Canada Revenue Agency To Tax BitCoin Transactions

First time accepted submitter semilemon writes "The Canada Revenue Agency has started paying attention to BitCoin transactions, as it says users will have to pay tax on all transactions using the currency. From the article, "The CRA told the CBC there are two separate tax rules that apply to the electronic currency, depending on whether they are used as money to buy things or if they were merely bought and sold for speculative purposes. "Barter transaction rules apply where BitCoins are used to purchase goods or services," Canada Revenue Agency spokesman Philippe Brideau said in an email. In this situation, that means whatever you've received in exchange for your $1 worth of vegetables must be documented as a taxable gain of at least $1 somewhere. When it comes to trading BitCoins for profit, the tax man says there are tax implications there, too. "When BitCoins are bought or sold like a commodity, any resulting gains or losses could be income or capital for the taxpayer depending on the specific facts," ruled the CRA."

Comments

Kind of innevitable and entirely reasonable

[sg_oneill]

All seems reasonable to me. Our civil society is founded on the fact that since the government actually costs money, then people need to pay tax. Trying to hide money in bitcoin ought be seen as tax evasion, unless they are paying taxes on that money.

Libertarian types trying to sponge off the taxes of hard working tax payers via tax evasion need to stop being so greedy and stealing other peoples money.

Re:Kind of innevitable and entirely reasonable

[synaptik]

I haven't heard any libertarians espousing bitcoin as a means of evading taxes. I just sold mine from 2010, and I am well aware of the need to pay income tax on the net proceeds. Just like anything else.

Re:Kind of innevitable and entirely reasonable

[Anonymous Coward]

I'll go along with it if I can PAY my taxes in bitcoin...Until then @!#$@#$ off.

Re:Kind of innevitable and entirely reasonable

[olip85]

Good move by the government, and it is a good thing that this is happening sooner rather than later. Yes, taxes suck, yes I want to pay lower taxes, etc, but roads and healthcare don't pay for themselves.

Re:Kind of innevitable and entirely reasonable

[Anonymous Coward]

Trying to hide money in bitcoin ought be seen as tax evasion

Why? If the government said that some things aren't taxed and you use those things to reduce your taxes, how is that *your* fault and not the government's fault?

Re:Kind of innevitable and entirely reasonable

[gl4ss]

I'll go along with it if I can PAY my taxes in bitcoin...Until then @!#$@#$ off.

well you probably can't pay your taxes in apple shares either.

Re:Kind of innevitable and entirely reasonable

[roman_mir]

Quite the opposite is the case, if there was no way to escape government taxes, if there were no tax havens, if there was no way to move money offshore, where government could not put its hands on it, then all taxes would be much higher.

You are under the wrong impression that government just needs that specific money to operate and if you give it that specific money then government will be satisfied and will do what you think it should do.

Nothing is further from the truth, the truth is that government is a way to extract money from the real economy. Every government worker exists only as a parasite appendage to the real economy, and the more the parasite can extract from the real economy the more it will extract.

All the competition among different tax jurisdictions, and yes, among currencies and different types of money prevent government from attempting to take away all of your money. It is a good thing for the Californians that Texas exists (in the context of States within USA itself) and it's a good thing that offshore tax havens exist, it's a good thing that there are other countries with their own banking systems, it's a good thing that there are competing currencies, including Bitcoin, it's because if there was no Texas and no other countries and no offshore zones and no Bitcoin, etc., the taxes would always go up, government spending would always go up, of-course there is a breaking point, when people stop working above table and go underground into black markets (which exist today and also act as competitive markets to the rigged official economies).

CRA is pro-active, not willing to leave a stone unturned, but they are not going to succeed in this case, many transactions will benefit from the pseudo-anonymity that Bitcoins provide, somewhat similar to anonymity that cash provides, and it's a good thing that the government cannot and will not be able to tax everything.

Re:Kind of innevitable and entirely reasonable

[spire3661]

Please expain to me why the government should get a cut if i transfer money from one human to another. Its insanity to expect a cut from EVERY FINANCIAL transaction. This level of taxation goes FAR BEYOND what it takes to run a nation.

Re:Kind of innevitable and entirely reasonable

[Anonymous Coward]

It is inevitable; it is certainly not reasonable.

Our not-so-civil society is in direct opposition to government action, including taxation. Society is that which is chosen, the mutual, peaceful, voluntary, collaboration between fellow human beings. Government is the idea that an institution has the moral privilege to initiate violence within some geographical region to achieve its ends.

So 'government costs money' is not what our society is founded upon; indeed, it is what disrupts society. Your stockholm syndrome attack on your fellow man for avoiding theft is glaringly obvious. You choose to internalize the abuse of authority to lessen its pain by siding with the abusers against those who try to avoid theft. You even go as far as to say it is the victims of theft that are the ones guilty of stealing... madness.

Re:Kind of innevitable and entirely reasonable

[Anonymous Coward]

Here in the US, the roads and healthcare, just like everything else, are paid for by going further into debt. Federal taxes and the % levels they're set at today are mainly about reinforcing social classes.

Re:Kind of innevitable and entirely reasonable

[siride]

People aren't going to agree, and there will be enforcement in that case, be it from the government or some private army or posse of vigilantes. Personally, I'd rather have a republican government having a monopoly on enforcement than a multitude of private forces. We've had periods in history like that and usually they result in a lot of violence and social disorder.

Re:Kind of innevitable and entirely reasonable

[amiga3D]

Just so you know, tax avoidance is a bi-partisan thing.

http://latimesblogs.latimes.com/washington/2010/09/congress-taxes-irs.html

Re:Kind of innevitable and entirely reasonable

[amiga3D]

Have to buy those votes somehow.

Re:Kind of innevitable and entirely reasonable

[roman_mir]

The fact is that American government is about 80 times the size that it should be, Canadian government is probably 60 times the size that it should be, basically those government should be cut to about 2-4% of their current size and the economies would strive.

But this also means disassembling the existing welfare state (I mean completely dismantling it, kicking people off their government pensions, off government provided health care, shutting down all gov't 'insured' loans, getting rid of public education, public transit, public utilities, public everything.

BTW, for those who don't know it, USA is the LARGEST tax haven in the world. That's right, USA will not collect taxes for foreign governments on money that belongs to foreigners in USA and that is made in USA (capital gains, dividends, etc.) If CRA wants to tax Canadian Bitcoin savers, Canadians can just use USA exchanges.

Re:Kind of innevitable and entirely reasonable

[Anonymous Coward]

Tell me how a air traffic controller or a teacher, to use two examples a "parasite appendage to the real economy"? All are not strictly needed, but the economy would be much smaller if planes would crash into each other, or if people didn't learn to read and write so they could contribute more to the economy.

The idea that what the government does only extract money from the economy. Without the government the economy would be much much smaller.

Take away all the roads that are maintained by the government and see how the economy do. There are lots of bad things that the government does, but not everything is parasitic.

Re:Kind of innevitable and entirely reasonable

[Solandri]

Libertarian types trying to sponge off the taxes of hard working tax payers via tax evasion need to stop being so greedy and stealing other peoples money.

It all depends on efficiency.

- If the tax money collected by the government is spent on a program which yields a higher return (by increasing the nation's productivity) than if the money had remained in private hands, then tax evasion is stealing from other taxpayers.

- OTOH if the government is spending money on programs which aren't more efficient than private use (or are even losing money), then tax evasion actually helps the economy (in totalitarian states, it leads to black markets) and it's the government which is being greedy and stealing people's money.

There's a tendency for libertarians to pretend only the second state exists, and for big-government proponents to pretend only the first state is possible. The reality is that either state is possible. We have to be constantly vigilant to appraise the effectiveness of government programs, and not afraid to cut the ones which become wasteful. But likewise, neither should we immediately dismiss all government programs as wasteful.

Re:Kind of innevitable and entirely reasonable

[Jawnn]

This level of taxation goes FAR BEYOND what it takes to run a nation.

[citation needed]
First of all, there is precious little agreement on how much it actually takes to "run a nation", but in the case of the U.S., it is plain to even the most dim-witted that we are not collecting enough to cover that expense. Unless/until we can agree to spend less, more revenue is required. To suggest that it is excessive is to deny reality.

Re:Kind of innevitable and entirely reasonable

[AuMatar]

There's also programs that may be inefficient or cost money that society decides are worth paying for anyway. Not everything needs to be about making a profit. Those programs should still be watched to ensure that are as efficient as possible, but they shouldn't necessarily be killed. Social Security is an example of that- there's no financial gains for keeping old people alive and sheltered, but its something society decides is a good idea.

Re: Kind of innevitable and entirely reasonable

[Anonymous Coward]

But but the free market will fix everything.

Re:Kind of innevitable and entirely reasonable

[paiute]

Let me guess. You get to define what belongs in the "real" economy. Is it full of true Scotmen?

Re:Kind of innevitable and entirely reasonable

[Trepidity]

Sounds pretty silly. I moved from the USA to Denmark and things work much better here. You know why? Because the government is twice as big, not smaller. So infrastructure is actually built and maintained, healthcare coverage is universal, education is strong, the unemployed get skills retraining, etc., etc.

Re:Kind of innevitable and entirely reasonable

[ganjadude]

the issue is not "covering the expense" it is deciding which expenses need to be cut. Our economy brings in more in each year then we spent per year only a decades ago. there is no excuse that spending levels have gone up to trillion dollar deficits when we still take in more money than only a decade ago. Let me ask you something. has anything gotten better for the rising taxes and government spending? Some will argue for others against of course. I argue that we dont get nearly as much for what our government spends vs 10 years ago. Even if we got the exact same that we got 10 years ago from our tax money, there is no reason for spending to have gone up.

somewhere along the line the federal government forgot all about the 10th amendment.

Re:Kind of innevitable and entirely reasonable

[omglolbah]

That isnt really the argument though as I read it.

If a government program run by a public entity does X amount of work at the cost of 1 million dollars...

And a private entity can do the exact same amount of X for 0.9 million dollars.. The argument is to let the private entity handle the work.

This also goes the other way though and sometimes it is much less costly to have a public entity handle something compared to having it privatized.

Fire protection services, various welfare programs and the likes.

Re:Kind of innevitable and entirely reasonable

[dryeo]

Here in the US, the roads and healthcare, just like everything else, are paid for by going further into debt. Federal taxes and the % levels they're set at today are mainly about reinforcing social classes.

Yea, we have a right wing government currently, same thing, into debt why they scream how they're fiscally conservative. (http://www.politicalcompass.org/test puts both Harper and Obama far to the right except Obama isn't as statist compared to Harper, who by the way also promised transparency in government and makes Obama look very open).
The Conservatives are also cutting Revenue Canada's budget way back while promising to go after offshore tax evaders.

Re:Kind of innevitable and entirely reasonable

[Cederic]

Income tax? Or Capital Gains tax?

I guess it depends whether you bought them or 'mined' them.

Re:Kind of innevitable and entirely reasonable

[SJHillman]

If I'm not mistaken, you're also not taxed on Apple shares until you turn them back into real-world money via dividends or selling your shares.

Re:Kind of innevitable and entirely reasonable

[roman_mir]

Because the government is twice as big, not smaller.

- you are mistaken, you don't know where you are.

Denmark has a trade surplus, not a 50 Billion / month trade deficit. Denmark has a tiny debt compared to its GNP, USA is in a hole that it can't get out of.

You are mistaken that Denmark has a larger government, Denmark has a much smaller government, insignificant by USA standard. Denmark is not fighting wars around the globe, by the way, it doesn't have about 85 or so MILLION unemployed people that could work if it weren't for a huge welfare state.

You should watch something before you come back with other comments.

Re:Kind of innevitable and entirely reasonable

[Anonymous Coward]

I'll go along with it if I can PAY my taxes in bitcoin...Until then @!#$@#$ off.

well you probably can't pay your taxes in apple shares either.

Err, you don't pay taxes on Apple shares either. You pay capital gains taxes on the money extracted when said shares are sold (through whatever valid accounting method).

The only situation you would is if the shares were given as compensation or a gift, otherwise you must have invested already taxed earnings in the first place.

Re:Kind of innevitable and entirely reasonable

[AmiMoJo]

Problem is that things like treating sick people instead of letting them die in the street isn't a very efficient use of money. A private company that doesn't give a shit about human suffering could generate more profit with that cash.

It is also rather hard to determine what is efficient when the pay-back on some things can take decades to arrive. The government often funds basic research that takes 10-20 years before any company becomes interested in and commercializes it, and sometimes it fails completely. That's the nature of research and if the government didn't do it then no for-profit company that can't see past next quarter's profits is going to.

One of the most important functions of government is to do things that are not profitable but which we as a society deem worth doing anyway. Applying commercial efficiency measurements to it is stupid.

Re:Kind of innevitable and entirely reasonable

[Trepidity]

It has a larger government measured by percentage of GDP: government spending equals 50% of GDP. It's true that it has lower debt, because it also has much higher taxes (around 50% of GDP as well), so it pays for its spending rather than selling bonds to pay for it.

Re:Kind of innevitable and entirely reasonable

[Anonymous Coward]

well you probably can't pay your taxes in apple shares either.

Not sure if you're saying that bitcoin is not a currency or that you can only pay taxes with a country's standard currency or both. I liked your response in any case. Bitcoin makes a lot more sense to me when viewed as a tradeable commodity like pork bellies.

Re:Kind of innevitable and entirely reasonable

[Anonymous Coward]

Bitcoin gains are already taxable. What they are proposing is yet another tax... not very reasonable. Canada always does dumbshit like this, they were taxing CD-R's and media because you could potentially copy something copyrighted.

Re:Kind of innevitable and entirely reasonable

[fredprado]

As it happens with bitcoins everywhere but in Canada now, apparently.

Re:Kind of innevitable and entirely reasonable

[roman_mir]

Again, you are mistaken, you don't know where you came from and where you are.

USA has a tax that is over 50% on those who actually pay taxes, and those who do not are getting a subsidy that grows the debt and thus the inflation (money printing), which is what is destroying the US economy in the first place. As a percentage of GDP USA government is spending much more than Denmark, because real GDP in USA is not the number that is given to you. That number includes things that have nothing to do with production, that number is absolutely irrelevant and you can't rely on it for anything. Real GDP in USA has been shrinking for over 2 decades now, USA government spends about twice as much money as it collects in revenues and it prints the difference (Fed is not a private bank, it's a government monopoly on fake credit).

Comparing an actual productive output of a country to a made up number is nonsensical, the only thing that should be looked at when all other numbers are nonsense is the trade deficit or surplus, USA has a deficit of 50 Billion a month, Denmark has a surplus, which it uses to pay down its debt (if it didn't finish paying it down yet), so at least in Denmark the taxes are going towards PAYING THE DEBT.

In USA the taxes and all the debt and inflation go toward growing the government.

