back to article And lo! Crypto-coins came unto the holy land. And the wise decreed they must all be taxed

The idea that Bitcoin and its ilk create uncontrollable and un-taxable instruments no government can control has been dealt a blow in Israel, where the local Tax Authority has ruled cryptocurrencies are boring old property. In a circular distributed by the authority dated February 19, the organisation said cryptocurrencies can …

  1. Marketing Hack Silver badge
    Angel

    To update scripture for our modern age...

    It is easier to pass a camel through The Eye of the Needle than it is for Bitcoin to enter the Kingdom of Heaven?

    1. Mark 85 Silver badge

      Re: To update scripture for our modern age...

      Let's add a bit more: Romans 13:1 "Let every person be in subjection to the governing authorities." and Matthew 22:21 Jesus said "Render to Caesar the things that are Caesar's;

      Looks like the usual pay up citizen.

      1. BebopWeBop Silver badge
        Trollface

        Re: To update scripture for our modern age...

        Good luck to the Israelis, I fear though that just making a law won't guarantee compliance (for some reason?)

        1. gnasher729 Silver badge

          Re: To update scripture for our modern age...

          Non-compliance with tax laws can come at a significant cost. And since crypto currencies are highly speculative, If you make it big and turn your gains into cash, the authorities in some countries don't care how you made the cash, they just care that you have it, and that you didn't declare any corresponding income, and there you go for tax evasion.

    2. Anonymous Coward
      Anonymous Coward

      Re: To update scripture for our modern age...

      It is easier to pass a camel through The Eye of the Needle than it is for Bitcoin to enter the Kingdom of Heaven?

      Being a pun lover, this is my favourite Bible verse, because in the original language it was a pun. Turns out that the words for "camel" and "thread" sound very similar to each other in Aramaic. Who knew?

      So there you have it: Jesus went round cracking puns. I love it. :-D

      1. Julian Bradfield

        Re: To update scripture for our modern age...

        Rope rather than thread - threads *do* normally pass through needles! Although everywhere else it appears, the Aramaic word gml, when it doesn't mean camel, means (roof-)beam. The idea that it means rope goes back to Syriac lexicographers, but why, nobody seems to know. [Thanks to the Comprehensive Aramaic Lexicon!]

  2. This post has been deleted by a moderator

  3. Andy Tunnah

    So how's this gonna work ?

    At what price do you pay tax ? When you bought them or when you sold them ? If the former, how will they stop people from saying "oh these ? I traded 6000 for a can of Coke years ago!". Or do people pay it when they sell them, which will make trading them a ballache

    1. Def Silver badge

      Re: So how's this gonna work ?

      As with most capital gains taxes, you pay tax on your profit. I.e., when you sell.

      Actual taxable income will be calculated once a year, as with most other things. So trading won't become any more or less complicated than it is today. You just need to keep records. Or a separate bank account where you can just report the difference in balance each year.

      1. Anonymous Coward
        Anonymous Coward

        Re: So how's this gonna work ?

        "As with most capital gains taxes, you pay tax on your profit."

        I suspect that the level of a "profit" is often illusory when inflation is factored in.

        It is like the annual 40% tax on the interest on my savings. Yet the gross interest is at least 1% less than the rate of inflation. So the tax isn't on an actual "gain" - but just on the practice of saving for a rainy day rather than spending everything.

        .

        1. Spudley

          Re: So how's this gonna work ?

          It is like the annual 40% tax on the interest on my savings. Yet the gross interest is at least 1% less than the rate of inflation. So the tax isn't on an actual "gain" - but just on the practice of saving for a rainy day rather than spending everything.

          There are tax-free savings options, you know. Assuming you're in the UK, you can have an ISA which allows you to save tax-free up to a certain value.

          If you've got enough savings in a taxable savings account for the tax to be noticeable then you've got your money in the wrong kind of account. (and if you've got enough money to make the right kind of account not an option, then arguably you've got your money in the wrong tax haven country).

          1. Cuddles Silver badge

            Re: So how's this gonna work ?

            "If you've got enough savings in a taxable savings account for the tax to be noticeable then you've got your money in the wrong kind of account. (and if you've got enough money to make the right kind of account not an option, then arguably you've got your money in the wrong tax haven country)."

            If you have enough money that you need to worry about taxes on the interest, you have enough money that you don't need to worry about taxes on the interest.

          2. Anonymous Coward
            Anonymous Coward

            Re: So how's this gonna work ?

            "There are tax-free savings options, you know. "

            Which have a relatively low cap - and an interest rate below inflation. The concept of "life savings" may be unfashionable - but old age particularly is likely to bring many reasons for needing capital in hand.

