Canada Revenue Agency To Tax BitCoin Transactions 297
First time accepted submitter semilemon writes "The Canada Revenue Agency has started paying attention to BitCoin transactions, as it says users will have to pay tax on all transactions using the currency. From the article, "The CRA told the CBC there are two separate tax rules that apply to the electronic currency, depending on whether they are used as money to buy things or if they were merely bought and sold for speculative purposes. "Barter transaction rules apply where BitCoins are used to purchase goods or services," Canada Revenue Agency spokesman Philippe Brideau said in an email. In this situation, that means whatever you've received in exchange for your $1 worth of vegetables must be documented as a taxable gain of at least $1 somewhere. When it comes to trading BitCoins for profit, the tax man says there are tax implications there, too. "When BitCoins are bought or sold like a commodity, any resulting gains or losses could be income or capital for the taxpayer depending on the specific facts," ruled the CRA."
Kind of innevitable and entirely reasonable (Score:5, Insightful)
All seems reasonable to me. Our civil society is founded on the fact that since the government actually costs money, then people need to pay tax. Trying to hide money in bitcoin ought be seen as tax evasion, unless they are paying taxes on that money.
Libertarian types trying to sponge off the taxes of hard working tax payers via tax evasion need to stop being so greedy and stealing other peoples money.
Re:Kind of innevitable and entirely reasonable (Score:5, Insightful)
Re:Kind of innevitable and entirely reasonable (Score:4, Interesting)
Income tax? Or Capital Gains tax?
I guess it depends whether you bought them or 'mined' them.
Re:Kind of innevitable and entirely reasonable (Score:4, Insightful)
As given in the summary, it is sales tax (if used to buy things) or capital gains tax (if mined and sold, or speculated in.) Which, I think, would be common sense. In America, at least, you can’t avoid taxes by switching to barter, script, or other currencies – it’s fair market value that drives the underlying tax code.
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it’s fair market value that drives the underlying tax code.
While it's a great theory for how taxes should be defined. it may be problematic... Suppose, you use X bitcoins to buy a digital product, such as an eBook, that is not for sale by any other means (it is not available to be purchased for USD).
You have a problem, since the product doesn't have a fair market value that can be uniquely discerned.
The value of the product is a matter of opinion. Some books are sold brand new for $5, oth
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While it's a great theory for how taxes should be defined. it may be problematic... Suppose, you use X bitcoins to buy a digital product, such as an eBook, that is not for sale by any other means (it is not available to be purchased for USD). You have a problem.
Well, no, I don’t have a problem – it’s the retailor who has to pay the tax so it is up to the local authority. And in America, these things don’t have sales tax. So the specifics don’t pan out in this case – but let’s take the view of the retailor.
It’s intangible? So? There is a whole chunk of legal and accounting standards that wrap around this. Has anybody anywhere swapped bitcoins for something else? If yes that gets you a value. It may be a fuzzy value
Re:Kind of innevitable and entirely reasonable (Score:5, Insightful)
Just so you know, tax avoidance is a bi-partisan thing.
http://latimesblogs.latimes.com/washington/2010/09/congress-taxes-irs.html [latimes.com]
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Why don't you lay off. Capital gains tax is a subset of income tax. So he's absolutely right.
Re:Kind of innevitable and entirely reasonable (Score:5, Insightful)
Good move by the government, and it is a good thing that this is happening sooner rather than later. Yes, taxes suck, yes I want to pay lower taxes, etc, but roads and healthcare don't pay for themselves.
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Have to buy those votes somehow.
Re:Kind of innevitable and entirely reasonable (Score:5, Insightful)
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Capital Gains (Score:5, Informative)
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It was taxed when the power company purchased the equipment and fuel to make the electricity, and again when you purchased the electricity from the power company, and again when you converted it into bitcoins, and again when you purchased some milk with it, and again when the shopkeeper paid his employees with the milk money.
Its "consistent" for sure, but its ridiculous as well. GP is right, the idea that somehow the Government needs a cut of every transaction (rather than just income tax) is absurd.
