Norway Rejects Bitcoin As Currency; Taxes As Asset, Instead

An anonymous reader writes "Norway is the latest country to consider the legal implications of cryptocurrencies like Bitcoin. Norway's director general of taxation has come out and said '[Bitcoin] doesn't fall under the usual definition of money,' which means that it will be considered as assets and charged under capital gains laws. This sentiment was echoed last week by the European banking authority as well, where citizens were warned of using the cyrptocurrency."

Comments

How is Norway going to know?

[FlyHelicopters]

If someone makes a bunch of profit on Bitcoins, how is Norway going to know if the person doesn't self report?

Also, how are capital gains taxed there? In the US, capital gains are taxed at a lower rate than most normal income, so if the choice is between normal income and capital gains, I'll take the latter every time (since I'm in the US).

Re: How is Norway going to know?

[therealkevinkretz]

In the US, To be taxed at the lower rate, it must be classified as "long-term" - I.e. the asset must be held for at least a year before it's sold. Other (short-term) gains are taxed at the same rate as income.

Re:How is Norway going to know?

[cdrnet]

Does it need to? It seems tax systems based on self-reporting and trust can work quite well (provided the taxes are reasonably low and people have a say in how the money is spent, as it should be in any democracy). For example, tax fraud is assumed to be low in Switzerland compared to its neighbor states despite the government having no way to know whether people self-report correctly.

Re:How is Norway going to know?

[sg_oneill]

Well this applies to anything else. If I aquire a load of highly prized poppies and don't report my acquisitions, how will they know?

In the end thats what tax investigators are for. Fortunately the lack of anonymity in bitcoin (Just look up the blockchain) , makes it easy enough to work out.

Re:How is Norway going to know?

[Anonymous Coward]

If someone makes a bunch of profit on Bitcoins, how is Norway going to know if the person doesn't self report?

Also, how are capital gains taxed there? In the US, capital gains are taxed at a lower rate than most normal income, so if the choice is between normal income and capital gains, I'll take the latter every time (since I'm in the US).

They are going to know the same way they catch money laundering, black market profit, offshore accounts for tax evasion, inheritance that try to avoid tax, etc - eg, you risk getting caught by large unexplained changes in bank accounts (auto-reported to tax authorities) when you cash in gains, or by acquiring major assets that don't match your reported income (houses, cars, etc.). Could you try to fly under the radar? Definitely, as many of the listed criminals already do. But if you get caught you pay a very very stiff tax penalty (on top of risk of prison time) vs. reporting it in the first place. And yes, capital gains are taxed less (at least for most people).

Re:How is Norway going to know?

[Anonymous Coward]

Bitcoin is anonymous in the sense that you don't know who's behind those IP addresses. Of course, you could try to find that out, but how would you know where to start looking for a specific individual who didn't self-report? Even if you have the IP address, that doesn't mean the person didn't take steps to protect themselves (like a VPN).

Re:How is Norway going to know?

[bentcd]

If someone makes a bunch of profit on Bitcoins, how is Norway going to know if the person doesn't self report?

They won't, but if they later find out they'll nail you to the wall.

As an immediate concern, if you're making lots of bitcoins then there's not really that much to spend them on directly and so you'll want to convert them into national currency. At this point the tax man may notice and start asking questions.

When the time comes that you can easily buy a Ferrari for bitcoins they will also have a chance of noticing, and will ask you how you could afford that Ferrari.

If you go to any length to avoid the tax man noticing any of those two scenarios, you're probably guilty of some shade of money laundering which will get you nailed that much harder if they do discover you.

Also, how are capital gains taxed there? In the US, capital gains are taxed at a lower rate than most normal income, so if the choice is between normal income and capital gains, I'll take the latter every time (since I'm in the US).

I think it's much the same thing here. Capital gains is 28% or thereabouts, whereas income tax is progressive from 28% up to 50%, -ish. There may be important nuances I am omitting, being a wage slave rather than a tycoon.

Re:How is Norway going to know?

[TheLink]

My advice is if you want to avoid (not evade) tax in a big way you should consult a real pro.

I don't know much about tax stuff but if I understand correctly the Tax arms of many governments are able to use the "guilty till proven innocent" approach.

e.g. if one day your undisclosed profits amount to something significant and you have a more lavish lifestyle, more expensive house and car than explainable by your tax filings the Tax Dept may require you to prove yourself innocent or get in big trouble.

I don't know whether this is also true for Norway.

Re:How is Norway going to know?

[gnasher719]

If someone makes a bunch of profit on Bitcoins, how is Norway going to know if the person doesn't self report?

If you spend the money eventually, and it is enough money, they might figure out that there must be income, and then they can ask you what the income is. And you might be in trouble for not telling them without being asked. If you have income that is tax free, you better keep proof of that income.

Re:How is Norway going to know?

[FlyHelicopters]

Very little of the US tax system is based on self-reporting.

Employers report wages, capital gains are reported by the big wall street firms, and PayPal reports if you do a lot of online sales.

Beyond that, almost nothing is reported and you can turn in any numbers you want. The IRS does audit some people, but if you keep two sets of books, how are they to know?

The IRS doesn't have access to bank accounts or other private financial transactions outside of a detailed audit.

Re:How is Norway going to know?

[Anonymous Coward]

tax fraud is assumed to be low in Switzerland compared to its neighbor states

Of course it is. Everything that's considered "tax fraud" in the rest of the world is considered a "business opportunity" in Switzerland.

Re:How is Norway going to know?

[FlyHelicopters]

When the time comes that you can easily buy a Ferrari for bitcoins they will also have a chance of noticing, and will ask you how you could afford that Ferrari.

How or why would they ever know I bought a Ferrari? Are such purchases reportable in Norway? (they aren't in the US)

You're right, if they do catch you cheating, the penalties are harsh... the question to ask is, what are the odds of being caught?

Re:How is Norway going to know?

[FlyHelicopters]

e.g. if one day your undisclosed profits amount to something significant and you have a more lavish lifestyle, more expensive house and car than explainable by your tax filings the Tax Dept may require you to prove yourself innocent or get in big trouble.

Maybe I should stop complaining about the US government, maybe it isn't so bad if such nonsense happens in Europe.

How I live is none of the government's business, unless they have cause to investigate, most private financial transactions are out of reach of the IRS.

The only real exception would be the NSA looking for national security reasons, but frankly the NSA doesn't care about tax cheats, they are concerned with terrorism. Since I have zero intention of ever being a terrorist, I'm not really worried about the NSA.

Re:How is Norway going to know?

[PolygamousRanchKid]

For example, tax fraud is assumed to be low in Switzerland compared to its neighbor states.

Tax fraud committed by Swiss citizens may be low . . . but tax fraud committed by citizens of its neighbor states in Switzerland is very high.

Re:How is Norway going to know?

[mysidia]

If someone makes a bunch of profit on Bitcoins, how is Norway going to know if the person doesn't self report?

How they'd do it in the US --- when you cash out your Bitcoins for US Dollars; the exchange or other organization you sell more than $100 Bitcoins to as an individual, has to fill out a 1099B or other 1099 information return, showing the proceeds of the transaction, with what you traded for the money.

In Norway; you may very well be on your honor to report, at least, until the enforcement authority inspects your bank records, or your personal records, after finding suspicious purchases that they can't explain given your reported income

Re:How is Norway going to know?

[Wootery]

Vehicles are registered to individuals, though. Even if the vehicles database and the tax database aren't unified now, they probably will be some day.

Re:How is Norway going to know?

[Anonymous Coward]

If my expertise was in fraud, and fraud was my business, I'd be asking what is the risk vs reward ratio. If the risk is low and the reward big, it may be worth going for it. On the other hand if the risk is high and the reward low then no. Every business opportunity involves some sort of risk. Even being a wage slave involves a risk (downturn in the economy, layoffs, etc).

Re:How is Norway going to know?

[mysidia]

How or why would they ever know I bought a Ferrari? Are such purchases reportable in Norway? (they aren't in the US)

If you pay cash, or other currency; the dealer is required to file a CTR to report the Large cash transaction.

If you trade something for the ferrari, the dealer had to fill out a 1099B. If you take out a loan or pay by check, your banks will record a transaction.

Large transactions in or out of your bank account are covertly reportable in the US behind your back -- your bank is required to report due to the Bank Secrecy Act and forbidden from informing you that they have reported.

If you bring $100,000 into your bank account, or take out a loan for $250k on a car, or you engage in new unusual spending habits, the tax authorities definitely will almost certainly be made aware that you did that.

Re:How is Norway going to know?

[FlyHelicopters]

A 1099B is for stock transactions from a broker, I doubt one would be filed for Bitcoin. Even less likely if it is an overseas exchange.

A 1099 Misc is for paying contractors, and the requirement there is $600.

A 1099-K is required for accepting payments via credit cards, like with PayPal or a merchant account.

It is possible that at some point, major US Bitcoin exchanges might start reporting the transactions somehow, but that is just a transaction, it isn't "income" or "profit".

There is a world of difference between "income" and "exchanging currency from one form to another".

For example, if I want to convert $1,000 from US Dollars to Euros, the Euros that I receive are not "income", it is just a currency exchange.

Re:How is Norway going to know?

[teg]

When the time comes that you can easily buy a Ferrari for bitcoins they will also have a chance of noticing, and will ask you how you could afford that Ferrari.

How or why would they ever know I bought a Ferrari? Are such purchases reportable in Norway? (they aren't in the US)

The car must be registered and insured. Also, Norway has a wealth tax and you'd have to list it there. Of course, you could try to find a way around all of these but the harder you try, the more likely they'd get for money laundering etc. instead if they actually caught you.

Re:How is Norway going to know?

[FlyHelicopters]

Vehicles can be, but don't have to be... A business can own a vehicle...

Even if the IRS had access to the state DMV databases (Ha, they can't get healthcare.gov to work, try making 50 different DMVs talk to the IRS properly!), what would they do with all that info?

Look for people with a Rolls Royce registered who also claim to earn little money? Then what? Perhaps it was a gift from family, perhaps it was purchased with savings, perhaps the person doesn't report a lot of income because of business losses or other tax deductions?

It would be a ton of work for very little gain. Plenty of people have plenty of stuff, yet don't actually make that much money after expenses.

I own my own business, if you saw my house, then my tax return, you'd think I was cheating... but I'm not, I report every penny of gross income, then take every legal deduction that I can. The tax laws favor business owners, this is not a secret.

Re:How is Norway going to know?

[Anonymous Coward]

How or why would they ever know I bought a Ferrari?

Unless you keep your Ferrari in the garage at all times, they will know.

I'm not in Norway nor in the US, but here the police sometimes discovers crime (mostly illicit drug trade) by going after owners of expensive cars who cannot reasonably justify how they can afford it.

If you want to drive a car on public roads, you have to have it checked in an official control center every X year(s) or every Y kilometers. When you request a licence plate, you need a document which proves that the car has been homologated for use on public roads.

Re:How is Norway going to know?

[FlyHelicopters]

You need to reread the Bank Secrecy Act... It applies to cash transactions, non-cash transactions don't count unless the bank has a reason to suspect you're committing a crime.

http://www.ehow.com/about_4672449_transactions-do-banks-report-irs_.html

A CTR is required for every deposit, withdrawal or exchange over $10,000 in cash. Wire transfers or transactions by check and non-cash means are not subject to the CTR filing requirement.

In addition to the above, banks can file for an exception from the CTR for a customer.

Once you get above a given amount of money in the bank, you move from the tellers to the private banking dept and receive a higher level service rep who handles things for you.

Or do you really think Bill Gates has every transaction he does reported to the IRS? I would imagine whatever bank he uses has an exemption on file for him.

Re:How is Norway going to know?

[FlyHelicopters]

The car must be registered and insured.

I'm actually starting to like the USA again...

Cars are registered and insured in the US at the state level, the federal government isn't party to it. Frankly, even at the state level, insurance is not filed with the state unless you have prior convictions of lacking required insurance (then you have to file a SR-22, at least in Texas).

My auto insurance is between me and my insurance company, I have a card to show a police officer if pulled over that I carry at least the minimum required coverage, but the government doesn't know how much, only that I have "enough".

As for a "wealth tax", are you serious? Blah... if it is taxed when I earn it, then you can't have another go at it, that is the whole idea of no double taxation. We fought a war of independence to rid ourselves of such nonsense. Of course, we have the death tax, which is clearly unconstitutional, but seems to be ignored anyway, so perhaps I shouldn't talk. Stupid government not following its own rules.

Re:How is Norway going to know?

[rasmusbr]

If someone makes a bunch of profit on Bitcoins, how is Norway going to know if the person doesn't self report?

Also, how are capital gains taxed there? In the US, capital gains are taxed at a lower rate than most normal income, so if the choice is between normal income and capital gains, I'll take the latter every time (since I'm in the US).

If someone sells Bitcoin for currency there is really nothing different about it from any other asset trading.

The tax authority will do research, create a list of Bitcoin exchanges and than request information from each exchange about any and all Norwegian citizens that trade and about any and all trades that they have made.

Re:How is Norway going to know?