Re:Kind of innevitable and entirely reasonable

[fastest fascist]

The title is misleading. Bitcoin transactions aren't being taxed, as far as I can tell. Sales denominated in bitcoins are subject to VAT (or similar), and government-currency-denominated gains from selling bitcoins for other currency will be taxed. Sending bitcoins from one wallet to another isn't, per se, subject to tax. As far as I can tell.

Re:Kind of innevitable and entirely reasonable

[fredprado]

The differences between a current and a tradeable commodity (especially virtual tradeable commodities) are not so clear anymore these days, and tend to get even more cloudy as time passes.

Re:Kind of innevitable and entirely reasonable

[TheRealMindChild]

Except, it is capital gains tax, not income tax. Being so sure that you know what you are doing, perhaps maybe you should hit the books again

Re:Kind of innevitable and entirely reasonable

[quickcup]

You are the one who is greedy demanding that others pay for you.

Re:Kind of innevitable and entirely reasonable

[dskoll]

So why do we need government again?

Because countries without governments tend to resemble Somalia, Afghanistan, Iraq and so on.

When a properly designed system could provide direct democracy

Right, because we all know how well e-voting works.

I think that those who favour no government and those who favour large intrusive governments should get to live in Somalia and North Korea, respectively, just to see where their extreme positions lead.

Re:Kind of innevitable and entirely reasonable

[maxwell demon]

If you don't like living under a government, you are free to move to Somalia. However I don't think you'll like the government-free life there ...

Note that Switzerland is a direct democracy, yet still has a government. Why would they have one if direct democracy made it superfluous?

And if all the work is done by robots, a government is needed more than ever, because then there will be no more economic wealth redistribution through wages.

Re:Kind of innevitable and entirely reasonable

[hairyfeet]

Well this probably shouldn't be taxed until its turned into something tangible or should be treated like capital gains in that you don't pay until you cash out. I mean we don't tax the virtual armor in MMOs, even though people actually pay real money for that shit, so I don't see why bitcoins should be treated any differently. At the end of the day its really just this virtual thing that really only has value because some people believe in it,, again we have seen people pay crazy prices for virtual crap because they believe in that but we don't tax it.

Of course sadly what is gonna end up happening is virtual crap will end up getting taxed too because god fucking forbid there be a single thing in the universe the government doesn't get a cut of, no matter how real or unreal the thing is. I just don't see how bitcoin should be considered any better or more special than WoW gold or any other unreal thing people are willing to buy, if they trade the unreal thing for real money? I suppose you could tax it then but I'd argue you are already taxing them when they spend the real money but at least that would make sense, treating BC any differently than WoW gold or horse armor just doesn't make any sense to me...hell we've seen idiots pay money for low UID account on Slashdot on eBay, does that mean the government should have a "low UID tax" since you could theoretically get some money for it?

Re:Kind of innevitable and entirely reasonable

[spyfrog]

I thought you were an democracy. So it isn't the federal government who is to blame - it is you the people that continue to vote in people who either doesn't lower spending or raises taxes to balance the budget.
Blaming it on the federal government is plainly wrong - you Americans simply wants to eat the cookie and keep it. Balancing a budget is easy - either you cut spendings or your raises taxes. Your politicians does neither and you keep voting on them so you should all take the blame.

Re:Kind of innevitable and entirely reasonable

[Anonymous Coward]

Actually you do. If you're given or are paid in Apple shares, you're taxed the value of the shares at the time you were given them. When you sell the shares, you pay additional taxes (or receive a tax credit) based on any differences in price from when you got them.

Re:Kind of innevitable and entirely reasonable

[synaptik]

Yep, capital gains, sorry. :) I was speaking loosely. I'd have gotten in right on my Schedule D.

Re:Kind of innevitable and entirely reasonable

[synaptik]

Yes, capital gains, sorry. :) I was speaking loosely. I'd have gotten it right on my Schedule D, come tax time.

Re:Kind of innevitable and entirely reasonable

[Anonymous Coward]

And once again, you address none of his points...

Denmark spends more per as a percentage of GDP than the USA. I know that it doesn't fit what you WANT to be true, but it turns out reality isn't subject to your fantasy.

Re:Kind of innevitable and entirely reasonable

[Big Electric Cat]

As far as cap gains goes, you don't have to convert your shares into money (i.e. sell them) in order to be subjected to the tax. You would also owe it if you bartered them for something else, or if any number of other "taxable events" changing the status of the shares occurred. The rules are complicated, but basically the idea isn't "money is magically the only thing we tax", it's just "we tax it when your ownership in the property ends or changes". I'm talking about the U.S. here - I don't think Canadian law is drastically different. It's possible to tax you, say, annually on the value of changes in your property, instead of waiting for it to be disposed of in some way as we do, but that's administratively very inconvenient (not all property is easy to value), and can be pretty unfair when property has frequent large price fluctuations.

Re:Kind of innevitable and entirely reasonable

[xelah]

- If the tax money collected by the government is spent on a program which yields a higher return (by increasing the nation's productivity) than if the money had remained in private hands, then tax evasion is stealing from other taxpayers.

It isn't quite as simple as that. Suppose you're a better carpenter than me and I'm a better gardner than you. And suppose there's some carpentry I want I could do myself in 10 hours, and you could do in 8. And suppose there's some gardening you want you could do in 10 hours and I could do in 8. The logical thing - the efficient thing - is to swap tasks and do each others. We both get what we wanted with less effort. Now suppose there's a 25% or more tax - for every 8 hours work you do, you have to do another 2 or more effectively for the government. This swap is no longer in our interests, and we're better off doing the work ourselves even though its less efficient. So, added to the cost to individuals of taking away some of what they consume to provide government services, there's an additional cost caused by reduced efficiency. Considering efficiency grounds only, the public program needs to provide higher economic welfare than the amount lost to the individuals who are taxed, plus the amount used up administering the tax, plus the efficiency loss caused by the distortion of economic decision making.

Of course, as any basic economics course will tell you, this effect can also be used to increase efficiency where purely private decision making comes out with poor results. Pollution is the classic case. And its also worth noting that the same effect occurs with monopoly prices.

But there's more to an economy than being efficient. Its purpose is to promote the economic welfare of its citizens. In the political view of most people, this includes some (widely varying) amount of redistribution, too. And if you take maximum overall economic welfare as the goal (which is tricky, because adding welfare across people is rather conceptually difficult), and notice that giving a little to a poor person produces a much bigger increase in his welfare than giving a little to a rich person, the logical outcome would involve quite a lot of this redistribution.

Re:Kind of innevitable and entirely reasonable

[alexander_686]

As given in the summary, it is sales tax (if used to buy things) or capital gains tax (if mined and sold, or speculated in.) Which, I think, would be common sense. In America, at least, you can’t avoid taxes by switching to barter, script, or other currencies – it’s fair market value that drives the underlying tax code.

Re:Kind of innevitable and entirely reasonable

[alexander_686]

I'll go along with it if I can PAY my taxes in bitcoin...Until then @!#$@#$ off.

Why? I don’t know about Canada, but in most of the world, if you make profits in a foreign currency (or script, barter, etr.) it is your responsibility to convert those profits to US Dollars. Why should BitCoins be different?

Re:Kind of innevitable and entirely reasonable

[HellYeahAutomaton]

Libertarian types trying to sponge off the taxes of hard working tax payers via tax evasion

Statist socialist types trying to sponge off hard working capitalists via government strong arming with prison and fines.

There, FTFY.

Re:Kind of innevitable and entirely reasonable

[xelah]

For an economy, efficiency isn't just about doing a particular thing with fewer resources. You can also be inefficient by doing the wrong things. Think of the badly organized communist state which manufactures - very efficiently - twice as many left shoes as right. Or more plausible government that piles its country's resources in to terrorism prevention, whilst ignoring road safety.

Re:Kind of innevitable and entirely reasonable

[HellYeahAutomaton]

Good move by the government, and it is a good thing that this is happening sooner rather than later. Yes, taxes suck, yes I want to pay lower taxes, etc, but the wars, drone strikes on brown people, and the Frankenfoods don't pay for themselves.

There, FTFY.

Re:Kind of innevitable and entirely reasonable

[Attila Dimedici]

Well, whether you consider that left or right depends on whether you think the Democratic Party is to the right or the left of the Republican Party. The post you responded to was on the Democratic Party side of the political spectrum.

Re:Kind of innevitable and entirely reasonable

[Attila Dimedici]

When you compared the relative size of government between Denmark and the U.S., did you include the individual states on the U.S. side? Denmark's government compares to a U.S. state which also does the tasks handled in the U.S. by the federal government.

Re:Kind of innevitable and entirely reasonable

[Attila Dimedici]

Does Denmark spend more as a percentage of GDP than the U.S. government combined with a U.S. state government, because in the U.S. government tasks are divided between the several states and the federal government?

Re:Kind of innevitable and entirely reasonable

[Anonymous Coward]

Because Government costs money, and that money is more than what they receive via income tax. Sales Tax is far more fair and equitable than income tax as you pay for your actual lifestyle, rather than your perceived lifestyle.

Obviously you are incorrect on the statement that 'this level of taxation goes far beyond what it takes...' as the Canadian government has been running very large deficits for the past few years, and thus it doesn't even come close to the level of taxation needed to run the nation.

Of course, the statment 'run the nation,' is another debateable matter entirely, but since you didn't mention anything like government overspending, I am going to assume that current goverment spending is the benchmark we shall use to decide how much money it takes to run the nation. I believe strongly that the Canadian Government is overspending, so if THAT is what you were trying to insinuate, you wont get an agument from me.

The above is to answer the question of why they should get a cut (assuming you believe that government is good for people... if you dont assume that government is good, this discussion is pointless). I'm not trying to answer the question of 'how much should they get.' I personally think Sales taxes should be raised, and income taxes should be removed or brought much lower and Spending be kept within the means of taxation.

Re:Kind of innevitable and entirely reasonable

[nomodon]

The same question goes in the other direction though. You have to include the size of the EU into the governance of Denmark.

Re:Kind of innevitable and entirely reasonable

[Anonymous Coward]

Alot of freedom too. The american religion says who you can and cannot marry around the world, and at what ages. They will prosecute you even if you move out of their grasp.

Re:Kind of innevitable and entirely reasonable

[ScottMcD]

The government expects to get a percentage of every transfer of money from one entity (or person) to another. The person receiving the money must count it as income. This is how income tax works. Just because a person decides not to report doesn't mean the tax isn't owed. And if the amount of money is high enough the government will figure out that tax is owed and come after the person to get it.

In the case of bitcoins (or any other non-local currency) the transaction must be converted to the local currency to figure out the value of the transaction and the amount of taxes to be paid.

Re:Kind of innevitable and entirely reasonable

[siride]

All this technology doesn't spring forth magically. It exists and is produced under a massive global system of powerful institutions, and supply and distribution chains, to say nothing of systems of education and healthcare and food production to provide for all the people that make these things happen.

Re:Kind of innevitable and entirely reasonable

[CastrTroy]

Exactly. They had a crackdown on people who made money off eBay a few years back. They obviously didn't go after people who just sold a bicycle on eBay but were more concerned with those running completely undeclared businesses off of eBay, some people making over $100,000 per year. Just like they won't go after people setting up a garage sale but they will expect taxes to be paid when you're running a business, even if you run it out of your home.

Re:Kind of innevitable and entirely reasonable

[Anonymous Coward]

Governments are supposed to be smart enough to allow something new to take off before taxing it to death. Unlike corporations, they are not slaves to next quarters earnings and thus are supposed to take the long view that more money is to be made if things are allowed to flourish during infancy. This is just demonstrates that Canada's tax agency is run by morons, and whoever controls that country should get rid of whoever heads it.

Re:Kind of innevitable and entirely reasonable

[Anonymous Coward]

Confusing a properly designed direct or delegated democratic voting system with digital ballot boxes is a little like confusing e-mail with those birthday cards that play a tune when opened.

Re:Kind of innevitable and entirely reasonable

[frig.neutron]

Tell me how a air traffic controller or a teacher, to use two examples a "parasite appendage to the real economy"? All are not strictly needed, but the economy would be much smaller if planes would crash into each other, or if people didn't learn to read and write so they could contribute more to the economy.

Technically, services such as air traffic control, education and the transportation infrastructure don't have to depend on the government. Private entities could be established to maintain and develop these systems on a for-profit basis. Users of these services would be billed directly at the time they use the services. The public at large would not be directly financially responsible.

Whether subjecting things like education and traffic control to the whims of private interest is a good thing is another question.

Re:Kind of innevitable and entirely reasonable

[alexander_686]

There are some countries, such as France, that have a wealth tax. So yes, in some places, you have to pay a tax each year you hold BitCoins, Apple, or whatever. (fun fact, a wealth tax has one of the highest tax drags for taxes for long term investments.)

Re:Kind of innevitable and entirely reasonable

[Trepidity]

Yes, it's counting all levels of government added together (international comparisons typically do, because the internal structuring differs so much between countries).

If you add up all governments in the U.S. (federal, state, county, municipal), the numbers are: taxes equal 27% of GDP, and spending equals 39% of GDP. If you add up all the levels of government in Denmark, the numbers are: taxes equal 49% of GDP, and spending equals 52% of GDP. Source: The Heritage Foundation (a conservative U.S. think-tank)

Doing a bit of digging for the U.S. federal budget, it looks like it's a little over half the total in both categories. Total 2012 federal tax receipts were $2.5 trillion, and total federal expenditures were $3.5 trillion. Since GDP was $15 trillion, that equates to 17% of GDP in federal taxation, and 23% of GDP in federal spending.

Re:Kind of innevitable and entirely reasonable

[Livius]

And it's a simple calculation because governments only spend money on one thing.

Re:Kind of innevitable and entirely reasonable

[Anonymous Coward]

Given what you've said, I take it you're in favour of a single world government then? If you're not then don't expect anyone to take your argument about the badness of competing authorities seriously.

Re:Kind of innevitable and entirely reasonable

[Anonymous Coward]

We don't have a wealth tax in this country. You don't have to hide currency.
We have a revenue tax. Why?

Because they control the currency they accept for taxes. So gains in that currency's value (LOL) wouldn't be taxable because 1 USD = 1 USD.

You don't have to pay taxes until you cash out. If you don't cash out (or donate the money elsewhere) they have no right to the gains.

"Hiding money" is a joke. It's only hiding if it's not really your damn money.

Most libertarians aren't sponging mooches, but most cunts on the internet are.

Re:Kind of innevitable and entirely reasonable

[cornjones]

[A]... government that piles its country's resources in to terrorism prevention, whilst ignoring road safety.

Oh c'mon... a cursory glance at the number of casualties from terrorism vs road accidents would show that to be just plain dumb.

at least use a more plausible example, geez!

