I read a really interesting post by @edicted the other day about tax in the crypto space, how complicated it can be and the suggestion of a 5 - 10% flat rate for tax on crypto. This has been topical for me as I have been looking at taking some profits and thus have to figure out the tax implications here in New Zealand. I like to think of myself as an honest person and so want to do taxes the right way.
Overly complicated for the lay person
Firstly, for tax purposes in New Zealand any crypto assets are deemed as property. That means every time you dispose of a currency - whether through trading, selling or purchasing good it is seen as a taxable event. Even for someone like me who has done only a small ammount of trades I need to go back and figure out the price I sold or traded for and keep a record of this. If you werent aware of this it could become quite a tedious process.
There is a document about taxing of airdrops which is 12 pages! long and comes with loads of assumptions and contradictions it seems. It is the same with hardforks and every other way of acquiring crypto. This is something I have always wondered about Hive/Steem - how will it be taxed? I have never put money in and so my purchase price is esentially 0... some say that the purchase price is the price of each Hive when it was issued to you. I cant imagine for tax purposes having to go through EVERY SINGLE transaction and working out the price - every curation reward, every post reward and dont get me started on any staking rewards - that would take days!
@edicted mentioned in their post (along with some comments) that it is so complicated that some people will just avoid taxes completely as they fear being put further under the microscope - I tend to agree with this! The idea of some type of universal tax for crypto therefore really appeals to me as someone who is a fairly basic user of crypto and doesnt understand all the technicalities.
Full transparency = big brother?
When it comes to a actually withdrawing crypto into FIAT it seems it is essentially impossible to do this without passing on all your details because of Know Your Customer (KYC) laws. This involves often verifying your identity with documents and also facial recognition. Easy Crypto in New Zealand has also said that they have been requested to pass on all customer details to the IRD (New Zealand tax department).
So it seems gone are the days of crypto being anonymous- correct me if I am wrong! Even LocalBitcoins now requires identity verification! It seems the only way to remain anonymous and sell crypto for FIAT is through some type of black market - does that even exist?
I know that tax is required to be paid on crypto and fair enough, tax keeps our economies going. That may change somehow in the future when crypto becomes more mainstream but it is what it is for now. I just dont like the idea of governments having full access to my crypto details especially when taxes are so confusing!
Seeking tax advice
Moving forward I will be looking to get some independent tax advice around my crypto and some clarification, especially as I want to start doing some more trading.
How is the crypto tax situation in your country? I would love to hear others experiences and tips around tax!
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