[FlyHelicopters]

I'm not in Norway nor in the US, but here the police sometimes discovers crime (mostly illicit drug trade) by going after owners of expensive cars who cannot reasonably justify how they can afford it.

What country do you live in?

In the US, driving an expensive car is not a crime and you're innocent until proven guilty in a court of law, so the police have no right to inquire as to how you can afford an expensive car. They do have the right to check to make sure it is registered to you, assuming of course they had some other reason to stop you (you were speeding in your nice new Ferrari). But if it is registered to you and you are insured, then they'll just write you a ticket.

How and why you purchased the car is of supreme indifference to them.

Now, if you're pulled over in a nice new Ferrari and you don't have your paperwork in order (valid drivers licence, valid registration sticker, and valid insurance), then they will either write you a ticket for all that, or if they suspect funny business, they might arrest you and find out if you own the car or not or if it is stolen.

But the police aren't in the tax enforcement business, that is about 5 levels removed from their job.

Re:How is Norway going to know?

[Anonymous Coward]

This is you expecting a government to understand modern technology. Just let that sink in for a minute.

Re:How is Norway going to know?

[Anonymous Coward]

You mean exactly like normal profits, where the person is guilty of tax evasion and thus jail time if they fail to do so. Audits happen periodically as spot checks to pick that sort of thing up.

Re:How is Norway going to know?

[FlyHelicopters]

The tax authority will do research, create a list of Bitcoin exchanges and than request information from each exchange about any and all Norwegian citizens that trade and about any and all trades that they have made.

Ok, fair enough... So what do you do with that information? Just trading currency between Bitcoins and another currency does not make any of it income.

What if you just move the money back and forth, every day, for a year? Each transaction is not "income". Any profit or loss is income, and probably would be reported the same way stock gains and losses are reported (since those are assets as well). But the original money is not income.

Re:How is Norway going to know?

[Anonymous Coward]

Now, if you're pulled over in a nice new Ferrari and you don't have your paperwork in order (valid drivers licence, valid registration sticker, and valid insurance), then they will either write you a ticket for all that, or if they suspect funny business, they might arrest you and find out if you own the car or not or if it is stolen.

OK, so you are telling me that you are going to buy a Ferrari and not insure or register it?

Sure, we can play theory-games all day long.

Re:How is Norway going to know?

[Joce640k]

The IRS doesn't have access to bank accounts or other private financial transactions outside of a detailed audit.

That's what they want you to believe, so you think you're getting away with it.

They prefer *everybody* to be a criminal in one way or another. That way they'll have something on you when they need a 'favor'.

Re:How is Norway going to know?

[Joce640k]

how is Norway going to know if the person doesn't self report?

Same way as they do for every other exchangeable item - sooner or later you have to turn it into real money to be able to use it.

Re: How is Norway going to know?

[LastSaneMan]

If your state has VAT, I'd consider that double taxation.
We have it even better tho, we're tripple taxed.
- Income tax (33%+)
- VAT (25%)
- Wealth tax (Unknown, since the first 2 prevents me from acquiring number 3)

On a positive note, my cancer treatment is free.

Re:How is Norway going to know?

[Joce640k]

Well this applies to anything else.

Yes.

If I aquire a load of highly prized poppies and don't report my acquisitions, how will they know?

Sooner or later you'll sell them and convert their value to real money.

Poppies are much safer than Bitcoin in this respect. Poppies are physical so can sell them for cash and keep it under the mattress. Bitcoin can only be exchanged for real money electronically, good luck keeping that a secret from the spies.

Re:How is Norway going to know?

[Anonymous Coward]

When the time comes that you can easily buy a Ferrari for bitcoins they will also have a chance of noticing, and will ask you how you could afford that Ferrari.

It is usually quite amusing to wander round the social housing estates in the UK, and viewing the somewhat expensive vehicles parked outside some of the houses of people with allegedly no source of income other than their state handouts, it's almost as if they've some sort of highly profitable side business going on (maybe something supply chain related) and they're not even taking any pains to hide from the powers that be.

I've found that the authorities can be more than a wee bit blind to things like this, that is, until it suits them..

I hate quoting from anything by Rand, but I was always fond of this passage from Atlas Shrugged..

“Did you really think we want those laws observed?" said Dr. Ferris. "We want them to be broken. You'd better get it straight that it's not a bunch of boy scouts you're up against... We're after power and we mean it... There's no way to rule innocent men. The only power any government has is the power to crack down on criminals. Well, when there aren't enough criminals one makes them. One declares so many things to be a crime that it becomes impossible for men to live without breaking laws. Who wants a nation of law-abiding citizens? What's there in that for anyone? But just pass the kind of laws that can neither be observed nor enforced or objectively interpreted – and you create a nation of law-breakers – and then you cash in on guilt. Now that's the system, Mr. Reardon, that's the game, and once you understand it, you'll be much easier to deal with.”

They've not made bitcoins illegal yet, but they've already stated slinging mud at the concept by making it the de rigueur currency of choice for criminal enterprises in the media (screw the fact that the biggest criminals are still making their transactions using the good old U$D, and in millions of the blighters to boot...)

Re: How is Norway going to know?

[alexander_686]

To follow up, and make the point even more explicitly, the same logic holds for foreign currency. if I hold Euros for more than a year and the Euro gets strong, I have to pay cap gains on that profit.

Re:How is Norway going to know?

[alexander_686]

I will point out this was one of the ways that Al Capone was nailed. He declared a very low personal income yet lived a lavish lifestyle. Questions were asked.

Re:How is Norway going to know?

[fnj]

non-cash transactions don't count unless the bank has a reason to suspect you're committing a crime

If you are trying to induce me to laugh, you succeeded. Anybody can suspect anybody of anything for any reason. I bet there is no penalty for "false suspicion" either.

Re:How is Norway going to know?

[bentcd]

How or why would they ever know I bought a Ferrari? Are such purchases reportable in Norway? (they aren't in the US)

It would need to be reported one way or the other. The easiest way to try to get around it is possibly not to register it but then you won't have a number plate (unless you fake one) and so couldn't use it on public roads. Maybe you could drive it on foreign plates and hope no one notices/cares that you've been doing so for far too long. You'd still be required to list it as wealth but if you choose not to there may not be any obvious ways for the tax man to find out on his own.

What will happen from time to time though is that someone you pissed off at some point reports you and then you may be in trouble again.

You're right, if they do catch you cheating, the penalties are harsh... the question to ask is, what are the odds of being caught?

If you want to drive the car on public roads it's probably very difficult to avoid registering it. Cheating one's way around this is probably possible but if you ever have an accident or otherwise end up in the spotlight it's game over.

Re:How is Norway going to know?

[jonbryce]

If it is more than €15,000, then yes it is reportable.

Re:How is Norway going to know?

[StripedCow]

how is Norway going to know if the person doesn't self report?

They just look in the bitcoin transaction log (and link it to you via stuff you bought)

You thought bitcoin was anonymous?
Think again.

It is the wet dream of the IRS (and NSA, etc.)

Re:How is Norway going to know?

[Joce640k]

the NSA doesn't care about tax cheats, they are concerned with terrorism. Since I have zero intention of ever being a terrorist, I'm not really worried about the NSA.

Really?

The NSA generates (and stores) data.

The trouble with having mountains of data is that sooner or later a politician will think "I could use that for...XXXX".

Or some police department will request it. Or the IRS.

If you build it, they will come.

Re:How is Norway going to know?

[Joce640k]

Ever hear of capital gains tax?

Re:How is Norway going to know?

[oobayly]

Mod comment:
Interesting: For some that may not know about the Swiss banking system
Overrated: For those that do know about the Swiss banking system
Insightful: Well, it's true
Funny: Made fun of the Swiss - always good
Troll: Winding them up about their dodgy banking system

Re:How is Norway going to know?

[Joce640k]

When it comes to getting money from citizens, you might be surprised how well they can mysteriously understand technology.

Re:How is Norway going to know?

[teg]

The car must be registered and insured.

I'm actually starting to like the USA again...

Cars are registered and insured in the US at the state level, the federal government isn't party to it. Frankly, even at the state level, insurance is not filed with the state unless you have prior convictions of lacking required insurance (then you have to file a SR-22, at least in Texas).

My auto insurance is between me and my insurance company, I have a card to show a police officer if pulled over that I carry at least the minimum required coverage, but the government doesn't know how much, only that I have "enough".

As for a "wealth tax", are you serious? Blah... if it is taxed when I earn it, then you can't have another go at it, that is the whole idea of no double taxation. We fought a war of independence to rid ourselves of such nonsense. Of course, we have the death tax, which is clearly unconstitutional, but seems to be ignored anyway, so perhaps I shouldn't talk. Stupid government not following its own rules.

As far as insurance goes - you only need to have liability insurance. If you want to insure your car for theft and damages, that's voluntary - but being able to pay for damages caused by you isn't. And as Norway is a rather small country, rather than a federation of states, expect it to have information and powers that you'd usually think would would be separated by "federal" and "state". You get a sticker every year showing that the yearly road fee is paid, and that liability insurance is OK.

Wealth tax has some bad side effects - like most taxes - and fortunately, the new government is working towards removing it. However, the Norwegian tax system is in general more sane than the US system - lower rates and less loop holes - so it isn't all bad. And more importantly, Norway has a healthy budget surplus - the key to any sane tax cut.

Re:How is Norway going to know?

[Vintermann]

How or why would they ever know I bought a Ferrari? Are such purchases reportable in Norway? (they aren't in the US)

You're not in Kansas anymore, friend! Not only is the Ferrari dealership (I think there is a single one) obliged to report purchases over a certain amount, but how much you're taxed is a matter of public record. They used to print them in the newspaper, even, though there's slightly more restrictions on them these days. Want to know how much I made in 2009? be my guest! (Spoiler alert: I'm not rich :P)

So when your neighbors see you driving a Ferrari, jealousy and/or civic duty might compel them to check the tax records, and if you're listed with zero in income and assets, the tax authorities might get a tip.

Re:How is Norway going to know?

[Captain Hook]

Look for people with a Rolls Royce registered who also claim to earn little money? Then what? Perhaps it was a gift from family, perhaps it was purchased with savings.

The point is, an automated database query is cheap and gives a shorter list of people to investigate compared to everyone in the tax durisdiction.

If you have a car whose purchase price is $40000 and you withdraw $30000-35000 from savings in the months before I think the database query could reasonably file you under the low priority investigation list. If you have a car whose purchase price is $40000 and no transactions which match up with it, then you get filed under the medium priority investigation list.

And if you have multiple houses and no income or savings to account for the purchase costs then you get filed under high priority and a human taxman will start an investigation.

You use the cheapest method available to create ever shorter lists of people with anomalies to pass to the next, slightly more expensive filter.

Re:How is Norway going to know?

[fnj]

e.g. if one day your undisclosed profits amount to something significant and you have a more lavish lifestyle, more expensive house and car than explainable by your tax filings the Tax Dept may require you to prove yourself innocent or get in big trouble.

Maybe I should stop complaining about the US government, maybe it isn't so bad if such nonsense happens in Europe.

How I live is none of the government's business, unless they have cause to investigate, most private financial transactions are out of reach of the IRS.

The only real exception would be the NSA looking for national security reasons, but frankly the NSA doesn't care about tax cheats, they are concerned with terrorism. Since I have zero intention of ever being a terrorist, I'm not really worried about the NSA.

Why do you evidently believe the circumstances are any different whatsoever in the US? It's the same with the IRS. They can suspect via exactly the same kind of observations that you are living beyond your means, they can audit you for that, and in that audit you will have to account for how you acquired your extravagant toys. Otherwise it's going to be a charge of tax evasion and that can be sustained in court through simply making a convincing case against you which you fail to take part. How do you think they nailed Alphonse Capone?

Yes, you are innocent until proved guilty, but that proof of guilt doesn't have to be mathematically perfect. Innocent people are locked up pending trial all the time. Not all of them can make bail. Then they might be freed by winning at the trial, or they might not. Innocent people are convicted at trial and locked up all the time. We might like to think that things have improved since Hitchcock's The Wrong Man , and they may have (or maybe not), but the same type of thing still happens. It is certain that if you are actually guilty, you have even a lot better chance of being convicted.

Re:How is Norway going to know?

[Karmashock]

Bitcoins record every transaction. If you know who owns a given wallet... who paid what for which bitcoins... you can follow the money.

Bitcoins are not an anonymous currency. They are a peer to peer free of middle men currency.

They are absolutely traceable unless you interface with them using totally anonymous money. Then they can't track you because you're turning the bitcoins into cash or cash into bitcoins. But if like most people you're transferring money from your bank account into bitcoins... easily tracked.

Use the banks and you're tracked.

Re: How is Norway going to know?

[K. S. Kyosuke]

In case of bitcoins, does that mean that you have to track them individually to keep yourself informed for how long you had each one of them?

Re:How is Norway going to know?

[Captain Hook]

How I live is none of the government's business, unless they have cause to investigate

The have cause to investigate, you've claimed a certain level of income but publically have assets which would be hard to afford at that stated level of income.

Re:How is Norway going to know?

[fnj]

Erm, did you miss the part where Norway declared Bitcoins an asset rather than currency? That's the whole point. So you're NOT just trading currency between two different forms. Not in Norway.