Re:Kind of innevitable and entirely reasonable

[Anonymous Coward]

So what good is your direct democracy without enforcement? You pass some very democratic rule that makes it illegal for me to, say, run a jet engine at 4 am in the morning next to your house. If you have to come enforce it yourself, then there is no law. If you send someone to enforce it for you, he has to get paid. If you pay for him yourself, then there's no government against the rich, since they pay for bigger guards. If we all have to pay for it, and bad things happen when we don't, congratulations, you have a government!

Re:Kind of innevitable and entirely reasonable

[countach]

Reasonable question. But should all digital artefacts be the same? What if I have some really cool computer code that might be worth a lot of money to someone. Should I try and value it?

Re:Kind of innevitable and entirely reasonable

[Wildclaw]

And if all the work is done by robots, a government is needed more than ever, because then there will be no more economic wealth redistribution through wages.

That is something I think most people don't get. Governments naturally grow to fit the size of the available labor force after the private sector has had its share. (when it doesn't, it is called austerity and is generally a bad bad thing)

Macroeconomically speaking, any government only has 4 options:

* Pay the unemployed (large government with entitlements)
* Employ the unemployed directly or indirectly (large government)
* Institute max working per week and other rules to increase number of employees in the private sector (shrinks government, grows private sector)
* Wait for inevitable collapse or civil war.

Re:Kind of innevitable and entirely reasonable

[alexander_686]

It feels like you are off topic here. We were talking about taxable transactions here – something that would trigger you to pay a tax. Being digital is kind of a side issue.

If you sold something – be it vegetables, BitCoins, or computer code – that would be a taxable event. If you exchanged something – like BitCoins for output of your computer code – that would be a taxable event.

But building a cool piece of code or painting a cool piece of art is not – unless I am missing something here,.

Re:Kind of innevitable and entirely reasonable

[Anonymous Coward]

It's the same in Canada, you have to apply the correct exchange rate in effect at the time of the transaction when declaring the profits on your taxes.

Re:Kind of innevitable and entirely reasonable

[Anonymous Coward]

Just the same goverment that turns a blind eye to tax havens, and mercilessly pursue average Joe Maple sirup for a few hundred bucks (canadian).

That's who.

Re:Kind of innevitable and entirely reasonable

[Anonymous Coward]

lol. the EU is not even close to comparable to the US federal government.

Re:Kind of innevitable and entirely reasonable

[Chuckstar]

Why don't you lay off. Capital gains tax is a subset of income tax. So he's absolutely right.

Re:Kind of innevitable and entirely reasonable

[Chuckstar]

Your post makes no sense. Just because Denmark actually pays-as-it-goes for its government, doesn't mean its government is smaller than the U.S.

I can't wait to see how you'll move the goalpost in response to this comment.

Re:Kind of innevitable and entirely reasonable

[Anonymous Coward]

Or you know the electricity grid in California which was done wrong.

Some things should be done right and for the good of everybody.

I would say gas / electricity / water / sanitation / internet (Phone isn't a problem but only because it was done reasonably well in the first place).

The thing is private entities don't do things exactly the same they nickel and dime everything and the end result is stuff that barely functions (And in the long run doesn't work as well - then they have to be bailed out).

Re:Kind of innevitable and entirely reasonable

[Anonymous Coward]

On the contrary, letting sick people die in the street is a horribly inefficient procedure. Not only do they obstruct and distract lawful use of the streets, they also form a huge public health hazard and a huge law enforcement overhead (because generally, bodies lying in the street need to be investigated). Far more efficient to put them in a quiet hospital (or hospice) somewhere. And if their condition is treatable (at anything less than astronomical cost), then it makes sense to treat them, because the total cost of raising and training a replacement person is also astronomical.

To be sure an individual company can save money by not considering that cost, but a whole country can't.

Re:Kind of innevitable and entirely reasonable

[Anonymous Coward]

"In America, at least, you can’t avoid taxes by switching to barter, script, or other currencies – it’s fair market value that drives the underlying tax code."

But you can sure as hell evade a significant amount given that you aren't brazen about it.

Re:Kind of innevitable and entirely reasonable

[Anonymous Coward]

What it takes to run a nation is a court system with an enforcement arm, and suffecient military power to deal with domestic challenges. Anything beyond that is gravy. The problem is nobody want to give up any of thier gravy. Frederick Bastiat put it quite eloquently “The state is that great fiction by which everyone tries to live at the expense of everyone else.” In addition there is a limit on the amount that can be raised. Squeeze to hard, money goes underground or overseas, and network effects from to reduce the risk of evading taxes.

Re:Kind of innevitable and entirely reasonable

[smash]

IF this is the case (I don't have the figures) I can tell you now that the government of Denmark spends a lot higher percentage of it's spending on PRODUCTIVE pusuits, rather than warfare and playing world police. PRODUCTIVE government spending is not a bad thing. Pissing money into the wind chasing ghosts and suppressing your population's civil rights, is.

Re:Kind of innevitable and entirely reasonable

[Anonymous Coward]

either you cut spendings or your raises taxes

Uhm, I hate to be the one to break it to you, but it's not a binary condition: doing both is a perfectly acceptable solution too...

-AC

Re:Kind of innevitable and entirely reasonable

[smash]

If you cut your military budget down to say, only 2-3 times your largest potential adversary's, and used it for defence rather than empire building, you'd probably be in surplus in no time.

Re:Kind of innevitable and entirely reasonable

[mysidia]

it’s fair market value that drives the underlying tax code.

While it's a great theory for how taxes should be defined. it may be problematic... Suppose, you use X bitcoins to buy a digital product, such as an eBook, that is not for sale by any other means (it is not available to be purchased for USD).

You have a problem, since the product doesn't have a fair market value that can be uniquely discerned.

The value of the product is a matter of opinion. Some books are sold brand new for $5, others $50, others $5000... In a sense, if the book is a one of a kind item, there is no way of having a fair market value for it.

Furthermore, what, if any fair market value, the bitcoin transfer might have, is also indiscernible.

Unlike with a real currency, there is no market for the bitcoins either.

So the user of bitcoins has some serious practical problems, until such time as the tax on bitcoin transactions is payable in bitcoin....

Re:Kind of innevitable and entirely reasonable

[Anonymous Coward]

Because society is what gives you property rights in the first place. Without the rest of us agreeing to it, you wouldn't even own anything in the first place. The government gets a cut because it represents the rest of us, and we should probably be paid for providing the "service" of granting you "property".

Re:Kind of innevitable and entirely reasonable

[Anonymous Coward]

Why are this guys posts all modded down? At the very least they are stimulating discussion and making people question their assumptions.

Re:Kind of innevitable and entirely reasonable

[mysidia]

Actually you do. If you're given or are paid in Apple shares, you're taxed the value of the shares at the time you were given them. When you sell the shares, you pay additional taxes,

Yes... this is analogous to receiving bitcoins.

But what about the act of spending bitcoins? The act of spending bitcoins may be a capital gains realization of income event too.

What happens, if you give a shopkeeper an Apple share for a $100 product?

In that case, maybe you possess only Apple shares, you have no dollars in your pocket to pay the tax.

This differs considerably from the situation where you sell some Apple stock for USD to realize a gain; of course you can pay tax in USD -- you got USD as proceeds.

The idea, that you gave bitcoin for a product, well, equitable fair treatment would insist that you be allowed to pay your tax in the form of a portion of what you got, without sacrificing the thing you got (In other words: PAY tax in bitcoin, since you gave bitcoin,, and it's the only tangible thing you had to have to make that trade, and the product is the only tangible thing you got from that trade).

Re:Kind of innevitable and entirely reasonable

[Anonymous Coward]

I think you need to show some proof that inflation is actually bad. Its a pretty big assumption you are making, but not backing up with anything.

Re:Kind of innevitable and entirely reasonable

[mysidia]

and can be pretty unfair when property has frequent large price fluctuations.

Hey, you could clear the price fluctuations, by selling all your property at the end of every year --- change all your assets into cash on Dec 31, of every year, or donate all your capital assets to your charitable trust. Then on January 1st, start accumulating new things.

But especially for appreciating assets, it turns out to be advantageous to defer the tax for as long as possible. Because money today is worth more than money in the future... $1 today is worth about $1.02 a year from now, and once you have considered compounding, the benefits of tax deferral can become extremely large over a sufficiently long holding period.

You can take advantage of this in many ways as an investor, that would not be possible if you had to pay taxes on value changes early.

In fact... the taxes would be a lot more harmful in that case, and maybe make investing not worth it

This is all well and good with investing, but once you've traded something -- it no longer applies. If you receive or spend bitcoins, in a transaction, you don't get to delay the gain, on the bitcoin value that changed hands.

Re:Kind of innevitable and entirely reasonable

[xiando]

> Unlike with a real currency, there is no market for the bitcoins either. Dude, really? There is something called MtGox out there. There are also other exchanges out there, the big ones are listed here: http://bitcoinity.org/markets/list?currency=ALL&span=24h The current market value of a Bitcoin is very easy to get, all you have to do is look at the ticker-price and you have it. Saying there is no market when BTC for millions of $USD is traded every hour is kind of ignorant. I'm guessing you haven't doubled your money lately?

Re:Kind of innevitable and entirely reasonable

[mysidia]

Please expain to me why the government should get a cut if i transfer money from one human to another.

I don't know, but what does this have to do with bitcoins? The fact is, they tax incomes regardless of source, and regardless of what forms the income takes, as long as there is an increase in value, and (if necessary) an income realization event.

This level of taxation goes FAR BEYOND what it takes to run a nation.

Different nations require different cost to run. The US, and other governments through their voted representatives have decided to do far beyond the minimum; generally, for the express purpose of providing external benefits, that would not be otherwise available.

Some good examples would be the weather service, the Military, Medicaid, Welfare/food stamps, and there are plenty of government programs and initiatives that we the people have voted in, through our elected representatives.

In fact... the revenue from every transaction involving income is not only needed, but insufficient... the US government is near broke, as-evidenced by mounting piles of debt, and interest rates that will likely increase, regardless of its market manipulation efforts to keep rates low.

Re:Kind of innevitable and entirely reasonable

[ganjadude]

if we did that in conjunction with everything else that the states do, or could do better, it would be even sooner. but yes, dropping military spending by somewhere over 50% would make me happy, but i also want to cut some 50% of the democrats stuff as well personally.

Re:Kind of innevitable and entirely reasonable

[khallow]

All seems reasonable to me.

They're just repeating rules that are already in place. Reasonable and what should be self-evident.

Libertarian types trying to sponge off the taxes of hard working tax payers via tax evasion need to stop being so greedy and stealing other peoples money.

That type of "libertarian" shows up throughout human society and has all sorts of professed ideologies.

Re:Kind of innevitable and entirely reasonable

[alexander_686]

While it's a great theory for how taxes should be defined. it may be problematic... Suppose, you use X bitcoins to buy a digital product, such as an eBook, that is not for sale by any other means (it is not available to be purchased for USD). You have a problem.

Well, no, I don’t have a problem – it’s the retailor who has to pay the tax so it is up to the local authority. And in America, these things don’t have sales tax. So the specifics don’t pan out in this case – but let’s take the view of the retailor.

It’s intangible? So? There is a whole chunk of legal and accounting standards that wrap around this. Has anybody anywhere swapped bitcoins for something else? If yes that gets you a value. It may be a fuzzy value – but it is a value. Don’t have that? That’s o.k. You can (and in some cases, are required to) bring in a independent 3rd party to assign a appraised value. Once again fuzzy, but this is routinely done when somebody donates a piece of fine art or a patent.

Re:Kind of innevitable and entirely reasonable

[mysidia]

Well, no, I don’t have a problem – it’s the retailor who has to pay the tax so it is up to the local authority.

You have a tax too.... capital gain on the bitcoin amount you traded. If you generated the bitcoins yourself, the entire value traded may be income for each of you, buyer and retailor. If you don't have a value for the thing traded -- not only do you now know what the value the thing is worth, you don't know what the value of the bitcoins involved in the trade are either, how many dollars of value, and how many dollars of cost basis go with those bitcoins, and whether, you booked a capital gain or loss on them, at the time of trade.

Don’t have that? That’s o.k. You can (and in some cases, are required to) bring in a independent 3rd party to assign a appraised value.

Great.... buy book... hire appraiser, appraised as worth $50.... $100 in appraisal fees. Taxes owed: .4 * ( 50 - 100 ) ... none.

Plus, there is still great doubt that the appraisal is even remotely a 'correct' fair market value... it's just someone's arbitrary opinion; the only extra worth it has is, it's not the opinion of someone involved in the transaction, so, hopefully it is not biased by a desire to avoid or reduce tax liability.

Re:Kind of innevitable and entirely reasonable

[Kalriath]

Really? I'm taxed monthly on the total value of my shareholdings (or rather, my share of my investment fund's shareholdings).

Re:Kind of innevitable and entirely reasonable

[ganjadude]

but to be clear, cutting the other 50%, frees the money up for the states, hopefully they dont ake it all, or more, but they can and should use some of the freed up money

Re:Kind of innevitable and entirely reasonable

[Kalriath]

Because he posts the same crap over and over again. It's like listening to Andrew Ryan in Bioshock, and look how Rapture turned out.

Re:Kind of innevitable and entirely reasonable

[Anonymous Coward]

Congress can get away with murder. In the grand scheme of things, who gives a flying fuck about tax evasion. Oh, and they will soon vote themselves out of Obamacare because it costs too much. Face it, they are a class ABOVE YOU!

Re:Kind of innevitable and entirely reasonable

[Tough Love]

All seems reasonable to me.

Is there a tax on giving money to your friend? No? Why? And how is that different from giving bitcoins to your friend?

Re:Kind of innevitable and entirely reasonable

[alexander_686]

As to the point of having to pay capital gains - I missed that point. However, does it matter if you generated the BitCoin or bought it from somebody else? No - you still need to estimate the fair market value of said coin.

With BitCons that is kind of easy - lots of other people do real world transactions with them. As for appraisal value - yeah - technically it is all material and should be reported, but if that was your only trade I would guess the American IRS would not care. In some cases they will ignore total yearly amounts under $200 - in other cases under $2l000, I have not seen a ruling for BitCoins yet. Now, if you did a lot of them.....

As for the apprisal you kind of hit it on the head - the value is that it is unbiased. (I would also argue a bit about the arbitrary bit - there are standards - now some are kind of lose and have been exploited but there are standads.)

Re:Kind of innevitable and entirely reasonable

[countach74]

In the U.S., the vast majority of the federal budget goes to fighting unnecessary wars and entitlement programs. "Taxes suck, but roads are cool" simply isn't a good argument. Like anyone else, I think roads are cool too, but you and I both know that very little of our tax money goes to them. If the government would bug out of the business that they don't belong in: health care, policing the world, entitlement programs, the war on drugs, etc etc, we'd all be better off.

