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Germany: Bitcoin Is "Private Money"
hypnosec writes "Germany has declared Bitcoin as a 'unit of account', which makes the virtual currency a kind of 'private money' and the process of Bitcoin mining has been deemed 'private money creation.' The recognition as 'unit of account' makes Bitcoin eligible for use in "multilateral clearing circles" and because of this citizens are liable to pay capital gains tax, if they profit from the crypto-currency by sale or purchase within a period of one year – the same as they would have to in case they profit by selling stock, bonds or other form of security. The question here is how the finance ministry would come to know of a person's Bitcoin holding as it is a decentralized currency with no governing body to keep count on the number of Bitcoins a person has. The German government expects that citizens declare their Bitcoin while filing their annual tax return."
If I were to start a cat breeding business and buy/sell/trade cats as currency, making money on some, losing money on others, it's a currency. If I am stupid, I'll play dumb declare nothing, and the government will come after me eventually and measure my income against my stated non-cat income, and sentence me to Al Capone Prison. Smart is declare it a business. Write off everything I can, and count every sale as a sale of a stock or pork bellies or a cat. If it's a business, I pay taxes only on profit, not income.
These are the US rules today, bitcoin changes nothing.
Learn to love Alaska
Honor system, but if you do anything to get on their shitlist they'll eventually find it out when you try and get it converted into salable assets.
And bitcoin's design matchess the 'well, we don't really have any way of knowing; but you are in serious trouble if we find out' enforcement model pretty well. Watching the block chain is already a thing in suitably interested hobbyist circles, and doing so doesn't require any blackhat wizard-fu, it's a protocol feature. For the moment, the transaction history is also relatively small.
None of that helps them connect a person to one or more wallet addresses; but if they do, by other means (probably if you try to cash out, possibly by surveillance of improperly anonymized use), they get a full transaction history automatically.
Of course, now that the NSA and Germany's equivalent can reach deep into your private online data, perhaps they *will* know exactly how much Bitcoin you have, and exactly how much you sold.
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Yes, you do... as long as you aren't harming others in the process.
Where it gets sticky is in the definition of what constitutes "harming others". For example, some argue that self-abuse (e.g. chronic drug use, or suicide) counts as harming others, in that by removing yourself from society, the other people in the society lose the benefits of your productivity/friendship/support/expertise/etc.
I don't care if it's 90,000 hectares. That lake was not my doing.
Here in Europe thanks to the Euro crisis there is a big crackdown on tax evasion. This includes the German government doing grey area stuff like buying leaked confidential lists of clients of Swiss banks. So it stands to reason that they strike deals to help others catch free loading scum as well.
Personally I am proud that I pay my fair share to improve the society that I live in and have no time for people who don't. It also helps me feel that righteous anger when I suspect that "my" money is wasted which is a favourite pastime of many internet commenters including me.