Arbitrary regulations are a bitch.

Re: How is Norway going to know?

[Rich0]

In the US, To be taxed at the lower rate, it must be classified as "long-term" - I.e. the asset must be held for at least a year before it's sold. Other (short-term) gains are taxed at the same rate as income.

Isn't capital gains tax charged on the appreciation of an asset from the moment you acquire it to the moment you sell it?

If you mine a bitcoin and sell it immediately, then the capital gain on it would be zero. You would only have a gain if you bought the bitcoins from somebody else. That is of course how many bitcoins are acquired.

Re: How is Norway going to know?

[aliquis]

I don't see why, average price per share is good enough for stocks and would be good enough for bitcoins.

Keep track of all your purchases and you know what you've paid for them, then inform the right authorities about any sales (of coins, a.k.a. also purchases of other things using them) giving the numbers sold, at what exchange rate and your average price paid for the ones you hold.

Which of course will get pretty tricky if you buy an item which have no value set in NOK, USD, Euro or such.

Re:How is Norway going to know?

[Anonymous Coward]

They can compare it to what you report on your tax return. If it doesn't match up they might decide to investigate.

Re:How is Norway going to know?

[N1AK]

that is the whole idea of no double taxation. We fought a war of independence to rid ourselves of such nonsense.

No. You fought a war of independence because you didn't like taxes and you really didn't like taxes from a government you had no representation in. When you won independence the government couldn't bring in taxes, because it would be too like the British, so to pay its army etc it sold the land instead; much of it Indian land which it forcefully evicted them from leading to thousands of deaths.

But that's all good right because taxes are just plain wrong by comparison ;)

Re: How is Norway going to know?

[locofungus]

I don't know about Norway's rules but in the UK, yes.

In the UK capital gains are calculated on a last in first out basis where the asset is fungible - shares, gold things like that.

However, I'm not sure exactly how it would work for an asset like bitcoin that you had mined. In theory the electricity costs should be offsetable when you cash in. When you're just buying and selling it would work like any other share or gold.

Anyone doing serious bitcoin mining now (where electricity costs are going to be a substantial fraction of any notional gain) would be strongly advised to get professional advice - it might make sense to setup a company for the mining.

Re: How is Norway going to know?

[Anonymous Coward]

That is a smarter system than the US with its income tax only.

You can easily hide income. You can't hide that new Maserati as easily, so the government will get its honest share of something, rather than the tax machinations going on over in Ireland.

Re:How is Norway going to know?

[sFurbo]

You have to register it to get your license plate, and you have to pay taxes whaen you get it (100% of the value of the car, to be exact).

Re:How is Norway going to know?

[Anonymous Coward]

GP here.

What country do you live in?

Belgium.

In the US, driving an expensive car is not a crime and you're innocent until proven guilty in a court of law, so the police have no right to inquire as to how you can afford an expensive car.

Being unemployed and driving a Ferrari can draw police attention here, especially in the city of Antwerp.

Re: How is Norway going to know?

[alexander_686]

Cap gains start when your purchase something, not when you manufacture it. Normally - there are exceptions. However, if you sell it under 1 year you pay taxes as if it were "ordinary" income.

And yes, if you mined and sold it immediately, your cap gains would be zero. However, you would have generated income and would have to pay taxes on that. Think of it as manufacturing.

Re: How is Norway going to know?

[locofungus]

Actually, now I check it's not that simple - I don't know if it has changed recently or I'm just misremembering.

You match: Same day
then within 30 days
then the rest.

and you work out an average cost for each chunk.

http://www.hmrc.gov.uk/cgt/shares/find-cost.htm

Tim.

Re:How is Norway going to know?

[alexander_686]

As tax systems go, the US requires one of the highest levels of self-reporting. Think small business and all of those deductions.

I am not saying a lot of information is not reported - just the ratio.

Re: How is Norway going to know?

[K. S. Kyosuke]

I don't see how "average price per X" is going to influence someone's impression whether the bitcoins I've just sold are the ones I had for a month or the ones I bought a year ago.

Re: How is Norway going to know?

[gnasher719]

If you mine a bitcoin and sell it immediately, then the capital gain on it would be zero. You would only have a gain if you bought the bitcoins from somebody else. That is of course how many bitcoins are acquired.

Who else would be in a comparable situation? For example, an artist creating paintings. He or she starts with some pots full of colours and an empty canvas, puts the colour on the canvas, and sells the result. How is that treated tax wise? I think if you sell the result for money, that would be treated as taxable income.

Re:How is Norway going to know?

[mysidia]

It is possible that at some point, major US Bitcoin exchanges might start reporting the transactions somehow, but that is just a transaction, it isn't "income" or "profit".

An information return is required by law, based on payments that a Bitcoin "Exchange" or Bank makes to an individual. It is up to the individual to report on their tax return what portion of the proceeds are income.

A 1099B is for stock transactions from a broker

A 1099B information return is the form required to be filed by barter exchanges as well. Bitcoin exchanges that allow a customer to sell or purchase Bitcoins ("TRADE DOLLARS") are barter exchanges. The fair market value of raw proceeds of transactions from Barter Exchange must be reported to the IRS using 1099B, see the barter exchanges

Bartering is the trading of one product or service for another. Usually there is no exchange of cash. Barter may take place on an informal one-on-one basis between individuals and businesses, or it can take place on a third party basis through a barter exchange company. A barter exchange is any person or organization with members or clients that contract with each other (or with the barter exchange) to jointly trade or barter property or services. ...

Barter exchanges have their own unit of exchange, usually known as barter or trade dollars. Trade dollars or barter dollars are valued in U.S. currency for the purposes of information returns. Trade dollars allow barter to take place between parties when one party may not have a simultaneous need or desire for the goods or services of the other members.

Earning trade or barter dollars through a barter exchange is considered taxable income, just as if your product or service was sold for cash.

Requirement for Barter Exchanges to File Information Returns Barter exchanges are required to issue Form 1099-B (PDF) Proceeds from Broker and Barter Exchange Transactions

Re:How is Norway going to know?

[Anonymous Coward]

Everything that's considered "tax fraud" in the rest of the world *was* considered a "business opportunity" *by certain Swiss banks*.

FTFY

As a Swiss citizen I'd like to point out that many (if not most) Swiss people don't agree with those business practices and are fed up with the bad reputation it has earned all of us. Much like not all Americans agree with US foreign policy (i.e. dropping bombs on innocent people)

Re: How is Norway going to know?

[JoeMerchant]

I don't see why Bitcoin couldn't be treated exactly like gold for purposes of taxation?

If you earn it by "mining" that's pure income, and if you trade it, then you've got capital gain/loss.

Re:How is Norway going to know?

[gnasher719]

In Germany, the car dealer will report it to the inland revenue. The car dealer will also want a paper from an insurance company that proves you have provisional insurance (valid for fourteen days). The insurance company will want you to sign an insurance contract within fourteen days, or show an insurance certificate from a different insurance, and if you provide neither, they will inform the police, who will stop you from driving a car without insurance. The inland revenue will have a quick look at the purchase price of the car and your declared income and ask themselves if there is a discrepancy and take appropriate action.

Re: How is Norway going to know?

[AcidPenguin9873]

The parent is referring to cost basis analysis for equities. There are several ways. Tracking individual stocks is one option but tedious. See the wikipedia article for details on the other methods: http://en.wikipedia.org/wiki/Cost_basis

Re:How is Norway going to know?

[gnasher719]

In the US, driving an expensive car is not a crime and you're innocent until proven guilty in a court of law, so the police have no right to inquire as to how you can afford an expensive car.

It's not the police that you worry about, it's the tax office. There is no "innocent until proven guilty" with your tax liability. Only if there is the question whether you committed criminal tax evasion. (To explain: If they think you had $1,000,000 income that you should pay tax for, there's no "innocent until proven guilty" that let's you avoid paying the tax. If they want to through you into jail for hiding your income, then you have "innocent until proven guilty").

Re:How is Norway going to know?

[Anonymous Coward]

You'd look for where they converted the bitcoin into real money, and work backward from there, obviously.

Re:How is Norway going to know?

[Anonymous Coward]

If you're part of the 64%, you're right. However, a whole lot of mine is based on self-reporting, and we don't do anything very fancy or complex.

And, if you run a publicly traded company, you must, most certainly, keep two sets of books, one set to tax law and one to GAAP.

Re:How is Norway going to know?

[rtaylor]

They'll notice the same way they find out about other hidden income. Bank activity and assets in your possession.

Re:How is Norway going to know?

[gutnor]

Considering that bitcoin by design keep the log of all transaction. Once your ID is linked to a wallet anybody will be able to know whatever you did with your money. Obviously not a big problem to workaround but the risk is a lot higher than with cash transaction.

Re:How is Norway going to know?

[Lord Lemur]

Let's break apart the example:

1. Convert 1,000USD => XEuros.
2. Time passes, people die.
3. Convert XEuros => 1,100USD
4. Calculate Capital Gain: $1100-1000 = $100
5. Calculate Capital Gain Tax: $100*0.15 (capital gains tax rate for most Americans) = $15

Until there is profit realized there isn't capital gains. Unless they want to track fair market value, year over year.

Re:How is Norway going to know?

[GameboyRMH]

If you build it, they will come.

And Keith Alexander will do it in his Picard chair.

Re:How is Norway going to know?

[Lord Lemur]

Well, the USA government paid for\commissioned\created much of that modern technology. They might have a fair shot at knowing enough to be dangerous. The history of the USA in crypto in particular might make one wonder what happens when the NSA/CIA/DIA decide they need extra cirricular funding, and look at bit-coin mining as an avenue to Cheat-to-Win.

Re: How is Norway going to know?

[K. S. Kyosuke]

That's all fine and dandy, but he was responding to me and I was commenting on the "the asset must be held for at least a year before it's sold to be taxed at the lower rate" part. I still don't see how "cost bases" and "original costs" and "depreciations" affect that, regarding the applicability of long-term capital gains tax rate vs. the short term one.

Re: How is Norway going to know?

[Anonymous Coward]

Tracking individual bitcoins is easy. Just check the blockchain to see when you acquired it for the coin you transfered out unless they insist using FIFO like Finland does. You could, arguably, say that it's always FIFO on that model as each coin (or actually transaction) has different properties and they are not as equal as something like stocks.

Re: How is Norway going to know?

[alexander_686]

For stocks one normally uses costs bases on individual tax lots and not average price.

The rule of thumb is if you can identify the costs acquiring the asset. For a stock purchase you get a confirm slip – so you can identify. For large projects you should be able to identify your costs. It is when you are running a business with lots of inputs and outputs and it is not worth the effort that one can use average costs.

Re:How is Norway going to know?

[Anonymous Coward]

Look for people with a Rolls Royce registered who also claim to earn little money? Then what? Perhaps it was a gift from family, perhaps it was purchased with savings.

Then you call in the forensic accountants to start following paper trails.

If it was a "gift from family", you ask which family member, and see if they have undeclared income.

Depending on the amounts, hiding cash can be quite difficult.

Re: How is Norway going to know?

[roman_mir]

Right, what it actually means is that if you hold Euros for a year or more and in that time period the Federal reserve in tandem with the USA Treasury and thus the Congress decide NOT to increase the national debt, then you may not see this 'capital gains' tax.

Capital gains tax in the age of gov't created inflation is simply theft via both: first the value of your currency is stolen, secondly, if you don't hold your currency and are smart enough to avoid the inflation tax, they want your money anyway, so it's 'capital gains' tax. Gov't is not supposed to own people, but that's what ended up happening.

Re: How is Norway going to know?

[sg_oneill]

If you know someone's bitcoin address, you for all purposes know their entire transaction history. If I receive bit pins I have to transmit that address. It's really not that hard to figure it out. Heck half the time you can type in a bitcoin address into google and it'll pull up their reddit account or whatever.

Re: How is Norway going to know?

[LordLimecat]

If you buy 50 BTC now, and then 100 BTC in 6 months, a year from now you would be able to sell 50 BTC. It doesnt terribly matter "which" bitcoins youve sold, because the income will be the same, the amount you paid will be the same, and the quantity will be the same.

I think thats what people are referring to.

Re: How is Norway going to know?

[gnasher719]

In the UK capital gains are calculated on a last in first out basis where the asset is fungible - shares, gold things like that.

The reason for that is that about £7,000 of capital gains per year are tax free. Without this rule, if you held shares for a long time and made gains, you could sell enough to make £7,000 profit just at the end of the tax year, and buy the shares back just after the new tax year, and slowly get rid of your taxable profits.

Re: How is Norway going to know?

[Anonymous Coward]

In the US, foreign currency fluctuation is treated as normal income (or loss), not capital gains.

Re:How is Norway going to know?

[Chrisq]

Mod comment:

Interesting: For some that may not know about the Swiss banking system
Overrated: For those that do know about the Swiss banking system
Insightful: Well, it's true
Funny: Made fun of the Swiss - always good
Troll: Winding them up about their dodgy banking system

Underrated: Anything that could be put in so many categories must be worth more than that!

Re:How is Norway going to know?

