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

[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

[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

[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

[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

[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

[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

[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

[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

[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

[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.

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.

Good for bitcoin

[vasanth]

good in the sense it is gaining legitimacy..

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

[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.

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.

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.

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