Many nations have made news with how they are choosing to accept, or not accept, bitcoin into their national economies. Some have chosen to ban outright the currency while others see it as an opportunity for domestic economic growth & as a tax revenue stream for the nation-state. Sweden has recently instituted new regulations that at least show it is not going to be banned anytime soon. Or will it?
In the country of Sweden, how they tax your income can be done in three different ways, depending upon its category of origin. You can be taxed on income from the economic activity, or a hobby. Bitcoin, or any digital currency, mining operations do not fall under this income sector due to the relatively high cost of equipment and the low potential for potential for profit. If you become good at mining, it will fall under this income outline, as outlined by Sweden’s Tax Authority in this way:
“…..carries out the mining in a professional and cost-efficient manner over a longer period with appropriate equipment,” or if “the activity is expected to create a surplus as measured over the full financial calculation period” and “the computing capacity can be expected to generate more than 25 bitcoins a year (or the equivalent value in form of transactional fees or other virtual currency)…..”
Also read: Sweden and Norway to add Bitcoin VAT – Norway to implement Bitcoin tax
Bitcoin does not seem to be deemed as “capital”, so bitcoin will not be taxed as income derived from capital. It is rare that hobby activities generate a taxable income, and tax deductions are available up to five years in advance, so bitcoin mining in Sweden will commonly fall under the tax of income from employment. Employment is the default tax sector for anything that doesn’t easily fit into a tax of economic activity or tax on capital. So Sweden has set up some laws as a baseline, which is a start.
A problem with bitcoin comes in the form of a new ban against using bitcoin to buy or sell scrap metal or “waste products”. The ban dovetails with the ban of using cash to buy or sell scrap metal and other industries that is becoming popular throughout European governments. Cash is not very traceable, and bitcoin is not considered traceable (the block chain ledger of bitcoin transactions notwithstanding), so it will also be banned in Sweden under certain situations.
The bans on cash are questionable in effectiveness, at best, and only hurt the average consumer, or a small business, not a criminal. These certainly help build a “Police State,” where every transaction must be “traceable” and monitored, presumably under the guise of “fighting terrorism”, not that Sweden is a hotbed of terrorist activity. Similar cash bans are being tested in the United States as well. If that is the end goal or result, this ban may be indicative of a bigger problem in Europe than a person buying scrap metal in bitcoin.
What do you think of the Swedish tax code for miners and the new Bitcoin ban joining a new cash ban? Share above and comment below.