[Chrisq]

Much like not all Americans agree with US foreign policy (i.e. dropping bombs on innocent people)

just to be a pedant that's an implementation detail, not policy,

Re: How is Norway going to know?

[Archangel Michael]

If you mine gold. You don't pay taxes on it until you convert it to currency. There is no way the Government knows how much you have, unless you tell them.

Oh, and ALL taxes are regressive!

Re:How is Norway going to know?

[tompaulco]

Or you could buy something with them. There is no special reason you would have to convert them to a local currency first if a vendor is willing to accept them.

Re:How is Norway going to know?

[mark-t]

What if instead of exchanging it for cash, you just paid with bitcoin directly because you found somebody who was willing to take that, for all practical purposes, as barter?

Re: How is Norway going to know?

[Immerman]

What if instead the dollar gets weak? My Euro's are still worth pretty much what they were a year ago, but it takes say 20% more dollars to buy them. So does my government get to charge me tax on the ~20% decrease in the value of their currency?

Re:How is Norway going to know?

[Anonymous Coward]

Unless you're in the "aristocracy"... then you can get away with theft:
https://en.wikipedia.org/wiki/MF_Global#October_2011:_MF_Global_transfers_client_account_funds_to_its_own_account
And even killing people:
http://www.huffingtonpost.com/2013/12/12/affluenza-defense-probation-for-deadly-dwi_n_4430807.html
Or a favored corporation - then you can get away with money laundering by just paying 11% of your profits.

Re: How is Norway going to know?

[alexander_686]

o.k. – but what is your point? What are you trying to say? You can hedge away most of that risk in real life.

Inflation steals value from past hard work. Deflation steals value from future work. And you can’t have zero inflation.

As you point out, the higher the inflation rate the higher the effective capital gains tax is. Right now in the US, the cap gain rate is lower than the ordinary income rate, so it takes 5 to 10 years for the 2 tax rates to become equivalent.

What would you suggest? And why would you favor one group and income type over another? Index Capital Gains to CPI? That is a idea I might favor – it would treat all income types on a more equal basis but it would make bookkeeping more complex.

Re: How is Norway going to know?

[Anonymous Coward]

We have the same things, only with different names. VAT is called "sales tax" here (Value Added? Your politicians are as scummy as our lying sacks of shit). "Wealth tax" is called "property tax" here, also less disingenuous. In most places you only pay property tax on real estate, some states have no sales tax.

Where I am there's Federal income tax, state income tax, state sales tax, county sales tax, city sales tax, county and city property tax, beer tax, other excise taxes. I do see where the tea partiers are coming from but what they miss is that there isn't "government" but there are governments; Federal, state, county, city. And the feds tax me a lot less than the combined local taxes.

Re: How is Norway going to know?

[alexander_686]

It depends on the context and thus which accounting treatment you pick.

The default mode is to treat it as any other type of asset. If it is plain vanilla investment.

However, different rules kick in when you are an active trader, hedging risk, have foreign operations or sales offices, etc. I will agree that this is common, but it only makes sense if we start dragging in other unrelated accounting principles.

Re:How is Norway going to know?

[Anonymous Coward]

Localbitcoins.com?

Re:How is Norway going to know?

[Troed]

When the time comes that you can easily buy a Ferrari for bitcoins

Don't know about Ferrari, but this Lamborghini purchase for bitcoin is legit: http://fr.reddit.com/r/Bitcoin/comments/1sn0gi/someone_on_4chan_actually_bought_a_lamborghini/

... which followed this Tesla purchase from the same dealer: http://www.newsday.com/classifieds/cars/bitcoin-used-for-tesla-model-s-purchase-at-lamborghini-dealership-1.6568853

Re:How is Norway going to know?

[Actually, I do RTFA]

It seems tax systems based on self-reporting and trust can work quite well

History begs to differ. Look at the introduction of withholding tax in the US, done during WWII. I mean, people were all about buying war bonds, rationing, etc. Yet it increased revenues.

Dishonesty is only one obstacle. Another is planning: Remembering to set aside enough money each year to pay your taxes. It's been shown that not having the cash to pay leads to not/illegitimately filing to avoid embarrassment, which in turn is a cycle that removes honest taxpayers.

tax fraud is assumed to be low in Switzerland compared to its neighbor states despite the government having no way to know whether people self-report correctly.

Isn't that like assuming that no one is speeding on an isolated stretch of road where the cops never set up speed traps (and it's known). That is, totally indeterminate?

Re:How is Norway going to know?

[mcgrew]

As for a "wealth tax", are you serious? Blah... if it is taxed when I earn it, then you can't have another go at it, that is the whole idea of no double taxation.

"Wealth tax" is another word for the most evil tax of all, property tax. We have no Federal property tax, but I don't know of anywhere in the US it isn't collected by local and state governments. Missouri is really bad about property tax, they even collect it on vehicles.

If you rent you're still paying property tax, it comes out of your rent just like maintenance and mortgage is. You landlord's property tax goes up $600? Your rent is going to be an extra $50 per month, at least.

Re:How is Norway going to know?

[Anonymous Coward]

Again, how are you going to know who to look for? You're literally looking for targets (people who didn't self-report). It's a difficult task, unless you're planning on harassing everyone. But even then, if the bitcoin-to-real-money services are offshore, it could make everything just a bit more difficult.

Re: How is Norway going to know?

[Anonymous Coward]

You can keep multiple bitcoin addresses, and not everyone is incompetent at keeping them private. Plus, you're looking for people who didn't self-report. How are you even going to know where to start?

Re:How is Norway going to know?

[cheekyjohnson]

Well, that seems like a pretty disgusting practice to me.

Re: How is Norway going to know?

[angel'o'sphere]

It matters. If he sells the 'old' 50, the gain is tax free, if he sells part of the 'new' 100 he gets taxed.

Re: How is Norway going to know?

[Anonymous Coward]

If you earn it by mining, it is not pure income. You have costs (electricity, equipment) associated with mining. In the US, a business is not taxed on the money that comes in. It's taxed on (money in minus money out). So if you have $100 in electricity to mine $125 in bitcoins, you'd be taxed on $25 (125-100), not $125.

Re: How is Norway going to know?

[lgw]

Inflation steals value from past hard work. Deflation steals value from future work. And you canâ(TM)t have zero inflation.

No, that's only true of cash savings, which is a very silly thing to have very much of. For wealth (stock, property, etc), the price in dollars is only indirectly important.

And capital gains tax when the government ramps up inflation is simply a property tax (which is unconstitutional for the federal government, as if that mattered). The amount of stock, proterty, etc you own hasn't changed, just the way the government measures it. It's as if you owned one kilogram of gold, and a few years later the government says "well, now you have 2.2 pounds of gold, so you owe us taxes on the 120% gain".

The only "stolen value" is the tax, the actual worth and usefulness of what's owned isn't directly affected by devaluing the currency.

Re:How is Norway going to know?

[fatphil]

It must be nice living in your cozy little bubble. If you ever want to leave it and see what the real world's like, start by googling "civil forfeiture".

Re: How is Norway going to know?

[packrat0x]

To follow up, and make the point even more explicitly, the same logic holds for foreign currency. if I hold Euros for more than a year and the Euro gets strong, I have to pay cap gains on that profit.

Wait, how does Norway tax foreign currency now? Does Norway treat other foreign currencies as normal income / loss? Were they NOT taxing foreign currency gain at all?

Re:How is Norway going to know?

[Anonymous Coward]

Of course, we have the death tax, which is clearly unconstitutional

I was right up with you until then. Why clearly unconstitutional? The estate tax is just another income tax. You're passing money from one person to another. That's income.

Re:How is Norway going to know?

[Hognoxious]

Yeah, it can't possibly work. That's why the Italian equivalent of the IRS didn't do a swoop at some fancy ski resort a few months back and even if they had they wouldn't have caught anyone.

http://www.bloomberg.com/news/2012-02-08/italy-police-pursue-ferraris-to-nab-tax-evaders.html

Perhaps this, perhaps that. Perhaps you're an imbecile.

Re:How is Norway going to know?

[H0p313ss]

*cough* Cambodia *cough*

Re: How is Norway going to know?

[JesseMcDonald]

Inflation steals value from past hard work. Deflation steals value from future work. And you canÃ(TM)t have zero inflation.

The only "stolen value" is the tax, the actual worth and usefulness of what's owned isn't directly affected by devaluing the currency.

No, that's not quite true. There is another sense in which inflation steals value, which only applies when the inflation is the result of an increase in the currency supply and not a decrease in the demand for currency. Namely, the entity that produces the new money (essentially for free, unless we're talking about a commodity like gold) gets to spend it and receive valuable goods and services at the expense of everyone else holding the currency, or contractual claims on currency, prior to the inflation.

It's all well and good to say that it's silly to hold onto cash savings in an inflationary economy, but at any given time someone will be left holding the cash, and the net loss to everyone but the central bank is the same whether it's one person holding a large amount of cash or many people each holding small amounts.

Re: How is Norway going to know?

[Hognoxious]

VAT is called "sales tax" here (Value Added? Your politicians are as scummy as our lying sacks of shit).

It's called a different name because it's not the same thing, dumbass.

Re:How is Norway going to know?

[H0p313ss]

Yes... I know, [citation needed]

Re:How is Norway going to know?

[angel'o'sphere]

(* facepalm *) you need a license plate, like in the US.
You pay road taxes, I assume you pay that in the US, too.
In both caes you have to report the type of your car.

Re: How is Norway going to know?

[alexander_686]

It's as if you owned one kilogram of gold, and a few years later the government says "well, now you have 2.2 pounds of gold, so you owe us taxes on the 120% gain"

.

Well, it is kind of like that.

Let’s say you buy 1oz of gold for $1,000. This is your costs basis. The $1,000 has a real value – anything you like – let’s say 1 custom suit.

The next day you have inflation of 100%. The real value of the gold stays at $1,000 – it can still but 1 custom suit. However, it’s nominal value is now $2,000.

You then sell the 1oz of gold. You now have made a “profit” of $1,000 on which you have to pay capital gains. If the capital gain tax was 50%, you would pay taxes of $500, leaving you with $1500 – which is now enough to by 3/4s of a suit. You have a loss of real value because you are interested in real returns, not nominal. The higher the inflation number the lower your future value will be.

The numbers that I chose were sky high but it is useful to illustrate a point. If you want to do the math, this is what I turned up in 5 minutes of searching on Google: http://quizlet.com/11698330/cfa-3-r11-taxes-and-private-wealth-mgmt-flash-cards/

FVIF (Future Value Interest Factor) = (1+r)^n (1+T) + tcg - tcg (1-B)
  r*=annual after tax return
  T*= effective capital gain tax = tcg (1-pi-pcg-pd)/(1-tipi-tdpd-tcppcg)
  B= value cost / current market value ( = 1 if the beginnin value is the same as the value at purchase)
  pi = portion of return received in interest
  ti = tax rate for interest

Re: How is Norway going to know?

[profplump]

You missed the part where deflation increases the real value of debt, which most individuals, corporations, and governments in modern economies hold to some degree or another. You can argue that they shouldn't, but so long as the do deflation is a big problem.

Re:How is Norway going to know?

[shaitand]

Backward to what, thanks to Fincern you know the exchange account is theirs but you have no way to determine if the address that sent their exchange wallet money was theirs or the address that sent that address money. If I sell you a lamp and ask you to pay me at address A, then I transfer the money to address B there is nothing to prove address B is also mine. I may well have turned around and used the money to pay a debt. You might say, it's the same amount so it's probably mine. What if I then transfer to C,D, and E different amounts that add up to that amount. Well you'd say they are probably mine too but it's slightly less probable. There is no way to actually know that, figures matching could be me shifting my money around my own accounts or it could just be that my purchases added up to that amount because it's the amount I had to spend!

Re: How is Norway going to know?

[lgw]

No, that's not quite true. There is another sense in which inflation steals value, which only applies when the inflation is the result of an increase in the currency supply and not a decrease in the demand for currency. Namely, the entity that produces the new money (essentially for free, unless we're talking about a commodity like gold) gets to spend it and receive valuable goods and services at the expense of everyone else holding the currency, or contractual claims on currency, prior to the inflation.

Yes, this is very true, but doesn't go far enough, because the same thing is happening right now even without the inflation. Value is stolen even without the currency inflation (though to be fair, unless the government is completely corrupt presumably some little value is gained through that spending).

It's all well and good to say that it's silly to hold onto cash savings in an inflationary economy, but at any given time someone will be left holding the cash, and the net loss to everyone but the central bank is the same whether it's one person holding a large amount of cash or many people each holding small amounts.

That's only true of physical currency, which is a nearly trivial portion of the banking and financial world. Holding a lot of physical currency is even sillier than a saving account paying 1% less than inflation. As long as we're not talking 100%/day hyper-inflation, I'm not concerned about the cash in my wallet losing a few % a year.

Re: How is Norway going to know?

[lgw]

Sure, all that's good info. I was trying to emphasize that money is a unit of measure, not really a thing of value in itself, and taxing on the basis of changing the unit of measure is a silly thing to do.

Re:How is Norway going to know?