Re:Capital Gains (Score:4, Informative)
Most countries (states) have a "single" tax point structure. In the non-progressive states (countries) the tax is delayed until the final customer transaction. In more progressive structures the tax is based on the value added at each stage of the chain. You buy a raw component for $1.00 you get taxed on the $1.00. You added your value and sell it for $5.00 you get taxed on the $4.00 value added. This the basic structure of VAT used inn many countries.
Therefore, the product is only "taxed" once.
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then you should be able to claim power consumption costs for bitcoin mining as a tax deduction. Which could alter the profitability of mining.
Ask an accountant and tax attorney if possible.
The actual production of bitcoin might itself be taxable, so that the capital gain is only change in value after producing it -- and on production, the bitcoin is immediately taxable in the fair market value of the entire bitcoin value generated. If it is, (which is most likely case), then the electricity consumptio
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It is not every transaction it is just capital gains tax. If you 'mined' BitCoins then the cost was the electricity needed to generate them. I
Yes... unfortunately, how you figure this electricity cost may be complicated. You have these lumps of X bitcoins, if you trade Y fractions of a bitcoin; you need to allocate a certain electricity cost to every lump of bitcoins you got, and then you have equipment you used for mining, and its depreciation costs.
It's unlikely that the electricity costs will be
Re:Kind of innevitable and entirely reasonable (Score:5, Insightful)
This level of taxation goes FAR BEYOND what it takes to run a nation.
[citation needed]
First of all, there is precious little agreement on how much it actually takes to "run a nation", but in the case of the U.S., it is plain to even the most dim-witted that we are not collecting enough to cover that expense. Unless/until we can agree to spend less, more revenue is required. To suggest that it is excessive is to deny reality.
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Re:Kind of innevitable and entirely reasonable (Score:4, Insightful)
I thought you were an democracy. So it isn't the federal government who is to blame - it is you the people that continue to vote in people who either doesn't lower spending or raises taxes to balance the budget.
Blaming it on the federal government is plainly wrong - you Americans simply wants to eat the cookie and keep it. Balancing a budget is easy - either you cut spendings or your raises taxes. Your politicians does neither and you keep voting on them so you should all take the blame.
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The government expects to get a percentage of every transfer of money from one entity (or person) to another. The person receiving the money must count it as income. This is how income tax works. Just because a person decides not to report doesn't mean the tax isn't owed. And if the amount of money is high enough the government will figure out that tax is owed and come after the person to get it.
In the case of bitcoins (or any other non-local currency) the transaction must be converted to the local curr
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Please expain to me why the government should get a cut if i transfer money from one human to another.
I don't know, but what does this have to do with bitcoins? The fact is, they tax incomes regardless of source, and regardless of what forms the income takes, as long as there is an increase in value, and (if necessary) an income realization event.
This level of taxation goes FAR BEYOND what it takes to run a nation.
Different nations require different cost to run. The US, and other governments thro
Re:Kind of innevitable and entirely reasonable (Score:4, Interesting)
Sounds pretty silly. I moved from the USA to Denmark and things work much better here. You know why? Because the government is twice as big, not smaller. So infrastructure is actually built and maintained, healthcare coverage is universal, education is strong, the unemployed get skills retraining, etc., etc.
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Because the government is twice as big, not smaller.
- you are mistaken, you don't know where you are.
Denmark has a trade surplus, not a 50 Billion / month trade deficit. Denmark has a tiny debt compared to its GNP, USA is in a hole that it can't get out of.
You are mistaken that Denmark has a larger government, Denmark has a much smaller government, insignificant by USA standard. Denmark is not fighting wars around the globe, by the way, it doesn't have about 85 or so MILLION unemployed people that could work if it weren't for a huge welfare state.
You shou
Re:Kind of innevitable and entirely reasonable (Score:5, Interesting)
It has a larger government measured by percentage of GDP: government spending equals 50% of GDP. It's true that it has lower debt, because it also has much higher taxes (around 50% of GDP as well), so it pays for its spending rather than selling bonds to pay for it.
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Your post makes no sense. Just because Denmark actually pays-as-it-goes for its government, doesn't mean its government is smaller than the U.S.