            1. Cuddles Silver badge

              Re: So how's this gonna work ?

              "Which have a relatively low cap"

              Perhaps your information is a bit out of date? When first introduced, ISAs had a limit of something like £3000 per year. Which is more than most people manage to save, but admittedly not a huge amount if planning for a long retirement. That cap has since been raised significantly, first to £15000, and now to £20k per year, with no limit on the total amount that can be held. You have to be doing pretty damn well to consider putting away close to the median national salary every year insufficient.

              In addition to that, a couple of years ago a personal saving allowance was introduced, which means that all savings are tax free up to a certain amount of interest earned (lower cap for higher tax brackets). Even without worrying about ISAs, you can save a fairly decent amount before you need to start worrying about taxes.

              "an interest rate below inflation"

              Inflation is currently 3-4%, depending on which measure you look at. The BoE base rate is 0.5%, and until recently was only 0.25%. ISAs are hardly unique in having an interest rate below inflation, that applies to just about any savings account you can get.

        2. Omgwtfbbqtime Silver badge

          Re: So how's this gonna work ?

          "I suspect that the level of a "profit" is often illusory when inflation is factored in."

          Sorry, that is incorrect. The profit is recognised when you convert the intangible into cash and bring it back "onshore". Nothing illusory about it - there is no Schrödinger's profit, you either made a profit or a loss (or broke even but that's less likely).

          Same as with shares, it doesn't matter if you have £25,000 worth of shares you bought for £10, you won't get taxed on it until you sell them (then under UK law you would get your capital gains tax allowance or if you are a limited company you can roll the proceeds into another investment (i.e. buy more shares)).

          1. Anonymous Coward
            Anonymous Coward

            Re: So how's this gonna work ?

            "[...] you either made a profit or a loss [...]"

            The profit is nominal. If you buy something for £100 and then later sell it for £104 you have made a nominal profit of £4. If the rate of inflation in that time has been 4% then you have made no actual profit on the investment. If the tax is 50% of that nominal profit - then you have made a loss of £2 in buying power.

            A real profit is when you sell something for a higher price than the original purchasing power of the original price.

            In the Weimar Republic hyperinflation meant all purchasable things leapt in nominal price by the day - their relative value remained constant. That's why people turned their currency into assets as soon as possible - hanging on to currency was a mistake as its buying power dropped by the hour.

            1. amanfromMars 1 Silver badge

              See how it works .... against pretty much everything ?

              In the Weimar Republic hyperinflation meant all purchasable things leapt in nominal price by the day - their relative value remained constant. That's why people turned their currency into assets as soon as possible - hanging on to currency was a mistake as its buying power dropped by the hour. .... Anonymous Coward

              In decades/centuries of government mandated inflation is the price of everything bound to hyperinflated and eventually inevitably unaffordable relative to true cost and/or value.

              It is why everything is so expensive nowadays whenever compared to the true cost of services provided yesteryear ......and the reason why All Accumulated Assets rapidly decline into Tenured Liabilities.

          2. Pali Gap

            Re: So how's this gonna work ?

            This makes perfect sense to me. But... I get the impression that this view is not a done-deal yet. There are I believe some tax authorities that are looking at trying to get their capital gains penny-worth on the crypto-to-crypto trade. It strikes me that would be a nightmare to account for and also to audit. So let's hope our dear HMRC don't try going down that route. After all "tax does not have to be taxing" (as they used to say).

    2. MonkeyCee Silver badge

      Re: So how's this gonna work ?

      "At what price do you pay tax ?"

      Don't know what Israel will do, but in the Netherlands they've been classified as an asset for 2-3 years. In the Dutch tax system, that means you pay your marginal income tax rate over 4% of the current market value of the asset. So if you're marginal rate is 30%, you pay 1.2% of the current market price. If you sell them, then you pay that 1.2% over the whole sale price. So for NL, current market price.

      I don't know how the tax on assets works in Israel, but I'm presuming it's a capital gains system(rather than wealth tax) based on the article. Therefore it's probably 20-25% of the difference between the price you paid and the price you sold for.

      "Or do people pay it when they sell them, which will make trading them a ballache"

      Well, you acquire the tax liability when you sell them, you can probably pay the taxes at the appropriate time.

      Can't see why it's an issue if you're trading. You make profits, you pay tax on them. Same as if you where trading fiat, oil or gold.

      If your trading meets certain criteria, then you count as a financial institution, and thus you need to run it like a business.

      1. MonkeyCee Silver badge

        Re: So how's this gonna work ?