[Anonymous Coward]

http://www.irs.gov/Businesses/Small-Businesses-%26-Self-Employed/Form-8300-and-Reporting-Cash-Payments-of-Over-$10,000

Yes they are. The IRS requires any cash payments over $10,000 must be filed in your taxes, so if you transact somehow via cash you must file or face penalties. If you buy electronically, the bank will report it.

If you exchange the money from a bitcoin to paypal or your bank account, the bank now has records that they submit to the IRS. Bitcoin doesn't report your transaction, but the bank sure will when you move it back to US$.

If you buy the ferrari via bitcoin, the trick is finding a dealer who will accept it. If you do, then maybe you're ok, but the dealer will still have to record their income and transactions and provide information on the transaction to you to their governing tax authority or face penalties themselves, so you can't trust that.

If you don't and somehow find a way to exchange it for cash and lug it around in a suitcase, then maybe you could get away with it, but I don't think bitcoin operates that way. Maybe if you found someone willing to sell their ferrari second-hand in direct exchange of bitcoins, but those guys strike me as few and far between, and likely most of their dealings are extra-legal so you may not want to deal with them anyways.

Re: How is Norway going to know?

[alexander_686]

Let’s focus on the argument that deflation does not steal anything. If deflation increases the value of your savings today, mathematically it must reduce the value of investments that pay in the future.

Nominal Return = Real Return + Inflation/(deflation).

Run though this simple though experiment. Let’s say you have a project that will generate a real return of 5% but you have deflation of 10%. If you risk your capital and time you would get a real 5.5% ($95/$90) return. If you had just sat on your cash you would have gotten a 11% return (100/90).

Normally deflation numbers are not that big, but I can point to a few historical examples in the 19th and early 20th century. However, even a low rate of deflation will lower the real rate of return. Take a look at Japan. Modest deflation for 20 years has led to underinvestment for that period. It is weird to see a country where the children have accumulated less capital then their parents.

Re: How is Norway going to know?

[alexander_686]

Speaking very generally.
Capital Gains taxes are paid on your net capital gains. i.e. if you lost $20 on the Euro but gained $20 from selling stock, you would net out at zero, and pay nothing. If you have a net loss some countries allow you reduce your income for tax purposes – normally with a cap. Most countries will allow you to carry over your loss for a couple of years to cover any (if there are any) future capital gains

Re:How is Norway going to know?

[FlyHelicopters]

^ While that is all true, and civil forfiture is a concern, keep in mind that when it is really used is when someone can't explain why they don't have a car registered in their name or why they are carrying around $10,000 in cash.

In my business, sometimes I do have large amounts of cash, but since I also have the bank receipts with me when I carry the cash, if a police officer says, "where did you get all that cash, are you a drug dealer?", I can say, "no officer, here are my bank receipts showing the deposit and withdraw of the cash from a business bank account.

That solves that problem 99% of the time.

Re:How is Norway going to know?

[FlyHelicopters]

Then you call in the forensic accountants to start following paper trails.

That is expensive and requires time and resources which are in limited supply.

Even worse, the person doing the paper trail following is likely paid a lot less than the CPA of a rich person hiding the money.

How do you think people like Bernie Madoff got away with it for so long? The people at the SEC are paid $80K a year, he pays his best people a million a year.

When the government is willing to pay for the best, they'll get the best.

If I have $50 million to hide, I can hire better accountants than the government can.

Depending on the amounts, hiding cash can be quite difficult.

Nonsense, it is plenty easy to hide, it is called money laundering. You simply need a business that is run for the purpose of showing expenses and cashflow, without actually making a profit, all the while you keep the cash. Profit and cashflow are two different things, it is not that hard to show break even while putting huge amounts of cash back.

Look at Amazon, in the past few years they have done over $100 billion in sales, yet report almost no profit (and some small losses). Yet they manage to have billions of dollars of cash in the bank.

Amazon is just doing it at a larger scale, but if you have $5 million or $50 million, the same principles apply.

Re:How is Norway going to know?

[FlyHelicopters]

The difference I suppose is that in the US, cars are registered with the state you live in, while the federal government collects most of the taxes.

Since the two often don't talk to each other, it would be harder to do that here.

And frankly, if I was evading taxes, I wouldn't have a Ferrari registered in my own name.

Re:How is Norway going to know?

[FlyHelicopters]

Yes, but if I do $50 million of business with a bank in a year, they have a financial interest in keeping me happy.

If a bank becomes known for ratting out its best customers, it soon won't have any of them anymore.

Re: How is Norway going to know?

[alexander_686]

Since we are changing topics, I will bite. If taxing using money as the measure is silly, what measurement would you suggest?

I will point out that there is nothing has an absolute value. The value of labor, gold, land, computers, etc. on makes sense when it is measured relative to something else, but that these relative values are not fixed – they will float.

Re:How is Norway going to know?

[FlyHelicopters]

In the US, as many as 1/3 of drivers lack insurance, it sure isn't stopping them from driving around.

Germany might be more organized and put a better stop to insurance.

As for the price of the car vs. income, while that sounds nice, that would be hugely labor intensive for very little gain. What if my business leases the new car instead of buying it? It just becomes a business expensive.

My business does several million a year in revenue, I own a small company, nothing major, but even a leased Ferrari wouldn't stand out among my other major expenses.

Re:How is Norway going to know?

[FlyHelicopters]

Yes, and this is the part everyone misses.

You're assuming the person you're using the Bitcoins with to "buy something" is someone other than yourself, a shell business created to launder the funds into clean tax free cash.

Re: How is Norway going to know?

[Copid]

And if you had borrowed the $90 to finance your venture based on assumptions about the nominal return that later turn out not to be true, your investment goes bust.

I don't get why so many people who underestand the problems associated with inflation manage to think that deflation is a big win for everybody. I especially don't get why it's this bad on slashdot. You'd think that math and CS nerds would be able to see "negative inflation is a wealth transfer from borrowers to lenders" as an inescapable restatement of "positive inflation is a wealth transfer from lenders to borrowers" or any one of a dozen formulations that describe the effects of changes in the price level.

Re:How is Norway going to know?

[FlyHelicopters]

So you buy and sell stocks every day for a year. Any profit made is income, offset by any losses (both in the stock market as well as in the real world). Just holding stocks isn't capital gains, the increase in value is.

Re:How is Norway going to know?

[FlyHelicopters]

Then I'm thankful I don't live in such a country that is so devoid of personal freedom.

How much I earn is no one's business.

Re: How is Norway going to know?

[OneAhead]

https://en.wikipedia.org/wiki/Regressive_tax
You're welcome.

Re:How is Norway going to know?

[FlyHelicopters]

The have cause to investigate, you've claimed a certain level of income but publically have assets which would be hard to afford at that stated level of income.

Ahh, but those assets are owned by my business, which declares millions of dollars in income, then deducts that income down to a small amount thanks to the wonderful business tax laws we have in the US.

Most of the comments in this thread are clearly written by people who have never filed a business tax return.

You're assuming that you report only $50K in personal income, yet live in a million dollar house and own a boat and a Ferrari.

What happens when you report $5M in gross income, then deduct that down to $500K thanks to deductions, then end up paying perhaps $100K in total taxes? That boat and Ferrari are paid for by the business, it isn't hard to find some business use for them, put your web site on the side and host some business parties on the boat, the Ferrari? You make client calls with it and take your business clients out for a drive in it to win business deals.

Scummy perhaps, but perfectly legal, if you cover your bases.

Re:How is Norway going to know?

[OneAhead]

Wow that's radical transparency. No wonder Norway is in the top-10 least corrupt countries. Though it seems to come at a steep price privacy-wise...

Re: How is Norway going to know?

[lgw]

It's a hard problem. For land a property tax works well enough, and a capital gains tax seems redundant (but the US federal government isn't allowed anything that's overtly a property tax). Also, I lay many/most of the problems with modern must-always-be-growth corporate governance at the feet of dividends being taxed unfavorably compared to capital gains, and would hate to exaggerate that.

Just as I'd like to do away with income tax in favor of payroll tax (so that the US government would have no knowledge of individual income), I'd favor a system of taxing earnings over capital gains (no need to tax the owners both ways), as long as it put gains and dividends on exactly the same tax footing.

But "gains" on bitcoin and gold and whatnot, where what you sell is only what you bought? I'm not sure why we need to tax those at all, beyond the government's burning desire to tax all the things.

Re:How is Norway going to know?

[FlyHelicopters]

Al Capone was an idiot, he didn't have his income laundered via a legitimate business that existed for the purpose of showing legal profits.

At some point, if you have enough money, you have to pay at least some taxes, or it begins to look funny. Al Capone didn't want to pay ANY taxes.

He went to prison for tax evasion because he didn't pay any taxes. If he had been willing to pay a bit of taxes from a legitimate company, he would probably have remained a free man.

Re: How is Norway going to know?

[JesseMcDonald]

That's only true of physical currency, which is a nearly trivial portion of the banking and financial world. Holding a lot of physical currency is even sillier than a saving account paying 1% less than inflation.

It's not just physical currency. If you have something whose value is tied to the dollar, and not adjusted for inflation, then you're affected by it. That includes not just cash in your wallet, but also savings and checking accounts, CDs, loans, rents, annuities, other contractual payments, even some foreign currencies. When prices go up by 3% across the board, what difference does it make whether you pay for it out of your checking account or cash from your wallet? You've lost the same purchasing power either way. And while you can try to adjust for inflation, that only works if you can predict the amount in advance.

As for savings accounts which pay 1% less than inflation... have you checked the rates recently? A really good 3-year CD might pay 1.2% APY. The best I could find for a high-yield savings account was 1%, with a $10,000 minimum. Please tell me you aren't claiming that inflation is less than 2.2%—even the BLS says that the CPI increased by around 2.23% annually from 2003 to 2013. That's only tracking changes in consumer prices, not the difference between where prices are vs. where they would have been without the inflation in the money supply; if prices would have decreased on their own, the actual loss is even greater.

Re: How is Norway going to know?

[shutdown -p now]

VAT is called a Value Added Tax because it is the tax on the added value - i.e. the increase in price relative to the cost of ingredients that went into making it. It only looks the same as a regular sales tax to the final consumer in the chain.

Re: How is Norway going to know?

[Immerman]

Informative, but unrelated to my question. Allow me to restate in a simple scenario:

Say I use all my assets to buy $1M worth of gold today, and then over the next year the global price of gold remains stable but the bottom falls out of the dollar so that my gold is now worth $2M. No change in actual value as measured in Euros, loaves of bread, or barrels of oil - just in the apparent value as measured in rapidly depreciating dollars. So, do I pay capital gains on the actual change in value ($0), or on the dollar-metric increase in value ($1M) ?

Re: How is Norway going to know?

[aliquis]

Maybe it work different in the US where you supposedly had different tax rates depending on how long you had held the property. Here where it's just 30% on any profits all the time it doesn't really matter when you bought anything or what you've done previously.

Re:How is Norway going to know?

[tompaulco]

I guess the part I am really missing is why people who have bitcoins would have some need to launder the funds. I mean, I have bitcoins, and I have no need to launder them. I know several other people with bitcoins, and they have no need to launder them. I guess that everybody has some desire to believe that the only possible use for an electronic currency would be to do something illegal with it. This is far from the truth. In fact, an electronic currency would be extremely useful in dealing with sales of any sort between people whose local currency is not the same, and can do so without the markup that a traditional bank would desire to collect.

Re:How is Norway going to know?

[mysidia]

Once you get above a given amount of money in the bank, you move from the tellers to the private banking dept and receive a higher level service rep who handles things for you.

That's NOT what I am talking about.

I am talking about John Q. Public going out to buy a Ferrari, not Bill Gates, or someone with established means to buy 100 Ferraris a year without batting an eyelash.

When you get enough money for private banking, then you are in the 10% that a different set of rules that applies to.

For the other 90% of the population, who lives from paycheck to paycheck; when you go out and plop down $250,000 for a Ferrari, there are most likely going to be some questions asked, and the IRS getting their little FYI slip.

After all.... if the bank catches you and reports the suspicious activity, there may even be a reward bounty out from the IRS with the name of the employee who filled the 3949-A on it.

Re: How is Norway going to know?

[lgw]

It's not just physical currency. If you have something whose value is tied to the dollar, and not adjusted for inflation, then you're affected by it. That includes not just cash in your wallet, but also savings and checking accounts, CDs, loans, rents, annuities, other contractual payments, even some foreign currencies

Most of these things are tied to inflation, more or less. Anything where the rate is fixed for more than a few years is different, then you're into the interest rate speculation casino. Savings accounts will pay a bit less than inflation absent government meddling (see below), and the more tied to a market something is, the more closely it will couple to inflation, modulo short term fear about stocks putting pressure on safe investments.

As for savings accounts which pay 1% less than inflation... have you checked the rates recently? A really good 3-year CD might pay 1.2% APY. The best I could find for a high-yield savings account was 1%, with a $10,000 minimum. Please tell me you aren't claiming that inflation is less than 2.2%â"even the BLS says that the CPI increased by around 2.23% annually from 2003 to 2013.

QE has messed badly with bonds and everything that depends from them, because while bond traders know that the rate paid by treasuries is bogus now (it's not a market rate for the first time since the gold shock), everything has been priced relative to treasuries for generations, and it's hard to change something that fundamental.

