Excessive Taxation of Cryptocurrencies

in #finland6 years ago (edited)

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A couple of days ago, I happened to read a post by some guy on the discussion forum of bittiraha.fi who had reported his income from poker games on Sealswithclubs, an online poker site where you can play for Bitcoin. The Finnish Tax Authority informed him of a decision on their part to tax every profitable hand separately while not allowing any deductions from loss-making hands. Now, there were a lot of hands in the previous tax year, and according to Pokertracker, this guy now owes 138 MILLION euros to the state.

The guy said poker has never been taxed this way which leads me to believe this utterly unreasonable decision has everything to do with the fact that bitcoins were at stake. As I've written before, The Finnish Tax Authority has issued new guidelines on the taxation of cryptocurrencies last month, effective as of May 29. According to the new guidelines, crypto-crypto exchanges are now tax events in case any profit in terms of fiat was made. Things will get rather interesting when decentralized multi-chain applications are rolled out and become commonplace. Such apps could make a lot of swaps between tokens even without the user knowing. If all profitable swaps are considered taxable income while the loss-making ones are not allowed to be deduced, the results can be tragic.

This is particularly concerning as decentralized web is on its way. Cryptocurrencies will comprise the Internet of Value and enable a large variety of new services paid for using micropayments. It will be standard to pay for a lot of things in very small increments to maximize efficiency. Why is the Finnish Tax Authority hell-bent on destroying business opportunities for domestic companies? Is it because they have no understanding whatsoever of the subject matter? Do they not understand that that decisions like this will make sure nobody in their right mind will report poker income, or any such income, if cryptocurrency has been in stake after this? Don't they have any idea how easy it is to use decentralized exchanges to evade any and all taxes and how impossible it is to ban decentralized anything? It would be far better for the state to create a business-friendly and future-oriented tax regimen to further growth and development.

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I guess it shouldn't be surprising that governments, long accustomed to having a monopoly on currency, would try to make cryptocurrencies less desirable.

Seems likely.

What the hell Finland? It's amazing how hecking dumb some governments can be! "We have this thing called reilukerho....."

Crypto-crypto trades being tax events probably is pretty common under different jurisdictions around the world. The IRS in the USA considers them tax events. I've heard Sweden is similar. But the poker taxation case is way over the top.

Sori, mä oon nyt niin väsynyt että kirjoitan suomeksi. Eli mä viittasin tolla typeryydellä siihen että tappioita ei oteta Suomessa kirjanpidossa huomioon ja noin valtio tulee menettämään verorahoja, kun kyllä cryptoa käyttävät voivat halutessaan kierrättää tulot muunmaalaiselle pankkitilille / paypallille. Espanjassa maksetaan veroja cryptosta samalla tavalla kuin osakekaupoillakin saaduista voitoista ja toi on se oikea tapa käsitellä crytoa tasavertaisena muiden sijoitustuotteiden kanssa. Olisi pitänyt avata vähän enemmän mun kommenttia :)

No ei tosiaankaan haittaa. Tietysti valtio menettää verotuloja. Veroviraston urpot eivät vaan tajua sitä. Tämän pokeriverotustapauksen jälkeen Bitcoineilla pelatusta pokerista maksetaan tasan nolla euroa veroja.

Espanjan tapa verottaa on tässä asiassa juuri täsmälleen oikea. Suomen nykylinja on niin käsittämättömän typerä, että veronkiertoonhan se johtaa. Vaikka tulli kuinka valvoisi maksuliikennettä ja yrittäisi verottaa kryptoilla maksamista ostettaessa tavaroita ulkomailta yrittäessään puuttua kryptotulojen realisoitiin maksamatta veroja, ei esim. digitaalisten hyödykkeiden ostamista tulli voi valvoa yhtään mitenkään.

I don't know much (really nothing) about Finnish Taxes but this seems an attempt to control something that is totally unknown to them

I get that feeling, too. With accelerating technological change I find such attempts to become more frequent.

Hi markku. I was in chat the other day and we were discussing the same thing. If someone made 100 000 over the year and had losses of 50 000 in trades he would be taxed 45% of the 100 000 leaving him with 5000. I haven't looked into it but it seems as though the authorities are trying to punish everyone dealing with cryptos. It will force it underground or exchanges in safe havens. Could you imagine paying 45% of your Steem earnings.
If you are trading and moving coins around but not taking out the exchange and saying parking off in Tether as a safety net. You should only declare once you take it out surely as it is too one sided and isn't viable. What are the taxes on normal stocks and shares?

If you are trading and moving coins around but not taking out the exchange and saying parking off in Tether as a safety net. You should only declare once you take it out surely as it is too one sided and isn't viable.

Yes. That's how it was until May 29, which was retroactively changed on July 2.

What are the taxes on normal stocks and shares?

The sum of all trades, profitable and loss-making is calculated for taxation to be taxed at the end of each tax year as capital gains. Capital gains tax is 30 %for gains at most €30,000 in a year and 34% for the gains in excess of that.

Just seems one sided. Hopefully the exchanges won't be forced to hand over details of the accounts to the various countries.

Yes, it is quite one sided. But I no longer trade and not only because the exchanges might be forced to hand over information to the countries where they're registered that, in turn, might share it with other countries. Trading cryptocurrencies is fast way to lose a lot of money. Buy something with sound fundamentals and hold long-term is the only strategy that makes any sense to me.

Using DApps that use multiple blockchains and cryptocurrencies and make swaps automatically would only be advisable to do fully anonymously barring any relevant change in the tax rules.

That poker taxation sounds like a nightmare...I think governments view cryptos as their own nightmare for taxing. I think in the US it’s considered a short term investment?

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I'm not sure. It's probably considered property. I think crypto-crypto trades used to be considered like-kind exchanges and thus exempt from taxation but since last year, the IRS has viewed such trades taxable if profitable.

Actually I’ve heard the property bit too...but I think given it’s new relevancy it hasn’t been clear since the government wants some kind of revenue from it.

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I am really growing a hate for governments and how they fuck us instead of protect us and help make our lives better. Sadly the bulk of what we pay ends up going to people who won't work one day for it.

There are very different kinds of governments. One thing they all have in common is that they are overwhelmingly powerful with respect to an individual. Governments are bureaucratic because they're large organizations and because it's vital that they be run according to clear rules. The disaster that the regulation and taxation of cryptocurrencies is is caused by a lack of rules than make sense. I could live with the old system where you pay capital gains tax when you cash out to fiat just fine.

Governments can't kill crypto. Suppose the US and the EU outlawed it or otherwise made life for crypto owners very difficult. There'd be plenty of countries left that would embrace it and reap all the benefits while some would weaponize it against those who banned it.

thanks for the new blog. that is great and nice photography.

What photography?

Yes. He also thanks me for a new blog. This blog is about 18 months old. By crypto standards it's ancient.

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