2nd February 2019
Cryptocurrency taxation – Take 2
I had written this around 18 months ago:Â How governments can benefit by imposing a range of taxes on cryptocurrency
I’ve completely changed my mind regarding capital gains tax on the increase in the value of cryptos.
Competitive neutrality requires that the government NOT tax the increase in value of cryptocurrency. If it were to do so, it would then need to allow us to debit as a capital loss the annual reduction in value in fiat currency from our income tax returns.
If cryptocurrency is an “asset” then fiat currency is a loss making “investment”.
If cryptocurrency has the characteristic that it appreciates in value over time, fiat currency has the characteristic that it falls in value over time. The mere fact that private currency appreciates while fiat depreciates doesn’t mean that one can be taxed for capital gains. Both need to be treated exactly the same. If crypto is taxed for gains, the fiat losses must be charged towards capital loss