Also, the Fed is now paying banks interest on bank deposits with the Fed, and that's also twisted pricing in ways I'm not sophisticated enough to understand.

Savings accounts are pretty messed up right now (some premium vs inflation is understandable, but as you highlight it's bad now), but they're in far better shape than in the Cater years where we had double-digit inflation, but savings account and CD rates were legally capped at 5.25%. That punished every American family with cash savings.

But in any case, my point in all of this was it's a mistake to keep a significant amount of savings in cash, whether savings account, CDs, or whatever: it's a bad plan. Beyond 6 months of expenses for emergencies, it's foolish not to invest in some fashion. And we're getting better low-risk bond investment vehicles for individual investors every year, thank goodness. I keep my low-risk money in short-term mid-grade corporate bonds that pay 4% or so right now, but fixed-maturity funds for such short term are a new (and wonderful) thing.

Re:How is Norway going to know?

[FlyHelicopters]

The illegal activity is the evasion of taxes... by using your bitcoins to buy something from a company, instead of paying taxes on capital gains on them, you are just spending the money now and getting "stuff". The shell company has to pay taxes, but companies can deduct things that the average person cannot, so you can turn it into cash without paying taxes on it.

Re:How is Norway going to know?

[Anonymous Coward]

If someone makes a bunch of profit on Bitcoins, how is Norway going to know if the person doesn't self report?

They don't, it's just a formality of law. Besides, Norway is one of the richest countries in the world per capita. Norwegians can afford to pay.

Re:How is Norway going to know?

[tompaulco]

Seems like the same thing would happen with any currency. Say I went to the Exchange and traded in some USD for some Euros . Then I sat on them for awhile and the Euro went up against the dollar. Then I went and bought some merchandise with the Euro. I would not have paid any capital gains on the amount that the Euro went up. Even if I went back to the Exchange and traded it back for dollars, I wouldn't pay any capital gains. The only way I would pay any capital gains is if I held the money in a ForEx trading account, where they would actually keep track of my trades and report it. In fact, they barely even do that. The last place I had an account (Ameritrade) just gave my accountant the total sales for the year and didn't even bother calculating the cost basis. My Accountant said I owed something like $10k in taxes. I knew something was screwy because I had only made a few thousand in profit.

Re:How is Norway going to know?

[Jack Griffin]

If someone makes a bunch of profit on Bitcoins, how is Norway going to know if the person doesn't self report?

Well that's how tax generally works, that's why each year you fill out a a Tax declaration. The catch is that the tax dept has more power than anyone to take your stuff and put you in jail, so there's a strong incentive to tell them the truth.

Re:How is Norway going to know?

[Jack Griffin]

The people at the SEC are paid $80K a year, he pays his best people a million a year.

Because the SEC can recommend you go to jail if you don't co-operate, and that is worth more than $1million dollars a year.

Re: How is Norway going to know?

[alexander_686]

Our of curiosity, where's here?

Re: How is Norway going to know?

[alexander_686]

I am a little confused on the situation – can you help me out? I feel like I am missing a step but I will take a stab at it. I think I am being thrown by the “global price of gold remains stable” - which is kind of a hoary concept.

You measure you gain based on your own local currency. You don't care about the change in the FX rates – it's got nothing to do with the problem.

Maybe this is a better example. You buy 1m USD of gold. Over 12 months there is 100% inflation. Now, a 100% inflation rate would imply a steep drop in the FX rate but that has nothing to do with this problem. You then sell the gold for 2m USD, so you would have 1m in capital gains that you would have to taxes on.

Re: How is Norway going to know?

[JesseMcDonald]

Savings accounts will pay a bit less than inflation absent government meddling...

Inflation is government meddling, most of the time (excepting rare decreases in the demand for currency and non-government forms of money), though not the kind you were referring to. Savings accounts should pay a bit more than inflation, not a bit less, as you're supposed to receive a net return in exchange for letting the bank borrow and invest your funds. Without inflation, no bank could get away with letting your purchasing power depreciate over time, because no one would bother with a savings account under those terms. Inflation lends the banks additional bargaining power since it means your money is losing value anyway, and even a poor investment begins to look better than stuffing your money under your mattress. (And by "poor investment" I mean a net loss to the economy, not merely low yields, though in the end it's the same thing. On the whole, it's better for the economy to hold your money and not invest than to invest in a below-average venture, but inflation pushes people to invest even when they shouldn't just to avoid part of the inflation. This is often a stated goal of inflationary policies, to force people to invest their savings rather than "hoard", but the harmful effects are either not understood or simply ignored.)

But in any case, my point in all of this was it's a mistake to keep a significant amount of savings in cash, whether savings account, CDs, or whatever: it's a bad plan.

I don't disagree. By all means, hold as little inflationary currency as possible. It would be stupid to keep any significant portion of your wealth in assets which depreciate by design. In the end, though, that just hands the problem off to someone else—generally someone even less able to deal with it. Not everyone has enough savings to make brokerage fees worthwhile, or the time to carry out essential market research while holding down two (or more) jobs just to pay the rent. That's part of the reason the inflation tax is so regressive.

Re: How is Norway going to know?

[tsotha]

Yes. But technically you have to do the same thing if you buy and sell euros or yen.

Re:How is Norway going to know?

[tsotha]

I think it's harder and harder to avoid registering your car. There are automated license plate checkers now - a cop can drive down the street and have the system check for registration on every single car driving the other direction. I think they're used in some places in the US, though they're not widespread.

Re:How is Norway going to know?

[Anonymous Coward]

Your original post seemed to indicate a personal filing not a business filing, hence the replies.
e.g.

If someone makes a bunch of profit on Bitcoins, how is Norway going to know if the person doesn't self report?

Most of us here on Slashdot are already long aware that many corporations avoid lots of taxes (plenty of Slashdot stories about Apple and the rest doing it).

I'm pretty sure the majority of us here do not regard corporations as persons - just judging from the posts whenever it comes up.

Re: How is Norway going to know?

[Sigg3.net]

Norwegian here. Let me just say that officials will mostly comment without thinking, so the only practical magic they can apply here would be to find registered companies that sell BTC and have them report sells/buys to the govt. (Same transparency in stocks, I take it. But IANAE.)

Re:How is Norway going to know?

[JonJ]

You get a sticker every year showing that the yearly road fee is paid, and that liability insurance is OK.

No, stickers are out now. It's all electronic.

Re:How is Norway going to know?

[JonJ]

You don't know shit about norway, and complain about a practice that has been abandoned which in no way took away from your personal freedom. I guess you're just an ignorat twat then.

Re: How is Norway going to know?

[alexander_686]

Inflation is government meddling, most of the time

Less then you might think. Inflation only makes sense if you look at both the supply and demand for money. You have grown up in a era with fiat money and the government trying to regulate the monetary supply. Go back to the 19th and early 20th century when the world was on the gold standard. You still had inflation and deflation. The difference is that today we have a low and steady inflation rate. Back then you had much larger, unexpected spikes

The government, either today or yesterday, had little control over the demand on money. The Federal Reserve has control over some lending standards but that is a blunt tool. The problem of yesterday is that there was no control over the supply of money. This lack of control more often meant deflation rather than inflation but deflation is as invidious as high inflation.

Re:How is Norway going to know?

[Hognoxious]

And frankly, if I was evading taxes, I wouldn't have a Ferrari registered in my own name.

Looks like you're smarter than [some] Italians, at least.

But you might have some explaining to do if you were found driving it. Belongs to a Mr M. Mouse, resident of Disnelyland, does it, sir? Mind if I call him to check he gave you permission to drive it? Have his phone number, by any chance?

Re: How is Norway going to know?

[alexander_686]

I would argue that you would want to tax all income at the same rate unless you can justify the difference. If there is a difference between economic, accounting, cash, and tax recognition people can get up to mischief.

You argue that only payroll tax should be taxable. Want to convert you salary away from taxable payroll to tax free BitCoin capital gain? It can be done. There are schemes of transferring income of one type to another. If you think earnings should be taxed at a higher rate than capital gains I will structure the investment so it returns more capital gains and less earnings. You would be amazed – and maybe sadden – to know how much time goes into optimizing returns based on taxes rather than economic returns.

On to your specific points:

You can’t make dividends and capital gains exactly equal to each other – the math won’t let you. If you want to equalize them then you are going to need to index capital gains to inflation – which was my original point.

How are dividends at a tax disadvantage? If you live in the US they are not. See George Bush’s QDI tax reforms. BTW, I am not a fan of those.

And I would be careful in leaving a higher tax on earnings and a lower tax on dividends and capital gains. Taxing on earnings tend to have a higher tax drag then that on capital gains. Higher tax drag means lower returns. Lower returns implies lower investment for tomorrow’s production. Besides, corporations tend to do a better job at saving and investing then individuals.

Re:How is Norway going to know?

[Anonymous Coward]

The kicker is when Bitcoins are accepted as a currency, not as some thing to exchange for currency. At this point, I would think that the governments' taxation model (which is essentially demanding money with menaces) is heading rapidly for the rocks.

Bitcoin transactions are not readily traceable, it is also not easy to work out who owns which bitcoins. Taxation depends on skimming off transactions, which in turn depends on someone cooperating with the skimming, which then depends on the government having a decent chance of catching someone not cooperating with this government skim operation. If detection is well nigh impossible, then the chain is broken.

Re:How is Norway going to know?

[FlyHelicopters]

:) Funny... +1

But it wouldn't be registered that way, it would be registered to "Capital Investment Enterprises, LLC". I would then show an insurance card with both my name (which matches my driver's licence) as well as "Capital Investment Enterprises, LLC", showing that the car is insured and that I'm an authorized driver from the insurance company (approved by the company to drive the car).

It makes the police officer happy on the side of the road, but makes it hard to put two and two together in database searches.

Really, this isn't hard, only fools get caught doing this sort of thing.

Another way to go about it is to form a non-profit and have it own everything. There are many ways to do that as well.

Re: How is Norway going to know?

[Immerman]

Okay, so assuming you're correct that answers my question.

Basically my question boils down to: Do you only get taxed on actual capital gains, or also on non-losses to inflation. Your answer says I get taxed on both.

Another scenario to maybe clarify if that did not: I put all my assets in property/silver/whatever - stable stuff with no great profit/loss potential in inflation-adjusted dollars. A few years later after the dollar crashes I cash out for whatever reason. Actual inflation-adjusted value of my assets is essentially unchanged, but it takes 10x as many dollars to represent the same "objective" value - bread is now starting at $20/loaf for the cheap stuff and minimum wage is $75/hour.

So, according to you in that scenario I would be charged tax on the 9/10 of my assets that represent "capital gains" in terms of dollar metrics, despite the fact that I have made no actual gains in capital at all, and am actually being taxed on the devaluation of the dollar.

Re: How is Norway going to know?

[alexander_686]

Yes, the higher the inflation rate the higher the effective tax for capital gains is. You can avoid this issue if capital gains are indexed to inflation. You can avoid this issue if capital gains are indexed to inflation.

Here is a link to another post in the same thread. It has formulas.
http://slashdot.org/comments.pl?sid=4561385&cid=45706561

To nit-pick a bit, I will repeat myself in saying that you want to look at inflation, no the relative value of the dollar to the EUR or whatever. The FX rate of the dollar could be off by +/- 20% from the “real” value. There is a relationship between currency strength and inflation, but it is lose and has a lag time of 10 to 20 years.

For example, during the Greek crisis when fear was at its highest, people dumped EUR for USD, so the dollar became stronger and the EUR collapsed. However, from a relative perspective not much happened – inflation rates remained mostly unchanged. Americans could buy about the same using USD before and after. Same for the Europeans using EURs. Or, to put it in your context, the USD/EUR could move 20% up or down and the cost of bread would still be $2.

Re: How is Norway going to know?

[lgw]

I do like a flat tax across all possible income/gain sources as a starting point, with the possible exception of a break for long-term gains/dividends (but then, once you start using tax law to encourage behavior in any way, where does it stop?).

A proper payroll tax would capture non-cash compensation as well (much like the current income tax does). You need to keep the 100 years of loophole closing in the current income tax law, but push the paperwork burden onto the employer (even small business owners already need accountants, so it wouldn't be an undue burden there I think). But then, my goal there was to get the governments snooping nose out of citizens business - the less the government knows about each of us, the better.

Capital gains "indexed to inflation" may be the most workable system, but would be gamed and complicated. Dividends are still unfavorable compared to capital gains, as they can't be offset by capital losses. You make a good point though that an earnings tax has drag that a gains tax doesn't.

Re: How is Norway going to know?

[lgw]

Not everyone has enough savings to make brokerage fees worthwhile, or the time to carry out essential market research while holding down two (or more) jobs just to pay the rent. That's part of the reason the inflation tax is so regressive.

Just to touch on this: you're right, but it highlights a major failing in our culture and educational system. This basic knowledge of how money works and why it's important to do more than a saving account should be basic fundamental cultural knowledge, but instead it's almost entirely absent. While people try to attribute the concentration of wealth to malice, I disagree - it's incompetence. We need to make "competence with wealth" a cultural priority now that we've reached this amazing place where half of Americans own stock.