        Sorry, important disclaimer: I am not a lawyer, tax adviser or financial adviser. Please consult a profesional if swelling persists :)

        "In the Dutch tax system, that means you pay your marginal income tax rate over 4% of the current market value of the asset. So if you're marginal rate is 30%, you pay 1.2% of the current market price."

        This is a simplification, the actual calculation is more fiddly, as it changes based on your marginal rate as well as other factors. But it will get you in the ball park of what you pay for an asset tax.

      2. The Dogs Meevonks

        Re: So how's this gonna work ?

        "I don't know how the tax on assets works in Israel, but I'm presuming it's a capital gains system(rather than wealth tax) based on the article. Therefore it's probably 20-25% of the difference between the price you paid and the price you sold for."

        That throws up an interesting conundrum then... because of you 'mine' them, you've not actually paid for them in anything other than time/energy/hardware. So when you sell them.. can you offset the original/susequent time/energy/hardware costs against the sale price and then only pay on the profit.

        As it's increasingly hard for anyone to mine new bitcoins, and they are close to reaching the maximum number of bitcoins (so no more can be produced)... It's almost impossible for any average person to get in on the act... and I wish I hadn't sold my few several years ago before the bubble grew so large at the end of last year... Instead of paying of my car... it would have paid of my mortgage... But at least it was untaxable at the time and I made a decent enough profit as I'd not bothered mining them for a couple of years anyway.

        Makes me wish I'd mined more when I had the chance almost 8yrs ago instead of it being an experiment that cost me too much in extra energy use than I felt wasn't worth the returns (at that time).

  4. Anonymous Coward
    Anonymous Coward

    At last, a government which recognises that bitcoin is a collectible item, like art or butterflies, and not a useful instrument of trade.

    This may spread, organised crime syndicates governments are quick to learn from each other how to extract resources from honest people.

    1. MonkeyCee Silver badge

      Currencies versus assets

      "At last, a government which recognises that bitcoin is a collectible item, like art or butterflies, and not a useful instrument of trade."

      Firstly, quite a few governments have recognised it as an asset. So nothing new.

      Secondly, it's an asset. Not a collectible, or a novelty, or more importantly a currency. Because assets and currency are treated differently for tax purposes.

      So just be to be clear, assets include things like precious metals, land, property, royalty rights etc. Art, if held for investment purposes is, otherwise depends on your jurisdiction/accountant/lawyer. In general an asset can be valued, and thus taxed.

      In general, collectible is used to describe something which is only an asset to a sub-section of the population. However, most people would be able to sell crypto (or land, gold etc) too a much wider market, hence why asset rather than collectible.

      1. Anonymous Coward
        Anonymous Coward

        Re: Currencies versus assets

        "In general, collectible is used to describe something which is only an asset to a sub-section of the population."

        A friend was the executor for a person's estate in England. The distantly related inheritor lived in South America - but then came to England for a visit as they apparently presumed they would otherwise be ripped off.

        When they left it was noticed that several pieces of ceramic had gone with them. Fair enough - effectively their property - and their eyes had widened when told the valued worth in the UK that had already been declared to HMRC for the inheritance tax.

        My friend was quietly amused that they would be unlikely to find a similarly profitable market for them in South America.

      2. Anonymous Coward
        Anonymous Coward

        Re: Currencies versus assets

        Collectibles are often assets - just ask any divorce lawyer. So the distinction between assets and collectibles is pretty artificial. Just think of peoples coin and stamp collections - or even collections of obscura such as vintage rifles, coke bottles &c. These are all evaluated and counted as assets in divorce proceedings around the world.

  5. Anonymous Coward
    Anonymous Coward

    Have cake, eat cake?

    If it's not a currency then why are businesses trading in it classified as financial institutions?

    1. Anonymous Coward
      Anonymous Coward

      Re: Have cake, eat cake?

      Perhaps for the same reason that businesses trading in shares are classified as financial institutions despite shares not being a currency?

  6. Mage Silver badge
    Coat

    What is it?

    Something can't be a currency AND an investment.

    At best cryptocurrencies are investments. At worst they are ponzi schemes. The Blockchain isn't scaleable. The cost of creating extra coins is too high and dependant on electricity & computer costs, not economic indicators. The time and cost per transaction is too high.

    So not a currency. It's a possession, even though it's not physical.

    Seems like a reasonable decision.

    1. imanidiot Silver badge

      Re: What is it?

      The blockchain principle IS scalable. The BITCOIN block chain specifically isn't scalable and takes way too much computing power. Please stop conflating the 2. The blockchain idea is actually a good one. Bitcoin is likely going to crash and burn, causing a lot of people to lose a lot of money. And I won't feel sorry for them.

