February 27, 2018 (Windy Hill Beach, South Carolina) — There has been “… a growing international movement in recent weeks to crack down on Bitcoin tax avoidance — most notably in the US”, according to The Australian newspaper. The article notes that “Four days ago, Coinbase, one of the world’s biggest cryptocurrency exchanges, announced to its client base that it had received a mass “summons” from the US Internal Revenue Service, for the account details of 13,000 investors. Coinbase revealed that the requested details had included ‘taxpayer ID’ numbers, as well as name, birthdate, address, and historical transaction records for ‘certain higher-transacting customers’.”
The main focus of the article was about Australia’s soon-to-be-implemented cryptocurrency tax regulations, which it described as an escalation of the Australia tax office’s “crusade against Bitcoin”: “Tax-dodging Bitcoin investors will be confronted by the full investigative powers of the Australia tax office (ATO), which has revealed it will use anti-money laundering legislation due to come into force next month as the basis for a longawaited blitz on cryptocurrencies. Under the legislation, the ATO will use compulsory 100-point identification checks for Bitcoin investors as part of its new arsenal, giving it the ability to roll out its data-matching techniques to take on the previously opaque cryptocurrency world. ATO deputy commissioner Will Day said the tax office would rely on “increased transparency” from the government’s antimoney laundering counterterrorism financing rules to tackle cryptocurrency tax cheats.”
One of the aspects of Australia’s tax policy seems much less a crusade against Bitcoin than the US treatment of using Bitcoin to buy stuff after it has appreciated in value. In Australia, “The ATO’s guidance states that there are no tax implications for Bitcoin in certain circumstances. ‘Where you use bitcoin to purchase goods or services for personal use or consumption, any capital gain or loss from disposal of the bitcoin will be disregarded (as a personal use asset) provided the cost of the bitcoin is $10,000 or less,’ it says.” Contrast that to the U.S., where Bitcoin is explicitly considered a commodity. If you buy a cup of coffee with Bitcoin after your Bitcoin has appreciated in value, then you owe the tax on the capital gain you made on that commodity. Requiring such a tax calculation on every currency-style use of any cryptocurrency is so onerous as to seem obviously unreasonable. Yet that’s the state of tax regs today in the U.S.