Re:How is Norway going to know?

[Vintermann]

How much I earn is no one's business.

That attitude is very useful for employers to keep down wages, too :) I suspect that's why the system persisted, despite the rich hating it and the rest being reluctant to admit that they used it. It's a useful tool for labor unions.

I take a different attitude. Cash transfers are property transfers too, and property is an institution between society and individuals. If you want me to respect your property, surely I'm entitled to some information about what you claim as property? For some classes of property (especially real estate and business ownership), it's likely mandated to be public even in your country. Norway just takes it a bit further, that's all.

Re:How is Norway going to know?

[Vintermann]

The practice hasn't been abandoned last time I checked, it's just a little harder to get access. You need a MinID identity (= Norwegian citizenship, plus you leave traces!), and the lists are taken down after a brief period.

Re: How is Norway going to know?

[alexander_686]

Maybe one last point – I think we are getting to the end of the conversation here. I am a bit confused by your position on the flat tax and capital gains on BitCoins. I think a flat tax is a great idea. However, if you don’t tax cap gains on BitCoins that leaves a huge gap that you drive a semi-truck though.

I think you missed my point about transforming your salary – it’s not about including non-cash compensation. You can structure your pay in capital gains from BitCoins and excluded it from non-cash compensation. The Enron debacle offers lots of legitimate examples with the use of subsidiaries, partnerships, options, etc. to shift income. (Their issue was not that they used these forms but they cranked the volume up to 11.)

Here are 2 examples. Both are simple compared to what Enron did.

First, Steve Jobs He had a salary or $1, travel on the company jet, and other non-cash compensation (taxed at the higher income tax rate) plus a large slab of stock options (taxed at the lower long term capital gains). I personally consider this only semi-abusive. He got out of Social Security taxes, but he was exposed to risk and it aligned his interests with Apple’s. However, the reason why Jobs chose the $1 salary was to minimize taxes not out of altruism.

Second, I am going to make the assumption that you consider rent to be income and should not be – that is what I am getting from your posts. If not this still somewhat holds because rental income is taxed at a lower rate than other income. If you own a business you can split that business into 2 – one side is the operational side, the other owns the building. You can raise the rent to shift profits from the high tax corporate entity (double taxation on both the earnings and the dividends/cap gains) to the low tax building. That is a simple one.

Re:How is Norway going to know?

[FlyHelicopters]

That attitude is very useful for employers to keep down wages, too :) I suspect that's why the system persisted, despite the rich hating it and the rest being reluctant to admit that they used it. It's a useful tool for labor unions.

Yes, but labor unions in the 21st century are evil. :)

Ok, I get why they came into existence, employers were abusive in the past, but today we have a very different legal environment and real employee protections which didn't exist back then.

Cash transfers are property transfers too, and property is an institution between society and individuals.

Ahh, it is? I'm not sure I'd agree with that. Property is private, my property is my business. Yes, we do have deeds and title to property to track ownership and resolve legal disputes, but that is between myself and the state, not society.

Maybe I'm just more individualistic than you are.

You can go down to the courthouse and see that I own my house, but you can't see how much money I make or look at my tax returns. If I really cared about the house part, that can be hidden as well, I could have a shell company purchase the house to keep my name out of it.

Re:How is Norway going to know?

[Vintermann]

but that is between myself and the state, not society.

What legitimacy has the state, if it isn't society's representation of its common interests?

I think you're conflating two different uses of the word private here. It's not private as in privacy. I'm not denying that your property is your business, but quite often it is also my business.

By the way, you can't strictly speaking find out how much I own, because you only see how much tax I pay. You don't see my deductions, or the breakdown of income vs. various other taxes. Is it really a private business how much you contribute to society?

I doubt you're really more individualist than me. However, I consider most of our private property arrangements as useful constructions of our society (though the state), not any natural inherent right or anything.

Better than full taxes

[Anonymous Coward]

paying the few percentages of capital gains tax every year should be better than paying sales tax. Though I don't think it's realistic, in time all bitcoin transactions will probably have to pay sales tax.

cyrptocurrency

[Anonymous Coward]

"cyrptocurrency"

Even the summary is encrypted.

Re:cyrptocurrency

[Anonymous Coward]

you mean encyrpted

Real enough to tax.

[Anonymous Coward]

Sounds like a currency to me.

Re:Real enough to tax.

[Anonymous Coward]

Sounds like a currency to me.

It is taxed the way you tax gains from stocks, are stocks currency? (and the extreme value volatility is also very much like speculative stocks).

Re:Real enough to tax.

[Anonymous Coward]

Taxes is counted in dollars and cents, yes, but dollars and cents themselves are not taxable.

What is taxable is income, assets, transactions, inheritance.

Re:Real enough to tax.

[penix1]

are stocks currency?

No but they are treated as such. Just ask every CEO who is paid with stock.

Re:Real enough to tax.

[Joce640k]

Sounds like a currency to me.

It's far too unstable to be a real currency. It's more like, eg. gold - something with limited supply that has a value to other people.

Except that right now it's far too unstable to even be compared to gold. It's more like a stock in a smallish company - the value goes up and down wildly every day.

Re:Real enough to tax.

[Alioth]

It's pretty much useless as a currency though. It's so volatile that by the time a Bitcoin transaction has been confirmed, the value of the bitcoin concerned may have moved by 30%. If it moves the wrong way the merchant may make a loss on the sale.

Re:Real enough to tax.

[Millennium]

At this point it's more like a kind of bullion than a currency, per se. You can store and transfer raw value in BTC without much trouble, but other than a few notable-but-narrow exceptions, you can't walk into a store and buy something with it.

Since it doesn't act much like a currency yet, and probably isn't going to within the next five years or so, it doesn't make much sense to treat it as a currency yet. But you have to treat it as something, so for now, treating it as an asset makes the most sense. When and if the situation changes, the laws can also be changed.

What is the cost basis?

[SuperKendall]

So if I am mining bit coin, and it costs me more in electricity than I am getting in return from the bit coin I make, does that mean I get to write off my electric bill?

Or lets say I am making money, is my electric bill the cost basis for the bit coin? But I also needed a computer to mine, can I factor that into the basis?

I don't think they realize there are other legal ways to get bit coin besides buying it. Or perhaps then they just figure the basis is $0 and tax you 100% on the actual value.

Re:What is the cost basis?

[Anonymous Coward]

Am I wrong, but isn't it in most places, you don't get taxed on assets until you sell them? Actual realized gains and not just theoretical....

Re:What is the cost basis?

[gnasher719]

So if I am mining bit coin, and it costs me more in electricity than I am getting in return from the bit coin I make, does that mean I get to write off my electric bill?

Are you asking seriously?

If you run it as a business, all profits are taxable, all costs are tax deductible. However, if you claim to run a business and lose money all the time, the tax office will say they believe this is a hobby. Same as someone with a farm raising race horses who loses money every year and probably does it not as a business but as a hobby.

So you don't get to deduct anything, but you keep all the invoices, and if eventually you make money, you can offset your profits with your losses from previous years.

Re:What is the cost basis?

[Anonymous Coward]

No, they understand it quite well.

The main thing that isn't sorted, at least in the US, is exactly which rules apply, e.g. should it be treated as ordinary income or capital gains?

But still, the rules are still there, e.g. what can be deducted as a business expense, how to split costs when something is shared between personal an business use, how to deduct costs of equipment, etc.

The only thing is: if the IRS happens to disagree with your interpretation, you could get audited and end up with a higher tax bill and penalties to either pay or try to challenge in court.

Re:What is the cost basis?

[Anonymous Coward]

Sometimes it's both. There is Capital Gains tax when you sell something (if you made money on it).

And there is also Property Tax for just owning something, such as annual real estate tax on the value of your house. A lot of places collect an annual tax on the value of cars, boats, etc.

http://en.wikipedia.org/wiki/Property_tax_in_the_United_States

Re:What is the cost basis?

[Chrisq]

So if I am mining bit coin, and it costs me more in electricity than I am getting in return from the bit coin I make, does that mean I get to write off my electric bill?

Or lets say I am making money, is my electric bill the cost basis for the bit coin? But I also needed a computer to mine, can I factor that into the basis?

I don't think they realize there are other legal ways to get bit coin besides buying it. Or perhaps then they just figure the basis is $0 and tax you 100% on the actual value.

If they are treating it as an asset then you would be a manufacturer and presumably would benefit from all the usual tax breaks. Whether this would include making your electric costs tax deductible in Norway I don't know, but it should be the same as if you were manufacturing shoes, ships, or anything else.

Re:What is the cost basis?

[Andtalath]

That is actually the problem with counting them as assets.
This means that you can't count expenses, notably the power and the card against the profit.

Basically this means that gross instead of net will be taxed for BC-miners.

Re:What is the cost basis?

[mysidia]

If you run it as a business, all profits are taxable, all costs are tax deductible. However, if you claim to run a business and lose money all the time, the tax office will say they believe this is a hobby. Same as someone with a farm raising race horses who loses money every year and probably does it not as a business but as a hobby.

That's a bit hard to claim "this is a hobby", if your entity that is losing money is incorporated and has multiple beneficial owners.

I suspect if you hired good accountants and tax attorneys for your business, and managed it appropriately, you wouldn't much need to worry about the possibility of claims of "It's just a hobby"

Re:What is the cost basis?

[GuB-42]

In France we have a somewhat controversial tax called ISF (Impôt de solidarité sur la fortune).
People owning more than 1.3M€ in assets can be taxed up to 1.5% of their net worth annually.

Re:What is the cost basis?

[gmhowell]

Is that the one that Gerard Depardieu is irate about? (Or is it the entirety of the French tax situation?)

Re:What is the cost basis?

[afxgrin]

I'd try filing it as a capital expense and see what happens. Just prepare for them to laugh at you.

Re:What is the cost basis?

[jonbryce]

If you run a business mining bitcoins, then the sale of bitcoins is your revenue, and electricity is one of your expenses. So yes, you would be able to write off your electric bill. Depending on which tax juristiction you live in, you may be able to claim depreciation, capital allowances, investment allowance or similar on the cost of the computer.

Re:What is the cost basis?

[alexander_686]

But never investments.

All states have a property tax for land.

Some states have a yearly registration tax based on the value of cars and boats. Some states do it based on weight, number of axis, etc. But no matter how the taxes are calculated they are 1. all about the same and 2. go towards roads, boat docks, etc. So it is more of a method of calculation rather than a true wealth tax.

Re:What is the cost basis?

[alexander_686]

It's high taxes in general, both on income and wealth.

Re:What is the cost basis?

[Rich0]

A stock certificate is an asset.

How much capital gains tax did Facebook pay to the IRS when they created $90B in stock certificates that didn't exist the instant before the IPO? I doubt they had to pay capital gains on issuing stock. Those who bought and sold it, of course, had to do so.

Why wouldn't bitcoin be any different? The person creating the bitcoin is creating an asset, not buying/selling one.

Re:What is the cost basis?

[alexander_686]

Let me rephrase that: I am going to guess both but that is based on the assumption that Depardieu is semiretired and most of his income is from investments.

France has cranked up the income tax on employment and investment income.

However, wealth taxes tend to have a higher tax drag then either income taxes or cap-gain taxes. Much depends on the specifics of French tax law and Depardieu investment goals – which I don’t know.

Re:What is the cost basis?

[the eric conspiracy]

The stock certificates are a representation of the ownership right to the company. When you sell a share of stock you are selling your interest in the company.

So the shares of stock DID exist previously, in the form of the property rights of the people who own the company.

When the owners sell their stock you can bet damn well they have to pay a tax on that sale. The magnitude of that tax can be huge. It's one of the reasons people like Zuck take out loans rather than sell their stock.

Re:What is the cost basis?

[tompaulco]

I don't mine anymore because I don't have the equipment, but when I did, I ran it through my business. The computer equipment is depreciated. I actually did not write off the electricity because my office was in my home and it would be difficult to figure out the percentage used for the business. I could have (but didn't) charge the business rent for my office space. I treated sale of bitcoins as 100% profit and at the end of the year the cost of doing business was subtracted out. It being an S-corp, any dividends paid out would be taxable to the partners, and they would receive tax credit of any operating loss.

Re:What is the cost basis?

[tsotha]

This means that you can't count expenses, notably the power and the card against the profit.

Sure you can. The tax ugliness for assets only comes when you're trading existing assets. The rules for manufacturing are different.

taxed as asset?

[gadget junkie]

It's a common error in European fiscal policy that assets can be taxed. In reality only financial savings and income are taxed, and the final percentage applied is variously disguised as "capital gains tax", or other quibbles.
to clarify further: for an asset to be taxed, in my small world of financial analyst, it must either produce a taxable financial income, which is then taxed, or it must be an acceptable mean of exchange with no or negligible frictional costs. Houses are only an indexation parameter in taxes, since no tax authority whatsoever accepts a lien on 10 square feet as payment: they want hard cash. If the owner-occupier of a house had the opportunity or willingness to put the house in a separate company, it would be clearer still: the company would never make one cent, and it would be taxed on a fictional rent, which by itself is part of the owner's income. Therefore, the owner's income is taxed twice.
So, on bitcoins, the problem is magnified: if it is a mean of exchange, like banknotes, by itself it should not be taxed. the relevant transactions could be taxable, but not the means of exchange: after all, if I buy a car by bank draft or money transfer I do not pay either X or Y depending on how I paid. the effort of the authorities is to preserve the monopoly on fiat currency, that's it.