    2. MrAnonCoward43

      Re: What is it?

      What is the cost of mining minerals such as gold or extracting oil? Or even the cost to create an iPhone or Android phone? Or the computers that we all love, let alone powering the racks and racks of cloud servers. The arguments used against mining bitcoin are ignored for practically every other thing in our society.

      And how fungible are precious metals across the globe? Can you easily make payments on a huge number of websites for anything you wish to buy with either Gold, Silver, Oil, a few cars or a House? Any argument for classing Bitcoin as currency should be straightforward if viewed with no prejudices and ignoring its astronomic rise in value.

      Granted there are a lot of crypto coins (almost all?) that are ponzi schemes but I don't believe in any way that Bitcoin is. It's a very cleverly thought out solution to create a hardened digital currency and has actually scaled impressively well to date with teething problems that you'll be naive to suggest hasn't also occurred with Swift or aany other 'official' non cash based method.

      If you have any idea just how the s*** show of our banking system created the crash of 2008 and are continuing to create a debt bubble of epic proportions today, with consequences potentially worse than anything we saw before and how the regualtors were powerless to do anything then and as powerless now even after 2008. I think an interest in a decentralized currency like Bitcoin and SOME of the off shoots are in the best interest of much of the population.

      Add to that the scary precedence of India's push for a cashless society and it becomes even more important in my eyes.

      1. Anonymous Coward
        Anonymous Coward

        Re: What is it?

        This seems to misunderstand basic economics. Just because you put a lot of effort and resources obtaining something, it does mean it has the same value for me. So you may spend $US1000 to mine a cryptocurrency coin, but this does not mean it actually has a value of $US1000 for anyone else.

        The problem with cryptocurrency is that it is trying to replace other forms of currency which are better understood and have a much lower production threshold. It also has no inherent value - you can not use it to make electronic circuits, eat it or live in it. Or even put it somewhere to look at.

        1. MrAnonCoward43

          Re: What is it?

          In Bitcoin's case, its value is its scarcity which is the value of Gold and arguably the false value of Diamonds. Its value is also its use to easily transfer from one individual or corporation to another whilst being securable. It has nothing to do with the cost spent mining, that's the other way round, if a Bitcoin was valued at $10 (if we need to always go back and think in $ which is probably America's greatest success), the amount people will be willing to spend mining would be drastically reduced.

          I guess you can't make electronic circuits, eat or live in dollars (other currencies are available) and since they aren't backed by Gold any more then what is it that you are keeping in your bank, wallet or spending?

    3. LucreLout Silver badge
      Thumb Up

      Re: What is it?

      Something can't be a currency AND an investment.

      Krugerrand's.

      You get the currency value of a rand, and the commodity value of the gold. Granted, the commodity value is likely to always outweight the currency part, but it's the only exception to what you've said that I can think of.

    4. SloppyJesse

      Re: What is it?

      "The Blockchain Bitcoin isn't scaleable."

      FTFY

      "The cost of creating extra coins is too high and dependant on electricity & computer costs, not economic indicators."

      From the systems perspective the mining is all about maintaining the integrity of the transactions rather than generating new coin.

      If anything the block rewards didn't drop quickly enough as the system took off driving the miners 'arms race' to the crazy level we see these days.

  7. amanfromMars 1 Silver badge

    Re: This post has been deleted by a moderator

    Deleted because of what offence, RC/El Reg? It is not as if there was a specific sensitive target discussed in the post.

    Is its overarching reach into all segments of its simple control the problem to not be highlighted?

    1. Andy Tunnah

      Re: This post has been deleted by a moderator

      I reported your disgusting post, for calling Jews sub-prime people, and just being an abhorrent shit when talking about Israel.

      Your comment was the first register post which made me legitimately angry. Maybe try venting your views in public, to real people, see how well that goes. But you won't, because you're a racist coward.

      1. amanfromMars 1 Silver badge

        Re: This post has been deleted by a moderator @ Andy Tunnah

        Hmmm? Dear, oh dear, oh dear.

        I would be more than just pleased for El Reg to share the post you are ranting about, Andy Tunnah, in order to prove your opinion somewhat demented and unwarranted.

        Hopefully, normally, are there meds available to stabilise those sorts of paranoid schizophrenic conditions.

        The post is freely available to read elsewhere though, and most here on El Reg will know exactly where to look to find it.

  8. Justice
    Meh

    How will this 'tax' actually be applied?

    Irrespective of what people "think" BitCoin either is, or isn't. Exactly how are they going to levy a tax against a cryptocurrency? Sure, you can apply the tax if you've purchased it from an Israel-based exchange. Considering you can buy it anonymously pretty much anywhere in the world, they would actually have to prove you have it first. I wasn't aware that Mossad could track a BitCoin purchase back to a citizens wallet, but you learn something new every day.