I can't wait to see how you'll move the goalpost in response to this comment.
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Re:Kind of innevitable and entirely reasonable (Score:5, Informative)
Yes, it's counting all levels of government added together (international comparisons typically do, because the internal structuring differs so much between countries).
If you add up all governments in the U.S. (federal, state, county, municipal), the numbers are: taxes equal 27% of GDP, and spending equals 39% of GDP. If you add up all the levels of government in Denmark, the numbers are: taxes equal 49% of GDP, and spending equals 52% of GDP. Source: The Heritage Foundation [heritage.org] (a conservative U.S. think-tank)
Doing a bit of digging for the U.S. federal budget, it looks like it's a little over half the total in both categories. Total 2012 federal tax receipts were $2.5 trillion, and total federal expenditures were $3.5 trillion. Since GDP was $15 trillion, that equates to 17% of GDP in federal taxation, and 23% of GDP in federal spending.
Re:Kind of innevitable and entirely reasonable (Score:5, Insightful)
Re:Kind of innevitable and entirely reasonable (Score:5, Insightful)
It all depends on efficiency.
- If the tax money collected by the government is spent on a program which yields a higher return (by increasing the nation's productivity) than if the money had remained in private hands, then tax evasion is stealing from other taxpayers.
- OTOH if the government is spending money on programs which aren't more efficient than private use (or are even losing money), then tax evasion actually helps the economy (in totalitarian states, it leads to black markets) and it's the government which is being greedy and stealing people's money.
There's a tendency for libertarians to pretend only the second state exists, and for big-government proponents to pretend only the first state is possible. The reality is that either state is possible. We have to be constantly vigilant to appraise the effectiveness of government programs, and not afraid to cut the ones which become wasteful. But likewise, neither should we immediately dismiss all government programs as wasteful.
Re:Kind of innevitable and entirely reasonable (Score:4, Insightful)
There's also programs that may be inefficient or cost money that society decides are worth paying for anyway. Not everything needs to be about making a profit. Those programs should still be watched to ensure that are as efficient as possible, but they shouldn't necessarily be killed. Social Security is an example of that- there's no financial gains for keeping old people alive and sheltered, but its something society decides is a good idea.
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That isnt really the argument though as I read it.
If a government program run by a public entity does X amount of work at the cost of 1 million dollars...
And a private entity can do the exact same amount of X for 0.9 million dollars.. The argument is to let the private entity handle the work.
This also goes the other way though and sometimes it is much less costly to have a public entity handle something compared to having it privatized.
Fire protection services, various welfare programs and the likes.
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Re:Kind of innevitable and entirely reasonable (Score:4, Funny)
[A]... government that piles its country's resources in to terrorism prevention, whilst ignoring road safety.
Oh c'mon... a cursory glance at the number of casualties from terrorism vs road accidents would show that to be just plain dumb.
at least use a more plausible example, geez!
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Problem is that things like treating sick people instead of letting them die in the street isn't a very efficient use of money. A private company that doesn't give a shit about human suffering could generate more profit with that cash.
It is also rather hard to determine what is efficient when the pay-back on some things can take decades to arrive. The government often funds basic research that takes 10-20 years before any company becomes interested in and commercializes it, and sometimes it fails completely
Except most R&D IS done by companies (Score:2)
That's the nature of research and if the government didn't do it then no for-profit company that can't see past next quarter's profits is going to.
Sounds good, but in fact companies actually do most research. 3M and Dupont are largely research labs, for example. Surely you're familiar with the contributions of Xerox PARC (Palo Alto RESEARCH Center). Everybody likes to beat up on drug companies, but they spend BILLIONS on research. The best research in the world was 20th century US, when Edidon's research labs were creating awesome new stuff weekly, withou
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In my experience, the difference between government R&D versus private R&D is that companies do research that might actually achieve something - a more effective lightbulb or a cure for a disease. Government researches the breeding habits of the Southern Maryland pond worm for "just because", for no apparent reason.
That "just because" provides the foundation on which to develop actual products. The light bulb started out as an interesting experiment long before Edison developed one that was commercially viable.