Oh, but I can see it coming now: "What about the elderly? What about the people in need?" Nothing beats having to take responsibility for your situation and do something to protect and care for it. Ultimately, the real problem with all of this big government spending is that it assumes (and encourages) that people are powerless and need to be taken care of (as if we're not adults or something?). Personally, I don't buy that: I know that I am taking care of myself and my family and I am nothing special. I believe in my fellow men and women to be able to do the same; assuming we can't is nothing short of insulting.

Re:Kind of innevitable and entirely reasonable

[Tough Love]

I presume that you think it would be a good idea to tax all uses of cash as well?

Re:Kind of innevitable and entirely reasonable

[countach74]

What a ridiculous assertion: that the only way we can have air traffic controllers or teachers is via the government. Get off my lawn!

Re:Kind of innevitable and entirely reasonable

[countach74]

But... he's right. Real economy is exactly what he said it is. What he posted was in context and not total vomit, so why do you care? It's sad to think that what he's posted would challenge peoples' assumptions, but I guess we may just be that stupid as a society.

Re:Kind of innevitable and entirely reasonable

[Tough Love]

Canadian idiocrats are doing this because they do not expect an organized response from the victims er sorry constituency. Imagine what would happen if a tax on stock transactions were proposed (that is, in addition to taxing gains, tax every single transaction, win or lose).

Re:Kind of innevitable and entirely reasonable

[DigiShaman]

Moderate inflation is healthy so long as the GDP is growing too. It's preferable to deflation. But, inflation can turn into hyper-inflation in which it takes wheelbarrows of cash to purchase a loaf of bread. It wipes out peoples savings accounts and leaves those living off retirement as piss poor where an honorable death is preferable to begging on the side of the street with gums flapping.

Re:Kind of innevitable and entirely reasonable

[sustik]

* Institute max working per week and other rules to increase number of employees in the private sector (shrinks government, grows private sector)

Instituting maximum working hours will result in a more expensive workforce. I am not against it necessarily, but in order to prevent the country to lose in international competition, some protection mechanisms will be needed (anti-globalization). And before you say that 2 people working 20 hours can do the same as 1 in 40, answer the following as a practice question:

"If it takes 1 woman 9 months to bring a child to term, how long does it take for 9 women?"

And of course whether the 2 people sharing the salary that the one got earlier will be able to live on it, is not a foregone conclusion either.

Having said the above, I wish that working hours would be reduced to around 32 per week *everywhere*. That would allow more informed citizens and would increase civic participation, etc.

Re:Kind of innevitable and entirely reasonable

[Anonymous Coward]

You're expecting a video game plot to accurately model something as complicated as the national economy? Jeez, and you complain about "posting crap"...

Re:Kind of innevitable and entirely reasonable

[grumpyman]

Now that's interesting point - in theory at some point in time the bitcoin economy should be big enough to be 'independent' from real-world currency. Now that if there is at least some people comply to this, then there'll always be that link/hole.

Re:Kind of innevitable and entirely reasonable

[Anonymous Coward]

Watch. Learn. Purge the government programming from your brain.

Re:Kind of innevitable and entirely reasonable

[Anonymous Coward]

WTF are you talking about? Somalia has a government.

Re:Kind of innevitable and entirely reasonable

[tlhIngan]

While it's a great theory for how taxes should be defined. it may be problematic... Suppose, you use X bitcoins to buy a digital product, such as an eBook, that is not for sale by any other means (it is not available to be purchased for USD).

You have a problem, since the product doesn't have a fair market value that can be uniquely discerned.

I believe the tax code assigns fair value as being the value when the exchange happened. If your ebook cost 1 bitcoin and the current exchange rate was $200/bitcoin, it would be taxed as a $200 ebook.

It's how it drives other sales - if the fair market value isn't directly on the item (which causes a pile of problems if you're bartering and using coupons, because without documentation, you'll be charged the full regular price for taxation).

For things involving forex, the same thing happens - it happens at the going exchange rate of the day. If you bought an ebook for $100 Canadian dollars (about $97 US dollars), it would be charged at $97. (Failure to document can incur penalties including using the highest exchange rate of the period, i.e., you pay more).

The government may also choose to assign a fair market value that can be decidedly unfair. Though it rarely occurs since there's typically some way to exchange it to the usual currencies. Like the bitcoin exchanges.

Re:Kind of innevitable and entirely reasonable

[BlueStrat]

Trying to hide money in bitcoin ought be seen as tax evasion

Why? If the government said that some things aren't taxed and you use those things to reduce your taxes, how is that *your* fault and not the government's fault?

Because you haven't the made the "right" political money contributions, or you might belong to a currently politically un-favored race/class/religion/ideology/private business sector, or believe that government should not trample the Constitution/BOR at it's whim, etc.

There is no rule of law anymore. The Federal government has grown far too large and powerful, and nobody but the occasional scapegoat is ever punished for blatantly-criminal and illegal acts, including murders. They hardly bother to hide it anymore.

There is only rule of & by political expedience in the US anymore. And, political expedience has no rules except to benefit politicians at your ultimate expense, which you might be forced to pay in your wealth,.your liberty, your hopes & dreams for yourself and your children, or your and/or your family's lives. Or in all of the above. But, you and everyone else will pay.

If a central government grows powerful enough to make it worth the risk to corrupt, it will become corrupt, and in rough proportion to the amount of power & control the government has, and will at some point become a positive-feedback loop.

Another thing history has proven again and again is that if a government achieves the power and ability to enslave it's people, it will.

That's why the Constitution was really a plan for a distributed network, only a network to distribute the exercise of government power instead of data, but still very similar in basic security principles to a simple computer network, like avoiding having a central point of commend/control that, if compromised, compromises the entire system. That is exactly what has happened to the US over the last 100 years as the Federal government has grown so massive and gained so many new powers while infringing ever-more on the BOR with every passing day.

The political/ideological versions of malware/botnet criminals have compromised and rooted the "central command & control server" that the US Federal Government has become. It needs to be re-imaged to the last verified and tested-clean version, and returned to it's former minor place in the power network.

Strat

Re:Kind of innevitable and entirely reasonable

[pspahn]

Except in Denmark, you don't have San Diego, New England, and everything in between (not to mention the outlying territories...)

Re:Kind of innevitable and entirely reasonable

[Anonymous Coward]

Interesting. Yet I see "creationists are idiots" posts consistently modded up. I think all organized regions are scam, but more and more I am seeing the religious as my peers rather than the so called educated posters here.

Re:Kind of innevitable and entirely reasonable

[nedlohs]

None of that matters. Government size is determined by government spending, not by the level of taxation (thus the US government is much larger than tax receipts would indicate due to it using debt to fund spending). As a percentage of GDP is the normal way to compare since countries are different sizes.

Sure the US is very likely in a worse state than Denmark, but that doesn't magically mean Denmark has a smaller government.

Re:Kind of innevitable and entirely reasonable

[maxwell demon]

Only on paper.

Re:Kind of innevitable and entirely reasonable

[Anonymous Coward]

... favour no government ...

Anarchy is rarely promoted from "I make my rules, You make your rules" philosophy. No government means no taxes, no compliance/audits, no moral/monetary limits. The rich also forget it means no police to stop the peons ransacking their house and no public education telling peons the rat poison stays out of Richie Rich's soup.

... provide direct democracy ...

It's a nice 'for the people' speech, but to quote an old Slashdot post, "democracy is a dictatorship by the common man and the common man ain't nice". Meaning, it's not enough to give everyone a voice and guarantee a government which provides "tyranny by popularity". Much like the current government, we need to separate the data from the idiots and the bull-shitters.

The demand that everyone spend their week-end by voting on laws, just won't work in society. There will have to be a voting proxy (*), which requires 200 times the politicians of the current federal system. Direct democracy eliminates councils and parliaments but it is a massive increase in the number of people getting a pay-cheque from tax-payers.

* Voting proxy: Differs from representative voting, in that he doesn't represent the majority voice and the minority is silenced. He will represent 30,000 people voting 'no', for instance. Hence the number of 'no' votes at the caucus will be proportional to the number of citizens who disagree with the legislation.

Re:Kind of innevitable and entirely reasonable

[Malc]

Exactly, an item's not taxable until you make a sale. Give away your free code and there's no tax on it, not matter how cool or valuable you might think it is. The government will tell you what exchange rate to use and then you pay your tax liability in the currency of their choice. The AC that started this thread is clearly pretty naÃve about how taxation works. I'd like to see them refuse to pay just because the government doesn't accept alternatives to the national currency :)

Re:Kind of innevitable and entirely reasonable

[Captain_Chaos]

Do you deny that there are people who can't take care of themselves, through no fault of their own? If so, then you are delusional. If not, then you are an asshole.

Re:Kind of innevitable and entirely reasonable

[Anonymous Coward]

I recommend you actually read up on Somalia.

Re:Kind of innevitable and entirely reasonable

[Anonymous Coward]

"Oh, but I can see it coming now: "What about the elderly? What about the people in need?" Nothing beats having to take responsibility for your situation and do something to protect and care for it."

Unless you're an orphan in perfect health and who has never experienced a crime, fire, natural disaster or war inside your own country, you don't understand the real world. Of course we can take care of ourselves as adults. But you'll find that no matter how dedicated you are to your own safety and security, there are times when for reasons of family, home, and country that the personal resources you have available will fall very far short of what is needed. At that point you'll be saying "Please help me". And at that point I'll point and laugh and say "Take responsibility for your situation and do something to protect and care for it, Mr. Adult."

Not really, because I'm a part of society and will support it and people in need of help, but sometimes I do wonder if we should give people like you a huge tax discount. Some kind of "I opt out of the majority of society's costs" declaration. Then we can officially abandon you to your own devices when things go horribly wrong, and the rest of us could be reminded of why we do pay our taxes, because it isn't *that* bad a deal. What you're really expressing is the frustratingly bad job that government sometimes does. The solution there is to fix it, not to write off almost the whole damn thing.

Re:Kind of innevitable and entirely reasonable

[Anonymous Coward]

"The fact is that American government is about 80 times the size that it should be, Canadian government is probably 60 times the size that it should be, basically those government should be cut to about 2-4% of their current size and the economies would strive."

Yet, until the 2008 financial crisis, Canada's budget was in modest surplus for years, and paying down the debt, whereas in the US it was digging itself into a deep hole. We can argue about whether cuts as huge as you are describing would be a net benefit, but there's no question that it is possible to run this kind of "welfare state" with an appropriate level of taxation. Yes, higher than the US tax level, but the Canadian taxation level isn't nearly as high as europe.

As for kicking people off all that stuff, I'd love to see an example of a country where people had been kicked off "public everything". No public education, transportation, utilities, healthcare? Would that extend to no public policing, fire and emergency services, roads and their maintenance, defense? I'm picturing a country something like Somalia once you finish all that.

Re:Kind of innevitable and entirely reasonable

[Anonymous Coward]

As for kicking people off all that stuff, I'd love to see an example of a country where people had been kicked off "public everything".

- happened many times with many countries even over the last 100 years, you are ignorant of the even most recent history around you.

You will see it soon enough in USA, not because of ideology change but because of simple economic reality, interest rates go up and it will be exactly that, what you want to see.

Re:Kind of innevitable and entirely reasonable

[Anonymous Coward]

This.

Now there will be replies saying "but they are all the same". No they are not. There are people that would cut things. Yes, these people would also cut the things you don't want to be cut. No, there is no way to cut spending and pleasing anyone. Things have to go. People won't vote for that. You will default on your loans. That means your government won't be able to borrow more. That means they will inflate money like hell, or suddenly drop lots of funding. That means riots and hunger. But that is what people seem to want.

Re:Kind of innevitable and entirely reasonable

[FooAtWFU]

That's not an article about tax avoidance, though, that's an article about tax evasion, which is different. Remember, tax avoidance is the legal one which has even been endorsed by the court system: "Anyone may arrange his affairs so that his taxes shall be as low as possible; he is not bound to choose that pattern which best pays the treasury. There is not even a patriotic duty to increase oneâ(TM)s taxes." - Helvering v. Gregory.

(Not that tax avoidance and tax evasion are both bipartisan things, but, the distinction is worthwhile, because one is criminal.)

Re:Kind of innevitable and entirely reasonable

[RevDisk]

You're thinking "politician". Libertarians, usually, don't want to do the whole tax evasion thing. Theoretically just prefer low taxes in exchange for less government services. Now, some advocate fees for everything government instead of income or capital gain taxes. It's still taxes of a sort, just more specific.

"Anarchism" is wanting no taxes or fees (or government) whatsoever..

Re:Kind of innevitable and entirely reasonable

[Anonymous Coward]

Treating sick people before they infect others might actually be efficient use of money, as sick people won't be able to produce anything ( pay taxes ). Also there really isn't anything that actually _needs_ to be produced. What are we going to do with all that efficiency anyways? Kill people overseas? Improve our own quality of life? Which improves your quality of life more; killing people overseas (might prevent terrorist attacks, some say) or rehabilating your local drug addicts and helping the poor (they don't need to beg & steal & rob anymore, some say)?

I'd say we would have to figure out what the hell we want to archieve as a nation first, then we can discuss how we are going to reach those goals. Reach for the moon? Research new stuff? Keep the people safe? Offer quality of life even to the less fortunate ones? What is the goal?

Re:Kind of innevitable and entirely reasonable

[XcepticZP]

I'm utterly disgusted with the fact that you got upvoted. Not that I place value on being upvoted, but rather because it shows me the general consensus of people that are reading these discussions.

You're just presenting the same old rehashed arguments. Not even good ones, I might add. However, the person below that logically and clearly explains the error in your thinking gets no moderation.

You know, we'd love to just leave you guys the fuck alone and go to our own piece of land somewhere out there in the middle of nowhere where none of you can impose your morals and taxes on us. But ALL land is taken, and we have no where to go. Hence why statist assholes like you keep telling us to go to Somalia. Because statism has taken up ALL land, and we have no course of action but to convince you weenies that what you're doing is morally wrong and pretty darn violent. Heck, we can't even buy our own property. All we can do is rent it from government. Feudalism 2.0.

Re:Kind of innevitable and entirely reasonable

[Beyond_GoodandEvil]

I can tell you now that the government of Denmark spends a lot higher percentage of it's spending on PRODUCTIVE pusuits, rather than warfare and playing world police.
Have you ever sat down and thought that perhaps the reason Denmark doesn't play world police is b/c somebody has already stepped up and taken care of that? Or do you naively believe that the UN has helped prevent wars of conquest by providing a forum to allow nations to talk to each other?

Re:Kind of innevitable and entirely reasonable

[XcepticZP]

Why don't you rather suggest that people that don't like living under government should go out in the middle of nowhere where they can be left alone? Oh, that's right... Because government owns ALL land, and they will SHOOT you if you try claim any of it, even if they're not using it. That sort of violence is no different than the kind you find in Somalia.

Copy from a response to another poster above:
You know, we'd love to just leave you guys the fuck alone and go to our own piece of land somewhere out there in the middle of nowhere where none of you can impose your morals and taxes on us. But ALL land is taken, and we have no where to go. Hence why statist assholes like you keep telling us to go to Somalia. Because statism has taken up ALL land, and we have no course of action but to convince you weenies that what you're doing is morally wrong and pretty darn violent.

