, France changed its classification of crypto to “moveable property” and thus the tax rate for many cryptocurrencies decreased from as high as 45% to 19%. Previously, cryptocurrency gains were considered as “industrial and commercial profits or non-commercial profits” and they still are for many miners. However, after the reclassification, one tax lawyer said that French authorities actually “can not justify the principle of taxation resulting from its exchange with another cryptocurrency”. The tax lawyer justifies the claim by arguing that many individuals exchange currencies via a third party when traveling and do not pay capital gain/loss taxes on the profit/loss and cites the 2015 statement by the Court of Justice of the European Union that “bitcoin has no other purpose than that of means of payment”.
In the United States, the Internal Revenue Service taxes crypto as property as well so every exchange for a profit or loss is technically a taxable event, but has issued very little guidance on the issue. Canada and Mexico have their own laws along with countries throughout South America, the EU, Africa, and Asia.
Government confusion has lead to market solutions
The confusion around cryptocurrency taxes has lead to entrepreneurs filling the knowledge gap for consumers. Dash Force News talked with Perry Woodin of Node40, which deals with cryptocurrency tax compliance along with mining Dash and BTC and operating Dash masternodes. The Node40 team got into crypto tax compliance unintentionally after they realized the financial and time burden of “making sure everything was audit-able”. They then wanted to help other businesses and consumers stay tax and regulatory complaint with the attention to detail that the Node40 team ascribed to for a fraction of the cost. When asked what is the most difficult part of regulations for consumers, Perry said that it is “probably property law compliance in the US since it is just so dense”.
Perry mentioned that the biggest issue with crypto taxes is just the education gap between regulators and politicians. He said that “regulators are usually well versed in cryptocurrencies” and know the minute differences, but the “politicians that make the laws are not as knowledgeable”. Perry said that “mass education is probably the biggest issue to focus on in the future since many in the public simply don’t know much about cryptocurrencies”. He referenced the recent Japanese FSA crackdown, which grouped Dash with more privacy-focused coins like Monero and Zcash, which makes little sense since the Dash blockchain is public and anyone can view all transaction, whereas that is not the case for Monero and Zcash. However, Perry is optimistic as he is beginning to see regulators and cryptocurrency businesses educating politicians.
He was encouraged by New York regulators reaching out to local crypto businesses to ask questions about cryptocurrencies and their businesses. He said that the “serious legislators out there are the ones that recognize these crypto businesses are just trying to serve consumers and are asking serious questions.” However, he did not discount the fact that there still are plenty of legislators that just want to crack down without learning more about the industry. He was also excited about the fact that “there has been a lot of development going on that is just now starting to be released”, and said that “it’s going to be a great year”. He cited Node40’s work with cryptocurrency payment solutions provider, Alt Thirty Six, and the necessity to not only keep Alt Thirty Six compliant, but also keep Alt Thirty Six’s business customers compliant.
Dash attempts to make everyday use, including tax compliance, as easy as possible
A chief goal of Dash has been to satisfy as many consumer desires as possible. Many consumer desires include tax compliance within countries that have such standards. Through Dash’s governance and treasury system, the Dash community has an active stakeholder interests in advancing projects that provide services to make tax compliance easier since that will increase Dash usage in countries where consumers want to stay tax and regulatory compliant.
The potpourri of tax laws around the world and even within states of a single nation are causing a lot of consumer confusion that even tax lawyers are debating about the interpretations. These cryptocurrency tax policies have changed over time and most likely will continue to evolve. In response, the decentralized Dash treasury and project teams allows for agile adapting with evolving cryptocurrency tax policies across the world. Companies like Node40 and Alt Thirty Six can emerge on their own or with the help of Dash funding to relieve the burden of tax and regulatory compliance from individuals or smaller businesses that do not have the legal knowledge or full financial capability.
*Note: Some quotes and descriptions of France’s new cryptocurrency tax policy were conducted via Google translate.