Re:taxed as asset?

[Anonymous Coward]

What's "European fiscal policy" got to do with a country that is not in the EU? Or are you making a incorrect blanket statement?

Re:taxed as asset?

[Anonymous Coward]

The grandparent made no reference to the European Union, just "Europeans" in general. And last time I checked, Norway is still considered part of the geographic and cultural entity known as Europe.

Re:taxed as asset?

[sourcerror]

In reality only financial savings and income are taxed, and the final percentage applied is variously disguised as "capital gains tax", or other quibbles.

Real-estate is already taxed in most places in America. Most European countries also tax cars based on their engine's size.

Re:taxed as asset?

[Anonymous Coward]

So there is a "fiscal policy" common to this geographic and cultural entity?

Re:taxed as asset?

[paskie]

To a degree, there is some common "fiscal policy" in the European Economic Area (EU+Norway+Iceland+...).

Re:taxed as asset?

[Anonymous Coward]

I keep getting told we're socialists.

Re:taxed as asset?

[jonbryce]

Norway is in the EEA, and is known as a "fax democracy". The EU sends all the latest directives by fax to the Norwegian Parliament and they are required to implement them as part of Norwegian Law.

Re:taxed as asset?

[Anonymous Coward]

Therefore, the owner's income is taxed twice.

So? Most places already have multiple layers of tax in place. Income tax, VAT, GST, etc. If tax is considered a conflict between society and assholes who want to use public services but not contribute to the costs, then multiple layered taxes is probably a good move. Insisting on a single tax is insisting on a single point of failure waiting to be circumvented by freeloaders.

I do not pay either X or Y depending on how I paid.

If you buy anything by credit card as opposed to cash, you'll find there is an extra cut that goes to the credit card company.

Re:taxed as asset?

[gadget junkie]

Real-estate is already taxed in most places in America. Most European countries also tax cars based on their engine's size.

Same as before:tax authorities do NOT tax the car. they tax the buyer on the transaction, and there's some form of "possession tax". that's not a tax on assets. If it were a tax on the car, a car owned for example by a deceased penniless owner would still pay tax, and above all, it would be economically capable of paying such tax. but it does not: even taxes related on car possession tax the owner, not a car.

Bear in mind that these kind of stamp duties bear no relation of the use of public resources that using a car entails: If I want to tax for that, I'd tax the fuels, and that's exactly what governments do. when they do anything else, like "taxing cars based on engine size", they are simply meddling in people choices unrelated to use of resources and so on. I think that it's "politically convenient" to set up a labor intensive organization to collect and check a taxation which could and is more efficiently collected in another way, and above all it is unrelated to usage, income of the owner, efficiency gains and so on.

Re:taxed as asset?

[Anonymous Coward]

> assets can be taxed

Which is a good thing. You want to discourage people from saving. It's the gluttons that have killed the economy in the US by hoarding money like the stupid cartoon character Scrooge McDuck. So many Americans worship that character not realizing that it is their hoarding that has ended their country. There is no saving(no pun intended) it now. The people in that country are so ignorant that they do not understand the v in macroeconomic equations. Instead, their rulers encourage reducing v by encouraging saving money which reduces wealth by the same fraction of v reduction. The average American is so stupid that they follow along with that suicide plan. The Democrats have pushed proper encouragements against savings, but that is no match for the ruling Republicans that push hoarding.

Assets should be taxed heavily to make sure that wealth is destroyed. Inflation, and the recent QE3, are good tools the Democrats have used against hoarding, but they are not enough. In the US the only time assets are treated properly is the small 50% death tax. It is only sensible to apply that same tax every year.

Re:taxed as asset?

[OneAhead]

Nigel, is that you?

The article is a bit flawed

[TyFoN]

What really happened was that the norwegian IRS said that the bitcoin does currently not have any status as a currency in Norway and will be taxed as an asset.

They very clearly state that bitcoins have not been banned as a currency, only that it's status still has to be decided by Finanstilsynet (almost like SEC, but with a broader mandate).

The Norwegian IRS does not have the authority to claim it is a currency or not, only Finanstilsynet. All they do is tax what they see as an asset until Finanstilsynet gives other directions.

Nettvalutaen Bitcoins beskattes
Translated
Quite different heading than the /. heading.
Translated it just means "Bitcoins are to be taxed".

Re:The article is a bit flawed

[rasmusbr]

What really happened was that the norwegian IRS said that the bitcoin does currently not have any status as a currency in Norway and will be taxed as an asset.

They very clearly state that bitcoins have not been banned as a currency, only that it's status still has to be decided by Finanstilsynet (almost like SEC, but with a broader mandate).

The Norwegian IRS does not have the authority to claim it is a currency or not, only Finanstilsynet. All they do is tax what they see as an asset until Finanstilsynet gives other directions.

Nettvalutaen Bitcoins beskattes

Translated

Quite different heading than the /. heading.
Translated it just means "Bitcoins are to be taxed".

Yup, this is basically good news for Bitcoin since it means it won't be regulated as a currency. And Norway is a tiny, tiny market so it's fairly inconsequential.

And yet the price of Bitcoin is falling on this news. Talk about a nervous market!

Re:The article is a bit flawed

[Anonymous Coward]

I think you are confused. It could be treated like money (like gold) but it is not! The article never claims it is 'banned', merely taken as an 'asset'.

Re:The article is a bit flawed

[Anonymous Coward]

"Tax Administration has decided that Bitcoins is neither a currency or a financial service. Thus, trade with the popular online currency strike out on your tax return."
Exactly as what the article says.

Re:The article is a bit flawed

[Anonymous Coward]

I suspect that if it were being treated as a currency instead of an asset, people would still claim that it was good news for Bitcoin, since that would prove that Bitcoin is being recognized as a legitimate medium of exchange.

So what would be bad news for Bitcoin?

Re:The article is a bit flawed

[Anonymous Coward]

At this time?
There is no bad news. Bitcoin needs one thing more than all else at the moment: Attention, a lot of attention so that regular people who don't read slashdot know what it is.

Re:The article is a bit flawed

[TyFoN]

The headline say that it has been rejected, but the Norwegian article sais the status is not yet decided by the proper governing body. Quite a difference I'd say :)

Re:The article is a bit flawed

[Vitriol Angst]

It's the rejection by other means; "We are not outlawing it, but it will cost you to have it."

However I don't know if the tax on savings is less than or more than inventory.

Re:The article is a bit flawed

[Anonymous Coward]

Ah. That explains the daily /. articles. Anyone know how many BTC the editors are currently sitting on? :-)

Re:The article is a bit flawed

[Anonymous Coward]

What would be fair? If they were to allow a deduction for the cost of producing them, how would that be determined? Especially if one uses just one bitcoin, for that individual bitcoin, how does someone know exactly the cost in producing it?

Some thoughts...
When it comes to purchases, I think counting it as an "in-kind" exchange would be best. For example, if I were to do a trade at a pawn shop in order to get something, it should be treated like that. For the new owner of the bitcoin, there should be a value associated with it. After all, they would have accepted cash otherwise. If that new owner sells it, then the difference would be the income.

For the producer of a bitcoin, it is messier. If someone can document their expenses, why not? Or maybe require that it's the primary source of income (namely businesses) if deductions are to be allowed. Or maybe a standard deduction rate based on the average costs of producing a bitcoin (assuming they have timestamps). Maybe the simplest option would be have a standard deduction rate (anything in excess of X dollars would be taxable income) for producers.

Value Added Tax

[Alain Williams]

If it is not an asset and I were to sell some bitcoin, would I need to charge VAT (I am VAT registered as I am self employed) ? VAT is 20% in the UK at the moment, so it is a large cut. The person buying the bitcoin could reclaim VAT but only if they are VAT registered ... it is getting complicated.

Re:Value Added Tax

[lxs]

I suppose so. Here in the Netherlands you pay VAT on silver bullion but not on gold bullion. (Silver is treated as a commodity, gold is treated as money.)
I'm not 100% sure what our tax authorities think about cryptocurrencies, but if there is another price spike like the ones in April and November, I suppose I need to find out soon. And hire an accountant.
This Monopoly money is quickly turning into serious business.

Re:Value Added Tax

[jonbryce]

Unless you can find Bitcoin on one of the lists of things that are exempt from VAT, outside the scope of VAT, or chargeable to VAT at 0% or 5%, then yes, you have to charge 20% VAT on Bitcoin, just like you have to charge VAT on the sale of silver coins.

However, if you bought the Bitcoins from someone who is not VAT registered, you can use the second hand margin scheme so that you only pay VAT on 20% of the profit. If you do that, then the person buying them can't claim the VAT back even if they are VAT registered. You can't deduct any expenses when working out the margin, but you can claim VAT on the expenses separately subject to the usual rules, and if you sell at a loss, you don't get a refund.

Uhm, "Norway's economy:"

[Anonymous Coward]

I love how they have a section with "Norway's economy:" and then proceed to show an infographic that contains all the nordic countries BUT Norway.

Re:Uhm, "Norway's economy:"

[game kid]

It's an infographic. Were you actually expecting it to be terse, accessible, or relevant?

Seriously, I'd love to chat with any makers and fans of those things, and by "chat with" I mean "throttle".

Surely no suprise?

[Anonymous Coward]

I think in the uk you have to pay capital gains tax on profits from trading currencies anyway so what difference does it make?

But surely everyone already knew they would have to pay capital gains tax on bitcoin profits if they were large enough? Just as you have to on beeny baby trading profits, and comic books or whatever?

I agree vat is an interesting question. I would assume they are exempt like stocks and shares but who knows.

Alternative currencies

[Akratist]

I've followed the alternative currency movement off and on for some time, and it's interesting to see how governments take issue with them. What is more interesting here is that, while Norway obviously doesn't necessarily recognize a legal bucket a bitcoin can easily fit into, it's nevertheless viewing them as having some worth or profitability, and not participating in the normal flow of currency exchanges. In that sense, at least bitcoins seem to be taking on an intrinsic worth that isn't necessarily a characteristic of fiat currencies. While I don't have experience using bitcoins, this is definitely an interesting development.

Re:Alternative currencies

[u38cg]

I don't think governments really have much problem with it in general. Ultimately, a bitcoin is just a little piece of digital property, like an MP3 file or an original .jpg. Sure, it has some interesting properties, with respect to verification and copying, but other than that it's just a bit fo property. The only issue is their use for moving large amounts of value anonymously, sameas they are concerned about suitcases full of dollars.

Re:Alternative currencies

[tsotha]

What is more interesting here is that, while Norway obviously doesn't necessarily recognize a legal bucket a bitcoin can easily fit into, it's nevertheless viewing them as having some worth or profitability...

If you buy and sell anything the tax authorities will be waiting for their cut. They don't particularly care what it is.

For Now

[MrKaos]

it will be interesting to see how much pressure inevitabley gets placed on them by citizens using bitcoin to purchase.

So Bitcoins are going to rise in price like heck

[Anonymous Coward]

If you cash them in for money, you are taxable for capital gains. If you just use them to buy stuff from private persons, that's not really traceable very well.

Result: people will tend not to cash them in but keep them hoarded and in circulation in preference to "real" money, resulting in decreased availability for cash, and consequently rising exchange value.

ROFL

[Anonymous Coward]

Good luck enforcing that one.

Whaa, haa, haa

[Anonymous Coward]

The more countries that issue policies against cryptocurrencies, the stronger the resolve will be from CC users. The whole point of a CC is to bypass the political machinations of central banks and country congresses. The more machinations there are, the more CC's will be emphasized and even propagate.

There are something like 100 currencies. Many from countries run with true monetary insanity. They are not be declared "not currencies". They should be.

CC is currency. It meets all the definitions. The volatility in value of Bitcoin in particular is a function of the massive flows of funds, the relative newness since the underlying mathematical algorithm still has a few years until it reaches plateau.

When Ron Paul asked Ben Bernanke if gold was money, Ben said no. The constitution does not agree.

JJ

Retards

[Anonymous Coward]

Why should there be tax on a currency that doesn't have much of a use? That's fucking retarded. However, I didn't expect anything of intellect from bankers and bank supporters. The evil scum.

Reasonable Compromise

[Anonymous Coward]

We can't expect any country to make Bitcoins official, fiat currency, so making it an recognized assets seems a reasonable middle ground.

Re:Reasonable Compromise

[agm]

I disagree. It's none of the governments business. If I want to voluntarily trade with another person using bitcoins (or chickens, or shells) then no third party has a right to get involved. This applies double-so to the government.

The DeVry JD speaks

[Hognoxious]

In the US, driving an expensive car is not a crime and you're innocent until proven guilty in a court of law

How can you be found guilty of something that isn't a crime to begin with?

so the police have no right to inquire as to how you can afford an expensive car.

So you're saying they have to get a conviction before they can even begin investigating? How the fuck is that supposed to work?