Re:Kind of innevitable and entirely reasonable

[Viewsonic]

What does "bi" Partisan have to do with this? You mean "tri" partisan, or are you saying Libertarians are the same thing as Republicans who don't want to be associated with Bush?

Re:Kind of innevitable and entirely reasonable

[Anonymous Coward]

Thank goodness we're getting federal economic advice from 'ganjadude'. What an epic identity you have there.

Re:Kind of innevitable and entirely reasonable

[Anonymous Coward]

That's why the Constitution was really a plan for a distributed network, only a network to distribute the exercise of government power instead of data, but still very similar in basic security principles to a simple computer network, like avoiding having a central point of commend/control that, if compromised, compromises the entire system.

I disagree. I see the Constitution is simply the design for a common network protocol. Security, keeping the network from being compromised, and even what you put on the network is left to the users.

Or in other words, the Constitution just lays the groundwork for the Internet. Whether the Internet is full of intellectuals sharing useful information or a wretched hive of scum and villainy is up to the users.

"A Republic, if you can keep it"

So going back to an earlier "clean" version wouldn't help. It doesn't address the source of all the dirtiness: people who like cat pictures, p0rn, and fantasizing about Natalie Portman covered in hot grits.

Re:Kind of innevitable and entirely reasonable

[tehcyder]

"In America, at least, you can’t avoid taxes by switching to barter, script, or other currencies – it’s fair market value that drives the underlying tax code."

But you can sure as hell evade a significant amount given that you aren't brazen about it.

There are lots of illegal things you can do. You can do cash-in-hand work and pay no tax at all. You can deal drugs and pay no tax at all.

So what? The whole "because you can do something therefore it's OK" argument is ridiculous, unless you simply ignore the concepts of law, justice, society and morality altogether (i.e. you're a Hell's Angel or extreme libertarian).

Re:Kind of innevitable and entirely reasonable

[countach74]

Absolutely there are some who legitimately cannot take care of themselves. However, that does not mean that government needs to intervene. There used to be a time when families took care of the invalids. Churches and other non profits used to (and still sometimes do) provide help. Interestingly, now that there's so much aid for those in trouble, I've seen churches turn people in need away, but I digress.

Since I don't deny that there are those who cannot take care of themselves, I am not delusional but an ass hole. That comment is exactly the same type of drivel that is brought up in gun debates: you don't support gun control, so you must hate children. Give me a break! Just because I have a different belief to adress a problem than you does not make me an ass hole.

Re:Kind of innevitable and entirely reasonable

[tehcyder]

I'm guessing you haven't doubled your money lately?

It is truly exciting that there is a new vehicle for pointless speculation that creates no real economic activity.

Personally, I've been investigating the derivative bitcoin futures market recently. Using my non-existent offshore property portfolio as virtual collateral, I've geared up so that my exposure is greater than the GDP of all but seventeen nations on Earth. One wrong move, and I could cause a New Worldwide Great Depression, but on the flip side by this time next week I could own Apple, outright.

Re:Kind of innevitable and entirely reasonable

[RevDisk]

Not really. Defense is 17.7% of FY 13 Federal budget. We borrow roughly half of the money we spend. So, if you cut every single defense program (including things like GPS), you'd still have a shortfall of 32.3%. Give or take.

Not saying we couldn't trim the DoD. Just saying it's not a wonder cure.

Re:Kind of innevitable and entirely reasonable

[Anonymous Coward]

Tell that to the government of Hungary. Every bank transfers and ATM cash withdrawal is taxed here.

Re:Kind of innevitable and entirely reasonable

[amiga3D]

What ails you? Who gives a shit about parties when they really are just smoke screens for the ignorant. There is only one party in Washington and that is the Money Party. Oh there are a few people that try to make a difference but their party leadership shuts them down pretty quickly. Most of those get disillusioned and don't even bother to try for re-election.

Re:Kind of innevitable and entirely reasonable

[ganjadude]

Thank goodness for anon cowards to tell us all to judge a book by its cover

Re:Kind of innevitable and entirely reasonable

[swillden]

For an economy, efficiency isn't just about doing a particular thing with fewer resources.

Only if you define "efficiency" in an odd and particularly narrow way.

For an economy, efficiency is about doing everything with the fewest resources; maximizing the amount of net value to people. Which means it's all about allocating resources for maximum good. The challenge is determining what is "good". The best way we've found so far is to use pricing to stand in for aggregate resources consumed to produce a good or service, and to allow individuals to allocate their resources (or their stand-in: money) to purchase what they believe will do them the most good.

You can also be inefficient by doing the wrong things. Think of the badly organized communist state which manufactures - very efficiently - twice as many left shoes as right.

That's not efficient at all. It's pure waste since it's devoting resources to producing goods which no one wants to purchase. Even without the imbalance between left and right shoes, centrally-planned economies tend to do a horrible job at determining how much of what to produce. Marginal pricing tends to do a much better job of driving production resources to satisfy individual needs and desires. And -- believe it or not -- profit on investment capital is a huge part of what makes that work. The "parasitic" professional speculators and bankers are critically important to making all of the myriad resource allocation decisions that flow capital into the industries where it can accomplish the most good for people -- and in the process generate the best profits. The free market allocation process has its own inefficiencies and weaknesses, of course, but it's far better than anything else we've got.

Or more plausible government that piles its country's resources in to terrorism prevention, whilst ignoring road safety.

That is a good example of tremendous inefficiency: spending vast resources in an arguably-failed attempt to mitigate a non-problem.

Re:Kind of innevitable and entirely reasonable

[Anonymous Coward]

No one is saying that. When we finally get a Lib. pres. or a 10% slice of congress people will start using terms like Tri-Partisan, or switch to the much more effective Bec De Corbin.

Re:Kind of innevitable and entirely reasonable

[alexander_686]

Out of curiosity, on what type of tax? Is it a wealth tax or something else?

Re:Kind of innevitable and entirely reasonable

[Anonymous Coward]

You say the problem is that they vote for the "wrong" guys, but what if there aren't any "right" guys?

Re:Kind of innevitable and entirely reasonable

[Anonymous Coward]

Efficiency here would be measured by the ability to best get the job done. Just because a program doesn't turn a profit doesn't mean it isn't extremely efficient at it's intended (and valuable) purpose.

Re:Kind of innevitable and entirely reasonable

[gregor-e]

I wonder how feasible it is to expect to tax every transaction. There are bitcoin "tumblers" that spread your bitcoins among many wallets, then provide you bitcoins that have been subject to hundreds or thousands of exchanges of bitcoin between wallets. This makes the provenance of your new bitcoins somewhat harder to determine. But since it involves a great many transactions, any per-transaction tax would be likely to confiscate 100% of bitcoins processed.

Re:Kind of innevitable and entirely reasonable

[kmoser]

So what? The whole "because you can do something therefore it's OK" argument is ridiculous, unless you simply ignore the concepts of law, justice, society and morality altogether (i.e. you're a Hell's Angel or extreme libertarian).

Hells Angels are well versed in those concepts. Politician and Wall Street banker would be better examples.

Re:Kind of innevitable and entirely reasonable

[prelelat]

I wasn't aware of any new/current wars since Afghanistan(which we are now doing training only) nor of any drone strikes that Canada has carried out in military operation. The closest I could come up with was the NATO missions in Lybia which I think have wrapped up and the current support non combat roll in Mali. So I have no idea what the hell your talking about, can you care to elaborate on that?

http://www.forces.gc.ca/site/operations/index-eng.asp

Re:Kind of innevitable and entirely reasonable

[Anonymous Coward]

It's not the only way but to have it open to a free market with privatization would make for some logistical issues. There would still be room for people to be corrupt and having it deregulated would result in more issues. Having a privatized air traffic controller would be difficult because what if say Delta has a contract with the controller that they get priority landings. Do you regulate that? Then what is the difference between having it private or public? you might pay more for private so that they can make more money off of it. Which could increase the cost of tickets.

If you don't allow private companies to charge more and regulate them it would cause problems and wouldn't necessarily be cheaper for the customer. I mean how are you going to have healthy competition for the contract when you can logistically only have one air-traffic controller at a site. There still has to be oversight of it or it would be a nightmare.

Education is easier because you can logistically have more than one education center and have healthy competition, but if the cost is too great to go to good education you will end up segregating the poor class. This still seems to happen now as there are private schools and people don't want to work in inner cities. But at least you have something if it was all privatized you might end up with kids being home schooled by their crack whore parents. Kids from all backgrounds should have the right to a good education.

Re:Kind of innevitable and entirely reasonable

[Anonymous Coward]

This was modded "Troll"???

WTF?

Mods are smoking crack again, I see.

Re:Kind of innevitable and entirely reasonable

[dkf]

Absolutely there are some who legitimately cannot take care of themselves. However, that does not mean that government needs to intervene. There used to be a time when families took care of the invalids.

So... do you have family to look after you if you have the bad fortune to require help? No? Or what happens if your family just decides that you're not someone they really want to talk to, and that they don't want you sponging off them? Or maybe you've just previously moved across country to a new job before the accident and you don't have any family nearby. Should we just leave you out naked in the middle of winter to die of exposure then so that you're not a burden on the rest of us? No? Then we're into arguing about the level of social support.

I'm not going to say that the current level is right or wrong, but to say that there should be no support at all is pretty abhorrent. Yes, you could say that the support should be done through various sorts of non-profits (religious or otherwise) but that's just moving the responsibility around. (You do want to pay your tithes, your 10%-of-income church "taxes", right?) It's also important to note that having government handle these things affects many things in subtle ways; for example, it makes it far easier to move to a new job in a different part of the country as you will be able to know that, should shit happen, you won't be destitute. Maybe you've never moved far from one place, but lots of people have and it is an important part of making the economy more efficient and people better able to have appropriate work.

The biggest problem I have with so many who style themselves conservatives is that they start from the position, no, from the axioms, that taxes are too high and that government is always 100% bad. Given that I reject those as axioms (without comment on whether they could be true in some situations) having a sane discussion is rather difficult. (I prefer to start my 'social calculus' from axioms like "Don't treat any person like shit unless they have personally proved that they deserve it." YMMV.)

Re:Kind of innevitable and entirely reasonable

[dkf]

Except in Denmark, you don't have San Diego, New England, and everything in between (not to mention the outlying territories...)

Why is that an "except"? It looks like a statement of the obvious.

Proportionately, the US doesn't have as many major bridges or ferries as Denmark, as there are a lot of islands in Denmark (and far fewer people than in the US). But so what? They're not identical. Why does this matter to the argument? Are you saying that people become happier to pay taxes when they live next to the sea?? That would at least be a more amusing argument than most I've heard (even if it is a total BS strawman argument that isn't to be taken seriously at all).

Come on! Give us a hint why you thought what you wrote was a worthwhile addition to this conversation.

Re:Kind of innevitable and entirely reasonable

[Anonymous Coward]

The reason all of my comments were just moded down in a single day (to take down my 'karma' to prevent me from commenting) is the same reason that USA jails a man for 25 years by entrapping him in a drug deal.

It is all about the size of government in USA, there are too many people who are pro-government, pro-theft and pro-oppression and against individualism, against humanism, against capitalism, against freedom as a general principle. That's because they are part of the system, part of the problem.

Re:Kind of innevitable and entirely reasonable

[Kalriath]

It's very confusing to be honest. A quick glance over the investment statement for the fund I'm in says that apparently it is taxed on the total value of the holdings under something called "Fair Dividend Rate" - where it's assumed that all foreign shares will return a 5% dividend annually (even if they don't) but I don't have to pay tax on capital gains from the fund liquidating any assets (or get any credits for the fund losing value in assets). Then again, we also don't have a Capital Gains Tax anyway.

Re:Kind of innevitable and entirely reasonable

[david_thornley]

Depends on what exactly is happening. If you're paying for something, then the person you're buying from is probably required to report that as income. This isn't every financial transaction, and it's hardly insanity to expect citizens to pay their income taxes.

Re:Kind of innevitable and entirely reasonable

[Anonymous Coward]

Oh you Canucks are so cute. You think you're your own country.

Re:Kind of innevitable and entirely reasonable

[olip85]

I presume that you think it would be a good idea to tax all uses of cash as well?

If you buy 1 BTC for $100 and sell it for $120 then yes, you should be taxed on the $20 profit you made. As is done currently with speculating on stock and currency exchange. What's the big news?

Re:Kind of innevitable and entirely reasonable

[Tough Love]

I presume that you think it would be a good idea to tax all uses of cash as well?

If you buy 1 BTC for $100 and sell it for $120 then yes, you should be taxed on the $20 profit you made. As is done currently with speculating on stock and currency exchange. What's the big news?

Whoosh. That is not what the proposal is about. The Canadian proposal is that if you buy $100 worth of bitcoins and sell them for the exact same price, you will have to pay a transaction tax, unlike the case with normal cash.

Re:Kind of innevitable and entirely reasonable

[olip85]

I presume that you think it would be a good idea to tax all uses of cash as well?

If you buy 1 BTC for $100 and sell it for $120 then yes, you should be taxed on the $20 profit you made. As is done currently with speculating on stock and currency exchange. What's the big news?

Whoosh. That is not what the proposal is about. The Canadian proposal is that if you buy $100 worth of bitcoins and sell them for the exact same price, you will have to pay a transaction tax, unlike the case with normal cash.

I didn't see that in the article. It says (1) if you buy BTC and make a profit when you sell them, you pay taxes (similar to stock speculation, that makes sense) and (2) if you buy something with them, you pay taxes on the price paid (also makes sense, when I go to the store and buy something for $100, there is a 15% tax so it comes to $115).

Re:Kind of innevitable and entirely reasonable

[Anonymous Coward]

And people like me who favor geographically small states in confederation should live in Benelux, to see where our extreme position leads! w00t ;) I loved it when I could decide at 2pm that I would have afternoon tea in another country. From where I am, it's probably five hours flight, plus getting to the airport, plus customs etc.

(I'm not otherwise invested in this discussion, I just thought your logic was impeccable.)

Re:Kind of innevitable and entirely reasonable

[Anonymous Coward]

In theory, taxing everything at fair market value means that the government subscribes to a theory where every object in the universe has a price in dollars, and this can be defeated by exchanging your currency backed by love for the last wish of a dying child.

In practice, you can probably price most of the things you want to buy at some reasonable price in dollars. The IRS could come and say "That eBook really should have been valued at $20, not $10", but that would be a hard case for them to make.

Re:Kind of innevitable and entirely reasonable

[LordVader717]

What you describe just doesn't hold. Normally all economic activity is taxed and private chores aren't. You can't compare them.