People put research and development in the same category, when they are not. Research is the "just because," development is the "actually making something." If you look at Bell Labs, which has been one of the most fruitful corporate R&D endeavors, only 10% of its workforce was focused on research. Xerox
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You don't know enough about research and industry.
I will sum it up.
Public research digs up the most fundamental knowledge that in itself is only knowledge that can be applied.
Private research takes the public findings and refines the knowledge in a very focused, product-oriented way.
Both are required for our current successes.
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- If the tax money collected by the government is spent on a program which yields a higher return (by increasing the nation's productivity) than if the money had remained in private hands, then tax evasion is stealing from other taxpayers.
It isn't quite as simple as that. Suppose you're a better carpenter than me and I'm a better gardner than you. And suppose there's some carpentry I want I could do myself in 10 hours, and you could do in 8. And suppose there's some gardening you want you could do in 10 hours and I could do in 8. The logical thing - the efficient thing - is to swap tasks and do each others. We both get what we wanted with less effort. Now suppose there's a 25% or more tax - for every 8 hours work you do, you have to do anoth
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And it's a simple calculation because governments only spend money on one thing.
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Libertarian types trying to sponge off the taxes of hard working tax payers via tax evasion
Statist socialist types trying to sponge off hard working capitalists via government strong arming with prison and fines.
There, FTFY.
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All seems reasonable to me.
They're just repeating rules that are already in place. Reasonable and what should be self-evident.
Libertarian types trying to sponge off the taxes of hard working tax payers via tax evasion need to stop being so greedy and stealing other peoples money.
That type of "libertarian" shows up throughout human society and has all sorts of professed ideologies.
Re:Kind of innevitable and entirely reasonable (Score:5, Insightful)
I'll go along with it if I can PAY my taxes in bitcoin...Until then @!#$@#$ off.
well you probably can't pay your taxes in apple shares either.
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If I'm not mistaken, you're also not taxed on Apple shares until you turn them back into real-world money via dividends or selling your shares.
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Actually you do. If you're given or are paid in Apple shares, you're taxed the value of the shares at the time you were given them. When you sell the shares, you pay additional taxes (or receive a tax credit) based on any differences in price from when you got them.
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As far as cap gains goes, you don't have to convert your shares into money (i.e. sell them) in order to be subjected to the tax. You would also owe it if you bartered them for something else, or if any number of other "taxable events" changing the status of the shares occurred. The rules are complicated, but basically the idea isn't "money is magically the only thing we tax", it's just "we tax it when your ownership in the property ends or changes". I'm talking about the U.S. here - I don't think Canadian l
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and can be pretty unfair when property has frequent large price fluctuations.
Hey, you could clear the price fluctuations, by selling all your property at the end of every year --- change all your assets into cash on Dec 31, of every year, or donate all your capital assets to your charitable trust. Then on January 1st, start accumulating new things.
But especially for appreciating assets, it turns out to be advantageous to defer the tax for as long as possible. Because money today is worth more
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Actually you do. If you're given or are paid in Apple shares, you're taxed the value of the shares at the time you were given them. When you sell the shares, you pay additional taxes,
Yes... this is analogous to receiving bitcoins.
But what about the act of spending bitcoins? The act of spending bitcoins may be a capital gains realization of income event too.
What happens, if you give a shopkeeper an Apple share for a $100 product?
In that case, maybe you possess only Apple shares, you have no dol
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There are some countries, such as France, that have a wealth tax. So yes, in some places, you have to pay a tax each year you hold BitCoins, Apple, or whatever. (fun fact, a wealth tax has one of the highest tax drags for taxes for long term investments.)
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I'll go along with it if I can PAY my taxes in bitcoin...Until then @!#$@#$ off.
Why? I don’t know about Canada, but in most of the world, if you make profits in a foreign currency (or script, barter, etr.) it is your responsibility to convert those profits to US Dollars. Why should BitCoins be different?
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Reasonable question. But should all digital artefacts be the same? What if I have some really cool computer code that might be worth a lot of money to someone. Should I try and value it?
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It feels like you are off topic here. We were talking about taxable transactions here – something that would trigger you to pay a tax. Being digital is kind of a side issue.
