If you’re currently living in Canada and worried about the government imposing a new tax code for cryptocurrencies, Finance Minister Bill Morneau has good news to share. In his conversation with the media on the sidelines of the World Economic Forum in Davos, the minister assured that his government is not planning on imposing any changes to existing tax codes.
Morneau pointed out that he is more concerned about ensuring that the government doesn’t remain oblivious of “what’s going on underneath the market.”
So rather than deliberating on how tax codes can be recalibrated, the government is looking to ensure that the expanding crypto market doesn’t pose any threat to its economy. In particular, it wants to mitigate possible loopholes that could pave the way for unlawful activities such as terror funding and money laundering.
More Complicated than it Looks
In most circumstances, the Canadian government treats digital currencies on par with fiat currencies and commodities. Therefore, unlike in most other countries including the United States, cryptocurrencies such as bitcoin are essentially another source of legitimate income.
The decade-old tax policies in the country have no specific provision for digital currencies. For example, the current system treats bitcoin as a commodity and profits as either a capital or gain (with tax applied to 50 percent of the gain) or a fully taxable income. In the end, it all depends “on the facts and circumstances of the particular taxpayer,” according to Finance Department spokesman Jack Aubry, reports Bloomberg.
Compared to that, the US Internal Revenue Service deems bitcoin and altcoins as an asset or a capital gain, but taxes it as income in some instances nonetheless. Recently, President Donald Trump’s tax bill has also mitigated a previously gray-area by applying taxes when one crypto is exchanged for another.
Canada’s tax code has somewhat complicated business for those willing to legally submit their cryptocurrency transactions. As Laura Gheorghiu, a partner at law firm Gowling WLG puts it, the existing regulations are too little to have a meaningful impact, and people are virtually clueless as to how they should report crypto transactions.
Interestingly, Canada’s stand on cryptocurrencies stands in contrast with that of many global policymakers who are convinced that the time is ripe to undertake swift global action to reign in on digital currencies.
On a related note, the Philippines Securities and Exchange Commission on January 29, 2018, confirmed that it would soon introduce a new policy to regulate the crypto market. With this, the Philippines became the second country in the past couple of weeks to have announced the desire to embrace the rapidly evolving cryptocurrency market, albeit with added precautions.