Say a company needs their office lawn mowing and rather than pay a gardening company they do it in-house. They will need an new employee as no-one else has any spare time, but say they have a lot of lawn and from a purely material view it works out as efficient as having the gardening company do it. Tax benefit? Not really. They may save a small amount of money but the amount they save will go towards their before-tax profits and they will end up having to pay the same amount of taxes as if they outsourced. By the end of it the only way to save money is if they can do it more efficiently than the other company.

Re:Kind of innevitable and entirely reasonable

[xelah]

Things you product yourself are just as much a part of economic output as things someone else makes for you. Subsistence farming, for example, is recognized by economists as part of an economy's output, and one of the known problems with GDP statistics is that they typically don't include it because it's hard to measure. 'Imputed rent' - effectively, rent you pay to yourself to use the house you own - usually IS included in GDP statistics, by the way: http://www.bea.gov/faq/?faq_id=488

You'll probably find that if I DID accept your carpentry in payment for my gardening it would, technically, be just as subject to income taxes whether we use money to mediate our exchange or not. You can't avoid taxes just by accepting payment in kind (although can often evade them, because the authorities would be unlikely to bother us over an informal arrangement like that).

I deliberately left money out of my example to keep it simple, and because people tend to get hung up on money when thinking about economics and not look beneath it. An economy - money included - is a control system for individual decisions about economic activity, and it should be judged on the quality of those decisions. Whether we do our own carpentry/gardening or each others is one of the outputs of that control system. Most of the time when an exchange like that is considered (or, usually, a much more complex exchange spreading across many people interacting in many markets across time) it will be mediated by money. And when it IS mediated by money - and markets, and tax systems - the behaviour that the economy spits out will be what I described. We won't exchange tasks, it'll be the WRONG behaviour efficiency-wise, and it'll be because of taxation.

Say a company needs their office lawn mowing and rather than pay a gardening company they do it in-house. They will need an new employee as no-one else has any spare time, but say they have a lot of lawn and from a purely material view it works out as efficient as having the gardening company do it. Tax benefit? Not really. They may save a small amount of money but the amount they save will go towards their before-tax profits and they will end up having to pay the same amount of taxes as if they outsourced. By the end of it the only way to save money is if they can do it more efficiently than the other company.

This isn't really relevant to my example. The two situations (employee or outsourced) would, of course, be equally efficient if the decisions the economy spits out are the same - the same person doing the same task. It obviously doesn't matter if the money moves around one way or another if the physical outcome is identical.

To fit my example in to your scenario, suppose that an office would like their lawn mowing and that it's worth up to $300 to them. And suppose the employee/company would do it for $250. With no tax the exchange takes place. With a tax of 25% it doesn't, and that's the wrong decision for an economy (not an individual manager) to make. This does, of course, leave out certain problems....such as that it makes no sense to say that an office or company would like anything. I should also point out that in real life the company could find ways to do it less efficiently whilst saving money. eg, they could pressure their salaried sysadmins (who, shall we say, are not good at lawn mowing) in to doing it for free as unpaid overtime. This would use MORE resources (labour) for the same outcome, but has the side-effect of moving consumption from lawn mowing employee to shareholders. It would be an economically suboptimal decision, and a failure of the economic system.

Re:Kind of innevitable and entirely reasonable

[LordVader717]

The only way it wouldn't take place is if they wouldn't have it done at all for $333 (supposing 25% tax takes it to $250 for the company). In the real world however needs and demands are pretty flexible.
BTW, it's also an instance of the broken window fallacy to say that it is an inherently wrong decision not to have someone mow the lawn.

Having the sysadmin do it OTOH is more efficient, assuming that he could do it in his hours and that he can still fulfill his obligations as a sysadmin. If he can't then the manager made the wrong decision and jeopardized the company's system support, which will mean he'll either have to hire more people or will have downtime which impacts other employees, both of which costs money.
In order to get your fallacy to work you've had to assume the sysadmin does it for free. But that's just the manager being an asshole rather than a sound economic decision.
Understandably this sort of behavior is illegal in most countries. That's not to say it doesn't happen but they'd have practically the same incentive to pressure him even without the tax.

Finally, hiring professionals can easily be very inefficient. You have to negotiate, do quality control and administrate. The people you're hiring also have travel costs and might not necessarily be very efficient in the first place. In the end you might find you're better off doing it yourself which is what many small businesses do.

Re:Kind of innevitable and entirely reasonable

[rhodium_mir]

Payments on debt ARE government spending.

Re:Kind of innevitable and entirely reasonable

[lsatenstein]

All seems reasonable to me. Our civil society is founded on the fact that since the government actually costs money, then people need to pay tax. Trying to hide money in bitcoin ought be seen as tax evasion, unless they are paying taxes on that money.

Libertarian types trying to sponge off the taxes of hard working tax payers via tax evasion need to stop being so greedy and stealing other peoples money.

You provide the rationale to approve the decision that all online vendors collect sales taxes, (Federal or State)

Re:Kind of innevitable and entirely reasonable

[smash]

No, most of the wars in the past 2-3 decades have been instigated by the US (either directly or by CIA involvement to destabilise the country in question). Let me remind you that for all the crap spouted about democracy - the UN is a democracy - which the US conveniently ignores.

LOL

[intellitech]

And how exactly do they plan to accomplish this? Technical explanation required.

Re:LOL

[QuasiSteve]

Perhaps they'll make the exchanges report...exchanges.

Then exchanges will move offshore, and the governments will deem them illegal - kind of like gambling. So you'll have your BTC, but you'll have a hard time getting that turned into $CAD. 'Hard' being relative in the internet age, of course - it's not that hard to do online gambling in the U.S., and the Dutch tend to have zero problems accessing TPB despite ever-updating IP blocks.

To be honest, though, it isn't that much different from U.S. states in which you technically should report out-of-state purchases and pay taxes on it, and most people simply do not - then come complaining when the tax man finds out directly, or decides that places like Amazon should just collect the tax for them. I.e. complaining about what is essentially tax evasion.. it just happens to be a very popular form of tax evasion.

Re:LOL

[YodasEvilTwin]

Just like cash, they can't tell if you give your friend a few coins in return for something. But any company in the business of providing goods and services had better have their books in order. (Even drug dealers pay their taxes if they're smart -- too much attention on them otherwise.) They are going to tax volume sellers and cover the majority of transactions that way. Your piddling little trade doesn't factor into the grand scheme of things.

Re:LOL

[Anonymous Coward]

it just happens to be a very popular form of tax evasion.

Normal sales taxes are usually done automatically. Having to report out-of-state purchases and then paying sales taxes is too much work for the average person, or they simply forget (and it's nice to not pay as much too, of course).

Re:LOL

[ColdWetDog]

(Even drug dealers pay their taxes if they're smart -- too much attention on them otherwise.)

I would be interested in knowing best practices in this case.

Do you pay an import duty on your Colombian cocaine? Sales tax in the purchaser's city? Do you get addresses of your customers? VAT in Europe?

Fascinating idea.

Re:LOL

[misexistentialist]

I think the idea is to make the income appear to have come from legal sources, which might indeed incur the taxes you mention. But of course the government invents the crime of "laundering" so that it can grab all of it

Re:LOL

[ganjadude]

usually they have a front store, something that is mostly cash transactions, hot dog trucks, dry cleaning businesses etc..... or so I am told.....

Re:LOL

[squiggleslash]

Same way they tax companies that only engage in cash transactions.

It's not hard. Yes, there are opportunities for fraud, but when one company says it paid 1,000,000 bitcoins for a PC, and the selling company says it sold the PC to the first company for 10 bitcoins, then one or the other company has submitted a fraudulent tax return, and the truth will come out once both are investigated.

Re:LOL

[QuasiSteve]

To clarify, I didn't really mean that the tax evasion was also intentional.. 'popular' was not quite the word I was looking for.

To be honest, I'd be surprised if most people from such states even realize that their state requires them to report it - it's certainly rather easy to never even contemplate to even get to the point where one determines it to be too much work, or forget about it, or deliberately withhold it :)

Re:Dear CRA...

[sg_oneill]

Yes clearly Canadas population will be angry that tax evaders will be made to contribute to the resources of other people that they consume without paying.

Okay

[fustakrakich]

Then the government must accept Bitcoins as payment for all services..

Re:Okay

[maxwell demon]

Why? Could you avoid the duty of paying taxes by just buying in US Dollars instead of Canadian Dollars? Or does the Canadian tax office accept US Dollars for tax payment?

Re:Okay

[maxwell demon]

Oops, that of course should have been "selling", not "buying". I was too quick on the submit button.

Re: Okay

[Literaphile]

That doesn't make sense. You are taxed on any gains when you sell shares of a company - does this mean that you should be able to pay your taxes with stocks?

Re:Okay

[SplatMan_DK]

LOL ... ahemm ... no?

All sort of things which are not accepted as payment are taxed. Things like financial bonds and potatoes for example - they are taxed in different ways, but not accepted as "payment" anywhere.

[Item eligeble for collecting taxes] != [valid currency for payment]

- Jesper

Re: Okay

[VortexCortex]

That doesn't make sense. You are taxed on any gains when you sell shares of a company - does this mean that you should be able to pay your taxes with stocks?

No, this means you should be able to pay them with the equivalent of World of Warcraft loot though. I'm keeping all my actual wealth as diamonds buried out back in my Minecraft server. Ha! Try auditing that shit Tax man. You'll never get past the creepers and the redstone avalanches.

Re:Okay

[moeinvt]

If this "barter tax" applies as-described in the summary, how is the vegetable farmer, which operates via the barter system supposed to get $CA to pay the taxes?

Re:Okay

[j-beda]

If this "barter tax" applies as-described in the summary, how is the vegetable farmer, which operates via the barter system supposed to get $CA to pay the taxes?

That certainly is a problem for people operating entirely via barter, but in some sense it is "their" problem, not the tax collector's. If they can't come up with the bucks, they get tossed into the slammer or have their assets seized and sold at auction to pay their bills. Or both.

Why is anyone at all surprised at this? These types of rules have been on the books since people started having to pay taxes. Read your tax forms the next time you fill them out - they have all sorts of words about how to report things in therms of "fair market value" or convert things from other currencies.

ummm... duh

[larry bagina]

Can't speak for Canada's tax laws but that's entirely consistent with US tax law. Capitol gains are taxable. Bartering is taxable. The only news is that by specifically naming bitcoin they're further legitimizing it.

Re:ummm... duh

[maxwell demon]

Does it? If I buy from you, but pay with illegal drugs, am I exempt from taxes? If not, does it legalize illegal drugs?

Re:ummm... duh

[maxwell demon]

Oops, that should have been an answer to this post.

Re:ummm... duh

[TeknoHog]

Dude, I reckon that was a perfectly legitimate reply to the OP's sig.

Re:ummm... duh

[Anonymous Coward]

Not. Even. Remotely related.

Re:ummm... duh

[maxwell demon]

Not. Even. Remotely related.

You've seen my self-reply where I've explicitly stated that I accidentally replied to the wrong post?

Re:ummm... duh

[Anonymous Coward]

By the IRS's rules: You're not exempt from taxes, nor is the person you buy it from, and no it doesn't mean it's legal, it just means illegal income gets taxed too.

Re:ummm... duh

[Anonymous Coward]

One of the first tax issues litigated in Canada was whether or not gains from illegal activities were taxable. In short, they are:

Smith v Attorney General of Canada 1924 Ex. CR 193

"This is not a case with a meritorius quality commending itself to a court of justice. The appellant invokes his own turpitude to claim immunity from paying taxes and to be placed in a better position than if he were an honest and legal trader, and asks the court to discriminate in his favour as against other honest traders. As against an innocent taxpayer no man shall set up his own iniquity to operate such discrimination in his favour. His claim rests upon and is tainted with illegality and no court will lend its aid to a person who rests his case on an illegal act."

In modern times you will frequently see the CRA going after drug dealers and others of their ilk for unreported income and for a failure to collect sales tax on their drugs.

A more interesting question is whether or not the business expenses of an illegal business can be deducted under the income tax. For the most part they can be (although there are exceptions for bribes and illegal payments).

Re:ummm... duh

[Anonymous Coward]

You're conflating legitimize and legalize. They're not the same word, and have slightly different, though overlapping, meanings.

Re:ummm... duh

[west]

Capitol gains

I'm pretty certain the Republicans don't believe they exist.

Re:ummm... duh

[infinitelink]

It's "capital" gains. ; )

Re:ummm... duh

[olip85]

Capitol gains are taxable.

What about White House gains? Are they also taxable?

Re:ummm... duh

[Anonymous Coward]

Canadians do, though. They just burn them after they gain them, so there's nothing to tax.

Re:ummm... duh

[Anonymous Coward]

Yes.

Good for bitcoin

[vasanth]

good in the sense it is gaining legitimacy..

Re:Good for bitcoin

[Anonymous Coward]

Not true, actually. They're simply stating that barter legislation applies. It would apply as much to any fantasy currency. The moment two people agree to exchange a material object or service for Klingon darseks, then RevCan would be owed tax based on the fair market value of that object or service.

Re:Good for bitcoin

[Anonymous Coward]

*snorts*

If you "invest" in a Ponzi scheme and make money, you can bet your bottom dollar that they'll tax you on that income. Doesn't mean that the Ponzi scheme is legitimate, just that they're taxing you on the money you made on it.

The Government will always seek to maximise its tax revenue in any way it can; this says nothing about the legitimacy or not of Bitcoin.

Re:Good for bitcoin

[DerekLyons]

They aren't legitimizing Bitcoins, the government is just reminding people that certain transactions create a tax liability - they don't care if the transactions are in dollars, Bitcoins, or jars of pickled hamster poop. The same rules apply to all three.

Re:Good for bitcoin

[dkf]

"Dollars", "Bitcoins" and "jars of pickled hamster poop", united once more in the same sentence as they were truly meant to be! It all makes sense now!

This will make electronic currencies more accepted

[Anonymous Coward]

Electronic currencies are the cash of the future, if the government views them as legitimate it will be easier to convince retailers to do as well.

Back to beaver pelts and buckets of syrup...

[Anonymous Coward]

Back to trading in beaver pelts and buckets of maple syrup eh?

Re:Back to beaver pelts and buckets of syrup...

[Anonymous Coward]

Back to trading in beaver pelts and buckets of maple syrup eh?

Get enough and you can live in a hoose.

Hard core Bitcoin adopters

[MLBs]

Can they pay the tax with Bitcoin?

Re:Hard core Bitcoin adopters

[Anonymous Coward]

Nope; the Canadian Dollar is the legal currency of Canada, and that's what the tax is in. The tax is not for bitcoin as currency per se, but as bartering tool or a commodity. The same rules as if you traded a lump of zinc for cash or a loaf of bread.

Re:Hard core Bitcoin adopters

[Anonymous Coward]

Nope.

And the currency conversion they must do to pay their tax will be taxed.