If you sold something – be it vegetables, BitCoins, or computer code – that would be a taxable event. If you exchanged something – like BitCoins for output of your computer code – that would be a taxable event.
But building a cool piece of code or painting a cool piece of art is not – unless I am missi
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People aren't going to agree, and there will be enforcement in that case, be it from the government or some private army or posse of vigilantes. Personally, I'd rather have a republican government having a monopoly on enforcement than a multitude of private forces. We've had periods in history like that and usually they result in a lot of violence and social disorder.
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Re:Kind of innevitable and entirely reasonable (Score:5, Insightful)
So why do we need government again?
Because countries without governments tend to resemble Somalia, Afghanistan, Iraq and so on.
When a properly designed system could provide direct democracy
Right, because we all know how well e-voting works.
I think that those who favour no government and those who favour large intrusive governments should get to live in Somalia and North Korea, respectively, just to see where their extreme positions lead.
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If you don't like living under a government, you are free to move to Somalia. However I don't think you'll like the government-free life there ...
Note that Switzerland is a direct democracy, yet still has a government. Why would they have one if direct democracy made it superfluous?
And if all the work is done by robots, a government is needed more than ever, because then there will be no more economic wealth redistribution through wages.
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And if all the work is done by robots, a government is needed more than ever, because then there will be no more economic wealth redistribution through wages.
That is something I think most people don't get. Governments naturally grow to fit the size of the available labor force after the private sector has had its share. (when it doesn't, it is called austerity and is generally a bad bad thing)
Macroeconomically speaking, any government only has 4 options:
* Pay the unemployed (large government with entitlements)
* Employ the unemployed directly or indirectly (large government)
* Institute max working per week and other rules to increase number of employees in the p
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* Institute max working per week and other rules to increase number of employees in the private sector (shrinks government, grows private sector)
Instituting maximum working hours will result in a more expensive workforce. I am not against it necessarily, but in order to prevent the country to lose in international competition, some protection mechanisms will be needed (anti-globalization). And before you say that 2 people working 20 hours can do the same as 1 in 40, answer the following as a practice question:
"If it takes 1 woman 9 months to bring a child to term, how long does it take for 9 women?"
And of course whether the 2 people sharing the sala
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All this technology doesn't spring forth magically. It exists and is produced under a massive global system of powerful institutions, and supply and distribution chains, to say nothing of systems of education and healthcare and food production to provide for all the people that make these things happen.
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LOL (Score:2)
And how exactly do they plan to accomplish this? Technical explanation required.
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Perhaps they'll make the exchanges report...exchanges.
Then exchanges will move offshore, and the governments will deem them illegal - kind of like gambling. So you'll have your BTC, but you'll have a hard time getting that turned into $CAD. 'Hard' being relative in the internet age, of course - it's not that hard to do online gambling in the U.S., and the Dutch tend to have zero problems accessing TPB despite ever-updating IP blocks.
To be honest, though, it isn't that much different from U.S. states in wh
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To clarify, I didn't really mean that the tax evasion was also intentional.. 'popular' was not quite the word I was looking for.
To be honest, I'd be surprised if most people from such states even realize that their state requires them to report it - it's certainly rather easy to never even contemplate to even get to the point where one determines it to be too much work, or forget about it, or deliberately withhold it :)
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(Even drug dealers pay their taxes if they're smart -- too much attention on them otherwise.)
I would be interested in knowing best practices in this case.
Do you pay an import duty on your Colombian cocaine? Sales tax in the purchaser's city? Do you get addresses of your customers? VAT in Europe?
Fascinating idea.
Audit. Bitcoins aren't special (Score:5, Informative)
Secondarily, someone can rat you out. Maybe ypu have a partner or employee helping you sell "Fuck Taxes" T-shirts. If things go south, the former partner or employee could alert them to the fact that you sold $xx,xxx worth of T-shirts and didn't report the income. (Tax fraud.) Maybe the employee rats you out when SHE gets audited, or maybe she's unable to hide the income from the bysiness when she's audited.
It's easier to just pay the taxes you owe.