    1. imanidiot Silver badge

      Re: How will this 'tax' actually be applied?

      Bitcoin isn't all that anonymous actually. If they can link a citizen to a wallet (through payment to an exchange using "traditional" currency) then they have the entire and complete transaction history for that wallet right there in the block chain. They'll be able to tell exactly how much bitcoin that person has in his wallet and what transactions were made to and from it.

    2. Anonymous Coward
      Anonymous Coward

      Re: How will this 'tax' actually be applied?

      In general it's quite easy to cheat on CGT. You can buy a second-hand commemorative mug for cash in a charity shop and then sell it again for slightly more cash online and then evilly fail to declare the capital gains when you do your tax return at the end of the year, though arguably it's more fun to evilly waste the tax official's time by declaring such things in great detail with copies of all the documentation and receipts (of course you have to also have some serious capital gains in the same year to get you over the annual allowance).

      1. Omgwtfbbqtime Silver badge

        Re: How will this 'tax' actually be applied?

        "(of course you have to also have some serious capital gains in the same year to get you over the annual allowance)."

        ... and seriously no life if you manage to exceed £11,000 gains in second hand mugs.

    3. Spudley

      Re: How will this 'tax' actually be applied?

      Irrespective of what people "think" BitCoin either is, or isn't. Exactly how are they going to levy a tax against a cryptocurrency?

      It's a simple capital gains tax, so it'll be done the same way they apply tax to many other things -- you complete your tax return and state that you have made X amount of money from them this year. Failure to declare it would be tax evasion, just the same as it would be for anything else. And the likelihood of them catching you is much the same too; if they suspect you, they'll audit you and you'll be in for a world of hurt.

    4. I ain't Spartacus Gold badge

      Re: How will this 'tax' actually be applied?

      Justice,

      If you're trading using bitcoin, selling stuff online for it and buying other stuff. then you're probably un-catchable. But if you've bought it online via an exchange using your bank or credit card, then you've left records. And should you get audited by the tax man, that will be glaringly obvious. Otherwise you can get away with it as easily as any other transaction that attracts CGT.

    5. LucreLout Silver badge

      Re: How will this 'tax' actually be applied?

      Sure, you can apply the tax if you've purchased it from an Israel-based exchange. Considering you can buy it anonymously pretty much anywhere in the world, they would actually have to prove you have it first.

      Not dissimilar to physical gold or gems then. Or masterpiece paintings. I'll not pretend to have indepth knowledge of the processes of detecting the fraud that nondeclarationw ould almost certainly be, but you can google the penalties for yourself if you'd like.

  9. Anonymous Coward
    Anonymous Coward

    a BTC is just a number, admittedly woven into a tapestry of other numbers, worth intrinsically exactly the same as "7" or "09F911029D74E35BD84156C5635688C," (oops, which is one of those pesky 'illegal' crypto numbers)

    W.W.States are still trying to understand if BTC is a big NSA 'catch em' all' ploy or equally a KGB ploy. Poland was discovered subverting BTC in social media PSYOPS recently, allegedly (their chief financial regulator, not FSA but KNF, Komisja Nadzoru Finansowego has got sticky fingers?) Many UK banks will quietly drop your current account if they suspect serious BTC play. [KYC. No, I'm not and never have been an American!]

    in Italy, for other valuable items such as a house, the state allows you exactly one, without paying (excessive) CGT - whilst they try and collect as much as is reasonably possible if you go above a principal dwelling. In France, due to their complicated wealth & inheritance taxes, many sane people form a small company to buy their home, can even be an offshore Société Civile Immobilière, making it a legal-ish tax dodge.

    Perhaps, numbers shouldnt be taxed, special numbers shouldnt be illegal or taxed, or perhaps we could have just a 'house' equivalent, but perhaps one should buy it through an offshore shell, just to be sure!

    Now if *only* there was anything such as real privacy or pseudonymity in today's society, then that might be a goer, as it is . . .

    I have no monero, honey

  10. Toilet Duk

    Israel fears a currency outside its control? Ah yes, but of course.

    1. MrRimmerSIR!

      @Toilet Duk

      Just like any other state. Care to explain the subtext of your sly comment?

  11. Felonmarmer

    Depreciation

    So if the price goes down can you claim tax relief?

POST COMMENT House rules

Not a member of The Register? Create a new account here.

  • Enter your comment

  • Add an icon

Anonymous cowards cannot choose their icon

Biting the hand that feeds IT © 1998–2019