Re:This will make electronic currencies more accep

[Anonymous Coward]

Electronic currencies are the cash of the future, if the government views them as legitimate it will be easier to convince retailers to do as well.

You mean things like dollars and Euros?

You know - get paid directly into a bank account, pay for things with electronic transactions?

Bitcoin taxes won't work

[Anonymous Coward]

The point at which CRA can collect taxes is when the bitcoins are sold into Canadian dollars.

This is NOT how it works if you get paid in US dollars. you still have to claim those US dollars as income on your canadian taxes in canadian dollars. I can't for the of me figure out what exactly the fuck I'm supposed to do when it's not converted into CAD, and have just been writing down the USD amount . This probably isn't correct, but given the parity level of the dollar, any mistake made doing this is less than 4%, and likely not in my favor.

I can't imagine doing this for bitcoin where the volitility would fuck you over in a heartbeat. Sure I got paid 100$USD in bitcoin on thursday, but by friday it was worth 1$, so do I claim 100$USD income or do I claim 1$ when I convert it to CAD?

Re:Bitcoin taxes won't work

[QRDeNameland]

I can't for the of me figure out what exactly the fuck I'm supposed to do when it's not converted into CAD, and have just been writing down the USD amount .

My friend has a Canadian business that gets some USD income that gets deposited to a USD account in a Canadian bank. That income is converted at the average exchange rate for the quarter. For individuals, I believe you just use the annual average (I don't have USD income, but am a dual US/Canadian citizen and have to file to the IRS, and use CRA's average rate in reverse to report my CAD income in USD).

See the CRA's web page for more details.

Re:Bitcoin taxes won't work

[tompaulco]

I can't imagine doing this for bitcoin where the volitility would fuck you over in a heartbeat. Sure I got paid 100$USD in bitcoin on thursday, but by friday it was worth 1$, so do I claim 100$USD income or do I claim 1$ when I convert it to CAD?

Well, luckily enough it has never suffered a 100 fold decrease in the span of a week, nor has it ever suffered a 100 fold decrease over any period of time at any point in it's history.

All normal - nothing to see here

[SplatMan_DK]

The only newsworthy in this, is the fact that the authorities are looking into BitCoin transactions, thereby raising BitCoins legitimacy in the playingfield.

Pretty much every country on the planet taxes both capitol gains and bartering. In fact, one may wonder what took the authorities so long ...

- Jesper

Re:All normal - nothing to see here

[green1]

Nothing "took them so long" because nothing has changed. This is simply a press release explaining that everyone who thought things were different because it's bitcoins were wrong, and that the existing rules still apply.

And honestly, nobody should be even the slightest bit surprised. If you knew anything about taxes (which everyone who pays taxes should!) you'd know that barter transactions are taxable, and commodities transactions are taxable. Bitcoins obviously fall in to one or both of those categories, so they are taxable. All this is is a reminder that nothing changed.

Capital Gains

[Roger W Moore]

It is not every transaction it is just capital gains tax. If you 'mined' BitCoins then the cost was the electricity needed to generate them. If you then sell them for money (or exchange them for goods which have a value) and get more than the cost of mining them then the government taxes you on the capital gain. This is exactly the same as any currency speculation. If BitCoins want to be treated as a real currency then there real tax rules which apply.

Re:Capital Gains

[LordLimecat]

It was taxed when the power company purchased the equipment and fuel to make the electricity, and again when you purchased the electricity from the power company, and again when you converted it into bitcoins, and again when you purchased some milk with it, and again when the shopkeeper paid his employees with the milk money.

Its "consistent" for sure, but its ridiculous as well. GP is right, the idea that somehow the Government needs a cut of every transaction (rather than just income tax) is absurd.

Re:Capital Gains

[Anonymous Coward]

Most countries (states) have a "single" tax point structure. In the non-progressive states (countries) the tax is delayed until the final customer transaction. In more progressive structures the tax is based on the value added at each stage of the chain. You buy a raw component for $1.00 you get taxed on the $1.00. You added your value and sell it for $5.00 you get taxed on the $4.00 value added. This the basic structure of VAT used inn many countries.

Therefore, the product is only "taxed" once.

Re:Capital Gains

[Anonymous Coward]

Only the difference in gain minus cost is taxed -- you would subtract the cost of electricity from the gain from the sale and pay tax on that difference only. The taxes do not apply on the entire amount at every stage. That's the whole premise of value added taxes, capital gains, etc.

Re:Capital Gains

[Anonymous Coward]

Except in most countries companies do not pay sales tax, since it is assumed that the tools/resources are going to be resold to individuals(them paying the sales tax). This is explicitly to avoid double taxation.

Re:Capital Gains

[smash]

If this is the case, then you should be able to claim power consumption costs for bitcoin mining as a tax deduction. Which could alter the profitability of mining.

Re:Capital Gains

[mysidia]

It is not every transaction it is just capital gains tax. If you 'mined' BitCoins then the cost was the electricity needed to generate them. I

Yes... unfortunately, how you figure this electricity cost may be complicated. You have these lumps of X bitcoins, if you trade Y fractions of a bitcoin; you need to allocate a certain electricity cost to every lump of bitcoins you got, and then you have equipment you used for mining, and its depreciation costs.

It's unlikely that the electricity costs will be the same for every bitcoin, so you will probably need a tax advisor to help with the calculations, and in the event of an audit, the tax authority s likely to disallow the electricity costs and capital equipment costs into the cost basis, unless you have kept very detailed records that you can substantiate.

So you should consult with your tax advisor before mining bitcoins, and definitely before spending them. Which may increase costs significantly, after you consider the cost of hiring the tax advisors.

Re:Capital Gains

[mysidia]

then you should be able to claim power consumption costs for bitcoin mining as a tax deduction. Which could alter the profitability of mining.

Ask an accountant and tax attorney if possible.

The actual production of bitcoin might itself be taxable, so that the capital gain is only change in value after producing it -- and on production, the bitcoin is immediately taxable in the fair market value of the entire bitcoin value generated. If it is, (which is most likely case), then the electricity consumption for that unit of bitcoin produced either becomes -- deductable expense used to produce income --- and the cost basis of that bitcoin is set at the entire value of that lot of bitcoin on the day that bitcoin value was created, for capital gain purposes (Capital gain will be /changes/ to the value in the future, NOT a delayed tax for the original generation of value).

OR... if the bitcoin is not taxable at the time it is generated, then the elctricity consumption for that unit of bitcoin probably becomes -- the cost basis for that capital asset, that cannot be deducted as an expense, until the asset is sold, where it reduces the amount of gain based on the portion of the cost basis allocated to that unit of bitcoin.

If you can't prove either way, in case of an audit... the IRS agent will most likely be calculating your liabilities and penalties baesd on the interpretation that most favors the government (the first one).

Re:Capital Gains

[smash]

Yeah, wasn't claiming to be offering financial advice, but taxation works both ways. If they're going to tax you on a profit on someting then the costs incurred to generate said profit are often/usually tax deductible. Which would make your hardware tax deductible, as well.

If they want to start taxing bitcoin, they need/should start taking the costs to generate bitcoin into account for tax purposes also, like any other profit generating activity.

Re:Capital Gains

[DigiShaman]

It's a reminder that the money wasn't earned or created by you. Rather, you've temporarlily borrowed this wealth and must be taxed to remind you of that fact.

This is what you guys get when you vote for these tax and spend fuckers in office. US debt to GDP is now 105%! We've cross the event horizon. Down the death spiral we go. Annnnddd...Wwwweeeeeeeeeeeee!

Re:Capital Gains

[Anonymous Coward]

If you 'mined' BitCoins then the cost was the electricity needed to generate them. If you then sell them for money (or exchange them for goods which have a value) and get more than the cost of mining them then the government taxes you on the capital gain

So do I owe capital gains tax if I build a motorcycle and sell it to someone for more than the cost of the material I used?

Re:Capital Gains

[pspahn]

I tend to drink on Sundays also.

Re:Capital Gains

[jonbryce]

If you sell bitcoins that you mined yourself, that would be more likely income tax than capital gains. Obviously it depends which country you are in, but if you take raw materials and turn them into bitcoins, that to me seems no different from taking raw materials and turning them into loaves of bread to sell to people.

Re:Capital Gains

[Roger W Moore]

GP is right, the idea that somehow the Government needs a cut of every transaction (rather than just income tax) is absurd.

Yes...and no. I agree that, as someone who pays Canadian income tax, it seems like the government is getting a cut out of everything. However imagine that they did away with capital gains tax. At that point every rich person would be able to get away without paying tax. They would just live off the capital appreciation of their assets. There is a reason why the government has to get it's grubby paws on many transactions - its to ensure that everyone pays some share of the tax. The more things which are exempted the easier it is for the incredibly rich to hire lawyers and avoid paying their share.

For example there are expensive houses in London which are owned by companies whose only purpose in life is to own that house. Instead of selling the house you sell the company because this avoids the stamp duty when properties change ownership. So we are left with a conundrum: allow the rich to get away without paying a fair share of tax or the have the government getting a cut of everything neither of which is a great option.

Re:Capital Gains

[Roger W Moore]

Ask an accountant and tax attorney if possible.

Actually this is Canada - you can ring up Revenue Canada and ask them for free. Unlike the IRS they will tell you what rules they will apply to your situation and what you need to do (unlike the IRS who will never tell you anything other than "do it yourself" and "we'll fine you or take you to court if we think you got it wrong"). If you follow their instructions there will be no issues and if you think that they are wrong you can then talk to an accountant and/or lawyer. They were incredible helpful when I first moved to Canada so I'd definitely talk to them first and potentially save yourself a lot of money in accountant/lawyer fees.

Re:Capital Gains

[Roger W Moore]

No because then you put in considerable labour and you'll likely need to pay self-employment income tax on that. With BitCoin mining I suppose that you could argue that there was labour to generate the coins. However it will be hard to split the profit due to the "labour" from the profit due to the value appreciating over time.

Re:Capital Gains

[dkf]

Practically, it works by taxing on the whole amount that it is sold for, but allowing the reclaiming of the tax already collected on the input goods and services required to make the product or service. Since you have to be in the system to reclaim, there's a strong incentive for businesses to cooperate (and that keeps the total fraud level down).

Re:Capital Gains

[spire3661]

To be fair to the IRS, it is American Business that stops the IRS from providing help and services.

Re:Capital Gains

[Roger W Moore]

To be fair to the IRS, it is American Business that stops the IRS from providing help and services.

The IRS is part of the US government and the US government makes the laws in the US. How can a business stop them from helping citizens if that is what they _want_ to do?

Re:Capital Gains

[mysidia]

Which would make your hardware tax deductible, as well.

Deductible, possibly. But I'm saying, for the people who weren't fully prepared for the possibility in the future of being responsible for tax, may be taken advantage of, because they didn't fully separate their bitcoin related expanses and document them meeting all the requirements, and the actual deductible amounts to the IRS' satisfaction.

In other words: the deduction might be disallowed, years later, because you can't prove that your bitcoin GPU-enabled mining computers weren't also being used for some other non-deductible purpose, such as playing Quake II.

And you can't prove exactly how many of those kilowatt hours actually mined the bitcoins you got, to the IRS satisfaction.

Those would be the examples... basically, in the same manner as the IRS has been cracking down against home office deductions.

Unless you are extroardinary careful in keeping things separate, and acting like a total beancounter, making sure you can always prove that these were the expenses, they were deductible, and they were clearly separated from non-deductable items, thousands of times more so than the average person would be.

In the end, the IRS might just disallow all those deductions, and make you pay tax + penalty, or at sale disallow your non-zero cost basis.

Re:Capital Gains

[mysidia]

The IRS is part of the US government and the US government makes the laws in the US. How can a business stop them from helping citizens if that is what they _want_ to do?

The businesses influence what they want to do.

And the government doesn't make the laws, congress writes the laws, and the enforcement body headed by the president executes them.

The IRS only has authority to enforce (not make) laws or regulations.

The IRS sets rules about how taxes are done, and such, but they are required to agree with the law.

Businesses don't want competition from the government, and are prepared to spend a lot of money filing administrative complaints, petitions, and even filing lawsuits, in order to protect their business.

As a result, the IRS' activities are constrained -- for example, previously, the IRS was considering a program that would allow taxpayers to eFile directly through the IRS.

The legal objections from businesses, resulted in a system, where the IRS is not allowed to offer that service directly to taxpayers: instead, they are only allowed to provide the efile service to 'return data preparers' who interact with the service using only some standardized digital formats, which can be completed by computers -- incomprehensible to humans, and individuals aren't allowed access to submit data in that format anyways (only registered partner services) , but taxpayers are prevented from going to an IRS website and fill out a GUI form, to submit data, because taxpayer preparation businesses relying on eFile revenue, caused the IRS to be barred or prohibited from offering a direct electronic filing capability on a government website.

Re:Dear CRA...

[tompaulco]

Yes, because every Bitcoin transaction is someone trying to evade taxes.
Still, it's nice to know that they finished cracking down on all those filthy freeloaders using CAD$ for private untraxed transactions.

Already paying bitcoin taxes...

[CmpEng]

I made about $6500 in 2011 from bitcoins and my accountant advised me to treat it as I would any additional income. I suspect this is making things official in the sense that the CRA will start looking into past years to see if people haven't properly claimed it. In addition to claiming the $6500 as income I was able to write off a portion of my house utilities, mortgage, etc... in accordance with local bylaws.

Audit. Bitcoins aren't special

[raymorris]

Tax laws are enforced through audits. The government notices you have a site selling T-shirts, for example . Based on hueristics plus a random chance, they may decide to audit you. At the audit, tney examine your books, comparing what you spend versus the income you report. Maybe they notice you have a car, a 2011 Camaro. They know how much a 2011 Camaro costs, they probably see the payments on your bank statement. There had better be income reported to cover that expense. Once all of the major expenses are covered, and everything that's shown on your bank statements, and any major assets are accounted for, they know roughly what you're probably spending in cash, on small things. (People with $150,000 houses and $35,000 cars spend about $x,000 on entertainment.) It needs to all add up with the income you report.

Secondarily, someone can rat you out. Maybe ypu have a partner or employee helping you sell "Fuck Taxes" T-shirts. If things go south, the former partner or employee could alert them to the fact that you sold $xx,xxx worth of T-shirts and didn't report the income. (Tax fraud.) Maybe the employee rats you out when SHE gets audited, or maybe she's unable to hide the income from the bysiness when she's audited.

It's easier to just pay the taxes you owe.

Re:Audit. Bitcoins aren't special

[Anonymous Coward]

Anything with a connection to your 'real world' bank account (i.e. through a bitcoin exchange) is potentially up for scrutiny because if they take an interest in you, since they can see what comes in and out of your bank. This isn't any different from say, Paypal, WoW gold, or Linden dollars.