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ummm... duh (Score:4, Informative)
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Capitol gains
I'm pretty certain the Republicans don't believe they exist.
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It's "capital" gains. ; )
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Good for bitcoin (Score:5, Insightful)
Re:Good for bitcoin (Score:4, Insightful)
They aren't legitimizing Bitcoins, the government is just reminding people that certain transactions create a tax liability - they don't care if the transactions are in dollars, Bitcoins, or jars of pickled hamster poop. The same rules apply to all three.
All normal - nothing to see here (Score:2)
The only newsworthy in this, is the fact that the authorities are looking into BitCoin transactions, thereby raising BitCoins legitimacy in the playingfield.
Pretty much every country on the planet taxes both capitol gains and bartering. In fact, one may wonder what took the authorities so long ...
- Jesper
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Nothing "took them so long" because nothing has changed. This is simply a press release explaining that everyone who thought things were different because it's bitcoins were wrong, and that the existing rules still apply.
And honestly, nobody should be even the slightest bit surprised. If you knew anything about taxes (which everyone who pays taxes should!) you'd know that barter transactions are taxable, and commodities transactions are taxable. Bitcoins obviously fall in to one or both of those categories,
Already paying bitcoin taxes... (Score:3, Interesting)
The summary (and TFA) is misleading. (Score:5, Insightful)
Bitcoin Mining Business (Score:3)
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Sure. And those costs would then be offsettable against your profits for the purposes of paying tax on the bitcoins mined. You have been declaring them as taxable income, right?
Well of course (Score:2)
No special laws needed for this. If you earn $1 you pay income tax on it in most countries I'm sure. The govt doesn't care what currency you earn in. And capital gains are still capital gains, and thus taxable income, again, no matter the currency.
I've not heard anyone talking up Bitcoin as a means to evade legitimate taxes.
This applies to Sweden, too (Score:5, Informative)
Legitimacy... (Score:2)
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Yes clearly Canadas population will be angry that tax evaders will be made to contribute to the resources of other people that they consume without paying.
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Bitcoin tax evasion. It's a commodity just like any other, and the CRA is going to treat it as such. Sorry, no villains here, move along.
Re: Okay (Score:3)
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That doesn't make sense. You are taxed on any gains when you sell shares of a company - does this mean that you should be able to pay your taxes with stocks?
No, this means you should be able to pay them with the equivalent of World of Warcraft loot though. I'm keeping all my actual wealth as diamonds buried out back in my Minecraft server. Ha! Try auditing that shit Tax man. You'll never get past the creepers and the redstone avalanches.
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LOL ... ahemm ... no?
All sort of things which are not accepted as payment are taxed. Things like financial bonds and potatoes for example - they are taxed in different ways, but not accepted as "payment" anywhere.
[Item eligeble for collecting taxes] != [valid currency for payment]
- Jesper
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Well you invested in some hardware to do the mining, and then got some return on investment, so what makes this different from for instance
buying a bakery, flour and various other things, and then selling bread, except of course that there is not much added work into the bitcoin mining opperation.
Why should it be tax free and other form of return on investment should be taxable ?
Now if you think that your government is not using its tax money wisely, you're free to try to elect somebody else, even try to ge
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I can't for the of me figure out what exactly the fuck I'm supposed to do when it's not converted into CAD, and have just been writing down the USD amount .
My friend has a Canadian business that gets some USD income that gets deposited to a USD account in a Canadian bank. That income is converted at the average exchange rate for the quarter. For individuals, I believe you just use the annual average (I don't have USD income, but am a dual US/Canadian citizen and have to file to the IRS, and use CRA's average rate in reverse to report my CAD income in USD).
See the CRA's web page [cra-arc.gc.ca] for more details.
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I can't imagine doing this for bitcoin where the volitility would fuck you over in a heartbeat. Sure I got paid 100$USD in bitcoin on thursday, but by friday it was worth 1$, so do I claim 100$USD income or do I claim 1$ when I convert it to CAD?
Well, luckily enough it has never suffered a 100 fold decrease in the span of a week, nor has it ever suffered a 100 fold decrease over any period of time at any point in it's history.
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