Cryptocurrency and tax (1 Oct, 2020)

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Cryptocurrency and tax (1 Oct, 2020)

Postby aardvark_admin » Thu Oct 01, 2020 5:39 am

This column is archived at: https://aardvark.co.nz/daily/2020/1001.shtml

Will tax authorities really be able to properly tax cryptocurrency?

Even if they manage to convince the honest folk to meet their tax obligations, what about those who choose to exploit the anonymity that crypto offers?

Is the IRD's approach of using its powers to demand the records of crypto trading companies rather than seeking self-declaration (as the IRS is doing) a worrying move?
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Re: Cryptocurrency and tax (1 Oct, 2020)

Postby Perry » Thu Oct 01, 2020 4:41 pm

The NZ IRD is always "on about taxpayers' obligations / responsibilities."

Never about pointing out taxpayers rights, benefits and the like.

What us 'common people' must never forget is that tax department in any country cannot be objective.

Why?

Because they collect the money from the productive economy that pays their own [parasitic] wages.

As well as those of their political dominatrix.

(What's the plural of dominatrix?)
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Re: Cryptocurrency and tax (1 Oct, 2020)

Postby granada29 » Thu Oct 01, 2020 5:14 pm

Perry wrote:(What's the plural of dominatrix?)


dominatrices ?
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Re: Cryptocurrency and tax (1 Oct, 2020)

Postby kaxnurco » Sat Oct 03, 2020 11:07 pm

IRD are treating cryptocurrencies as property but they've also said that the only use for cryptocurrencies is to hold for appreciation of the value, meaning that taxes on the capital gains are due for anyone who buys and later sells. It's a frustrating ruling for those who buy other cryptocurrencies with bitcoin. Say I buy Ethereum with bitcoin. I have to calculate the value as if I had sold the bitcoin and bought Ethereum with the resulting cash value. If the value of that bitcoin is greater than what I purchased it for I would owe tax on it - but I actually have no money to pay that tax as I didn't receive any NZD from the purchase of ethereum with bitcoin. IRD don't accept cryptocurrencies to pay taxes of course so if I want to pay tax I have to sell bitcoin or Ethereum to do it. And pay tax on any profit from that sale.

There are other uses for cryptocurrencies and if you can prove to IRD that your intent on purchasing was for those other uses then no capital gains tax is due. The recent bunch of cryptocurrencies that have staking and interest are like this - rather than buying for the capital increase in the crypto, you buy to stake it. This means you pay tax on the staking income but not on the capital gains. Other people buy bitcoin to pay for overseas services easily - servers, etc, that may be another "not for capital gains" argument.

In reality it's likely that cryptocurrency users will need to pay capital gains (or claim losses) until more reasonable decisions are made on how to treat them.
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Re: Cryptocurrency and tax (1 Oct, 2020)

Postby Perry » Sun Oct 04, 2020 8:06 am

kaxnurco wrote:There are other uses for cryptocurrencies and if you can prove to IRD that your intent on purchasing was for those other uses then no capital gains tax is due.

Unless I mis-understand you, what you are referring to as capital gains tax will actually be income tax. I.e. The increased 'value' between purchase and sale price is treated as income by the IRD.

New Zealand has no capital gains tax.
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Re: Cryptocurrency and tax (1 Oct, 2020)

Postby aardvark_admin » Sun Oct 04, 2020 8:09 am

The problem is... who determines whether an asset has been purchased with the primary intention of reselling at a gain?

IRD of course.

I bet they are far less inclined to believe that an asset has been purchased for the purposes of "trading" if that asset is sold at a loss and therefore that loss should be applied to offset earnings in the same period.
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Re: Cryptocurrency and tax (1 Oct, 2020)

Postby Perry » Sun Oct 04, 2020 12:21 pm

aardvark_admin wrote:The problem is... who determines whether an asset has been purchased with the primary intention of reselling at a gain? IRD of course.

Since then, as it relates to residential rental homes, a fixed period has been set by the W'gton woodenheads. Sell for a profit within that time and pay income tax on that profit. I think losses are allowed - but not sure. Plus so-call ring-fencing. No other business in NZ is subject to such constraints.

As has oft been observed, getting the 'appropriate' tax revenue from gooble, faecesbook et al, is too hard.

Recall the educative approach we've heard a lot about, recently.

When it's simple and / or easy money - authorities pounce immediately and without lenience.

When it's too difficult / risky - authorities prefer the educative approach. (cough, choke, gasp, wheeze)

I wonder if it ever occurs to them to speculate on how they're viewed by the citizenry for such egregiously expedient standards?
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