What I don't understand is how they will enforce completely 'off the system' transactions, where bitcoins stay as bitcoins. Say I sold some heroin to person X on Silkroad and received some bitcoins, which I later spend on some Pokemon cards. If I'm careful about managing my bitcoin wallets and transactions made with them, never allowing anything that could be linked to me personally, I fail to see how an 'audit' is going to turn anything up, short of opening an FBI-style investigation checking what gets delivered to my house, deep packet inspection of my internet or whatever. Somehow I doubt the IRS has the resources to do that on the entire population.

Everyone knows that bartering, the oldest economic system, is one of the most foolproof ways to perform tax evasion, whether or not 'barter transaction' rules apply. Bitcoin, when used properly, allows for effectively anonymous bartering with anyone on the planet. The only drawback that I can think of is that staying completely off the system implies storing non-trivial amounts in your wallet file and therefore at the mercy of bitcoin's exchange rate, unless you are able to spend everything you earn immediately.

Re:Audit. Bitcoins aren't special

[Ginger Unicorn]

If everything about you appears to match your reported income (where you live, what you own, how many kids you have) then you may get away with them not noticing anything. If however they show up at your house and see $60,000 of pokemon cards, they're probably going to ask you to explain how you paid for them.

Re:Fuck you, Canada

[Coeurderoy]

Well you invested in some hardware to do the mining, and then got some return on investment, so what makes this different from for instance
buying a bakery, flour and various other things, and then selling bread, except of course that there is not much added work into the bitcoin mining opperation.

Why should it be tax free and other form of return on investment should be taxable ?

Now if you think that your government is not using its tax money wisely, you're free to try to elect somebody else, even try to get elected, but bitcoin mining is in no way "special".

On one hand it is "cool", but it is also trying to fix a human issue through technological means, and that does not work that well.

You are living in the same illusion as the people who claim that the internet treats censorship as a bug and routes around, it does not.
You can partially avoid censorship, more or less the same way as it was possible to avoid it 50 years ago, by taking risk, being prudent, and changing strategies very regularly.
But china is still a dictatorship, and our democratic advanced societies are rather less open to free speech than 20 years ago.
Moreover we live in a flood of data, where dissent is tolerated because it can be drowned by lolcats.

So instead of looking for ways to avoid taxes, make sure that they serve some useful purpose...

The summary (and TFA) is misleading.

[nuckfuts]

The CRA is not claiming a tax on "all transactions". They're claiming a tax on capital gains and income. If you make a transaction that results in a chunk of cash coming into your possession, or the equivalent in material goods, the value of that gain is considered taxable income. It has absolutely nothing to do with the medium of exchange. The CRA is not taxing BitCoin per se; they are taxing profits. They don't care whether you're using BitCoin or not. They're merely pointing out that using BitCoin as a medium of exchange does not confer some kind of exemption from taxes due.

Re:The summary (and TFA) is misleading.

[Anonymous Coward]

mod parent up

Re:The summary (and TFA) is misleading.

[Anonymous Coward]

There are countries where even transaction are taxed. 0.1-0.3% if you just send money between your own accounts, it's crazy.

Re:In other news

[Anonymous Coward]

A 100% tax on a product that costs 0 dollars is a tax of 0 dollars. No point in taxing something free.

Bitcoin Mining Business

[CanEHdian]

This should mean that you can start a business that is into bitcoin mining, and have your cost of doing business (Top-of-the line computers, GPU cards, etc.) deductable as a business expense.

Re:Bitcoin Mining Business

[hotseat]

Sure. And those costs would then be offsettable against your profits for the purposes of paying tax on the bitcoins mined. You have been declaring them as taxable income, right?

Re:Bitcoin Mining Business

[Anonymous Coward]

This should mean that you can start a business that is into bitcoin mining, and have your cost of doing business (Top-of-the line computers, GPU cards, etc.) deductable as a business expense.

This has fuck-all to do with it of course, but yes. Of course you can.

Re:Bitcoin Mining Business

[Anonymous Coward]

Well, actually I would write off the expenses and declare the BitCoins to be manufactured product, not gained income, which is sold wholesale through an exchange.

Re:Bitcoin Mining Business

[Anonymous Coward]

If he didn't, it would be difficult to deduct those business expenses.

Tax burden

[Anonymous Coward]

Now, the situation is that multinational corporations can evade tax by hiding assets in foreign companies. Bitcoin just evened out the playing field a bit. Bitcoin has the potential to be the largest tax-haven ever. But, that won't happen. Because lawmakers will strike down on tax-evasion when ordinary people are doing it. Hopefully they will see the obvious solution. Tax property and other assets that can't be moved more and income less. I believe in higher taxes on intellectual property as well. Tax trademarks, copyrights and patents harder. Don't make it so easy to cheat on the taxes. Make it hard. Because a free market is only a structure that has been set in place by government regulations and enforcement.

Re:Dear CRA...

[west]

Bitcoin tax evasion. It's a commodity just like any other, and the CRA is going to treat it as such. Sorry, no villains here, move along.

Well of course

[davesag]

No special laws needed for this. If you earn $1 you pay income tax on it in most countries I'm sure. The govt doesn't care what currency you earn in. And capital gains are still capital gains, and thus taxable income, again, no matter the currency.

I've not heard anyone talking up Bitcoin as a means to evade legitimate taxes.

Except most R&D IS done by companies

[raymorris]

Yore post sounds plausible, but declares that the world's we live in cannot exist. For example:

That's the nature of research and if the government didn't do it then no for-profit company that can't see past next quarter's profits is going to.

Sounds good, but in fact companies actually do most research. 3M and Dupont are largely research labs, for example. Surely you're familiar with the contributions of Xerox PARC (Palo Alto RESEARCH Center). Everybody likes to beat up on drug companies, but they spend BILLIONS on research. The best research in the world was 20th century US, when Edidon's research labs were creating awesome new stuff weekly, without any taxpayer funds.

In my experience, the difference between government R&D versus private R&D is that companies do research that might actually achieve something - a more effective lightbulb or a cure for a disease. Government researches the breeding habits of the Southern Maryland pond worm for "just because", for no apparent reason.

Re:Except most R&D IS done by companies

[servognome]

In my experience, the difference between government R&D versus private R&D is that companies do research that might actually achieve something - a more effective lightbulb or a cure for a disease. Government researches the breeding habits of the Southern Maryland pond worm for "just because", for no apparent reason.

That "just because" provides the foundation on which to develop actual products. The light bulb started out as an interesting experiment long before Edison developed one that was commercially viable.
People put research and development in the same category, when they are not. Research is the "just because," development is the "actually making something." If you look at Bell Labs, which has been one of the most fruitful corporate R&D endeavors, only 10% of its workforce was focused on research. Xerox PARC was a failure (for Xerox) because it did a lot of research, but the company was not able to effectively develop what it created into products. Research has a high rate of "misses," in that a particular project cannot be effectively capitalized, so it is dominated by government or industry consortiums. Often corporate research is done by sponsoring university projects, because it does not require a dedicated workforce, labs, or other capital. There are also tax breaks, so the capital risk vs reward is more appealing.

Re:Except most R&D IS done by companies

[joocemann]

You don't know enough about research and industry.

I will sum it up.

Public research digs up the most fundamental knowledge that in itself is only knowledge that can be applied.

Private research takes the public findings and refines the knowledge in a very focused, product-oriented way.

Both are required for our current successes.

Re:Except most R&D IS done by companies

[LordVader717]

Private companies are good at developing new products in established fields and using existing engineering and research practices (so long as they promise returns, which is another matter). They're usually the one who create the most recognizable products. But they simply don't do much in terms of fundamental research.

It's interesting that you mention Bell Labs. Their heyday was back when AT&T had a (government-granted) monopoly. They were able to focus on stuff which didn't belong to their core products of the day. Things have changed since then.

Alcatel-Lucent, the parent company of Bell Labs, is pulling out of basic science, material physics and semiconductor research and will instead be focusing on more immediately marketable areas such as networking, high-speed electronics, wireless, nanotechnology and software.

This applies to Sweden, too

[xiando]

I've traded a few bitcoins so I looked up the local rules and the rules for currency trading is basically the same as stock trading. Nothing special, you take gains minus losses and pay capital gains tax on that. duh!? I don't see how Canada saying that normal rules for currency sales & sales of goods and services in other currencies apply to Bitcoin is "breaking news". Here's the rules which apply to Swedish people: http://www.skatteverket.se/privat/skatter/vardepapperforsakringar/utlandskvaluta/valutahandel.4.70ac421612e2a997f85800029336.html

Legitimacy...

[infinitelink]

To all those naively posting that this is evidence of "legitimization" of bitcoin, it should be considered that most governments also tax illegal transactions (when they can't prove it illegal by the standards of court, though they know such activity is going on, so they just prove income): it's not what is being sold or traded, but what they can define as incomes and then demand, on that basis, a cut. Never mind that they're insolvent, control that money supply, print it with interest and add it to "public" (your) debt, and so on.

Great!!

[Anonymous Coward]

So the Goverment is accepting BitCoint as an official currency - otherwise how could you pay taxes on a currency which has no official exchange o exchange rate?

Re:Great!!

[afxgrin]

The Canadian government isn't really accepting it as a currency at all, that's why they are applying barter law to trade with it. However, 50% of capital gains in Canada are taxable and depending on your income bracket the percentage of that 50% is owed to the government, so ultimately if you cash out those bitcoins at some exchange when that money hits your bank account you'll have to account for it somehow. You can attempt to play stupid for a long time - the government is a slow beast when it comes to these things, however if you made any sizable gains the bankers will notice it and eventually the government. They'll just make you pay back what you owe plus interest if you "forgot" to report it. If this happens multiple times, then you'd likely get charged with tax evasion.

Re:In other news

[Anonymous Coward]

No point in taxing something free.

Free Software is about freedom, not cost.

Oh yeah, that'll work.

[Anonymous Coward]

Given how often bitcoins fluctuate in value, I'd be surprised if anyone could figure out how much money they owe the government. You might make a sale for $5 with of bitcoins, but by the time the transaction is concluded, only fractions of a second later, those bitcoins might actually be worth nothing or a million dollars. Also, the fact that bitcoin is anonymous kind of throws a wrench into the whole "knowing how much money people have so we can tax them" thing.

Unintended consequences

[uvajed_ekil]

Congrats to the Canadian Revenue Agency. You just forced all legitimate future Bitcoin transactions in Canada to either move out of Canada or be conducted in a manner that is technically illegal. Maybe a few large companies that are based around Bitcoin will submit to taxation (are there any in Canada?), but smaller companies and average citizens will either ignore this or circumvent it. Maybe they don't expect anyone to pay up and are just covering their asses, or even discouraging Bitcoin-based businesses from setting up shop there?

Re:Unintended consequences

[Ash-Fox]

Do you think they will eventually be only available to services that exist in places like Somalia or Cuba only?

If so, how long do you think it would take for the governments to decide that these particular sites operated outside of their territory should be null routed?

Re:This is laughable. . . .

[Anonymous Coward]

No modpoints to spend, but: Best post in the entire thread.

Re:In other news

[petermgreen]

That may have been the intention but in practice freedom to redistribute without paying any royalties means that downloadable copies are available free of charge and physical media copies are available very cheap. I'm sure this factors into many peoples descisions on what software to use.

Barter Tax? Total value?

[moeinvt]

"Barter transaction rules apply ... whatever you've received in exchange for your $1 worth of vegetables must be documented as a taxable gain of at least $1 somewhere."

Seriously? You're required by law to convert the value of bartered vegetables into dollars and then claim the total value as a gain? Is there such a thing as a law making so little sense that it's less than zero?

What about the vegetables you gave up in the transaction? Obviously both parties thought there was equal value in the trade. Assuming that the equivalent market price was $1, the deal is a wash. You gave up $1 worth of items for $1 worth of items. Where's the "gain" unless you must claim the value of vegetables you grow as "income"?

Plus, he said "AT LEAST $1" how can the "gain" possibly be more than $1?

Government is the natural habitat of ignorant, authoritarian a$$#0lez.

Better than cash

[Comboman]

The problem with keeping your savings in cash under the mattress is that it is being constantly eroded by inflation (unless you meant gold or silver coins). Bitcoin is a deflationary currency and thus avoids that problem over the long term (at least in theory).

Re:Better than cash

[synaptik]

And the problem with deflationary currency is that no one wants to spend it, because it will be worth more tomorrow.
A little bit of inflation is good, in that it discourages mattress-stuffing.

One is income tax, one is capital gains tax

[Comboman]

Actually you do. If you're given or are paid in Apple shares, you're taxed the value of the shares at the time you were given them. When you sell the shares, you pay additional taxes (or receive a tax credit) based on any differences in price from when you got them.

In the first instance, you'd pay income tax on the value of the shares; in the second case you'd pay capital gains tax on the increase in value. They are taxed at different rates and not convertible, which can be a problem. Say you worked at Blackberry and received shares as income when the stock was high. The company's stock value tanks and you are laid off. You have to sell your stocks to pay your income tax bill (on the high stock value), but you have to sell the stocks for pennies on the dollar. You can record a capital loss on your stocks but capital losses can only be used to offset capital gains, not income. In short, you're screwed.

Re:Barter Tax? Total value?

[j-beda]

"Barter transaction rules apply ... whatever you've received in exchange for your $1 worth of vegetables must be documented as a taxable gain of at least $1 somewhere."

Seriously? You're required by law to convert the value of bartered vegetables into dollars and then claim the total value as a gain? Is there such a thing as a law making so little sense that it's less than zero?

What about the vegetables you gave up in the transaction? Obviously both parties thought there was equal value in the trade. Assuming that the equivalent market price was $1, the deal is a wash. You gave up $1 worth of items for $1 worth of items. Where's the "gain" unless you must claim the value of vegetables you grow as "income"?

Plus, he said "AT LEAST $1" how can the "gain" possibly be more than $1?

Government is the natural habitat of ignorant, authoritarian a$$#0lez.

Government may well be the natural habitat of certain types, but getting your panties in a knot in reaction to some dude's characterization of the rules for reporting income is a bit foolish. The tax code is not any stupider for barter exchanges than it is for non barter exchanges. When you trade $1 of veggies for $1 of plumbing repairs or whatever, the tax code says that you have to treat it the same as if you had sold $1 of vegetables for $1 and then paid $1 for plumbing. You have $1 extra of income to report, and you have $1 extra expenses on your books. You are certainly allowed to deduct your vegitable-production costs from your vegitable-derrived income, and you may be able to claim that plumbing expense against income supported by your plumbing - just like if you had done it with cash.

Control citizens

[NewYork]

Govt doesn't need our taxes.
Govt can print currency.
Govt imposes taxes to CONTROL the citizens.

Re:In other news

[gregor-e]

Trading bitcoins for pizza is, arguably, getting you a free pizza. Nevertheless, the sharpened pencils of the tax department have decreed that you should be taxed on the basis of value received. It therefore wouldn't be much of a stretch for them to decide that Eclipse delivers a large fraction of the value of a commercial IDE.