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