The UK has exempted digital currency trading from value added tax (VAT). CoinJar relocates and cites the alleviation of Australia’s 10% Goods and Services Tax (GST) as the catalyst for change.This announcement coincides with CoinJar’s online wallet revamp. CoinJar offers services to manage online finances. Customers may link their bank account, purchase or sell bitcoins. The CoinJar wallet – CoinJars – feature multisig and two-factor authorization. New customers may initially deposit $1,000. This amount increases as more deposits are made, up to $10,000. In the last twelve months CoinJar has served over 37,000 customers and processed over $50m in USD transactions and over 285,000 Bitcoin have been sent between CoinJars – the digital wallets provided to users.
Also read: Finland Rules Bitcoin Services as VAT Exempt
While the Average Joe may have taken solace in the ATO’s legitimizing of digital currencies via taxation, it appears the cost may be too much. In fact, the price may be for nought. The ATO specifically states in their publication “Tax treatment of crypto-currencies in Australia – specifically bitcoin.” The ATO’s view is that Bitcoin is neither money nor a foreign currency. But when has the government let that get in the way of taxation? In this case, it seems, Australia’s overfed bureaucracy will be deprived of CoinJar’s future earnings. They appear to have laundered $5,000,000 in to government coffers before the Australian Bitcoin service was able to make its escape.
The HMRC outlines the following with respect to Bitcoin.
1. Mining is not an economic activity. Thus, mining is outside the scope of VAT
2. Mining income for services is not taxable
3. Not tax when Bitcoin is exchanged for other currencies
4. Charges for transactions related to Bitcoin are exempt from VAT
HMRC’s model puts that 10% GST haircut ($5m USD) back in CoinJar’s pocket.
The rules for free market business dictate
1. Satisfy your customers
2. Make enough money to satisfy more customers
The Australian Tax Office costs tax payers $2.9b to administrate. Though it would be warranted, the sixteen paragraph rant elicited from that frustrating fact is unnecessary. The onus is on those who claim legislation is positive to prove more value is created by the $2.9b in tax administration than leaving that money in the hands of people and business to fuel the economy.
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