Finland tax authorities matching Bitcoin transactions and bank transfers
metropolitan.fi
metropolitan.fi
If you had bought 1 BTC at $1000, another at $14000, and sold both at $3000 you would owe $600 in taxes even though you lost $9000.
You can imagine how people feel about paying these taxes, when they are so obviously flawed and unjust. Some people may owe hundreds of thousands in taxes even if they made no actual profit.
These crypto tax articles become less and less relevant in the coming tax year as people are going to be filing losses, not gains. I expect headlines like “How to make sure you add up your crypto losses to the full amount”
I'm no expert, but from what I understand, you can't deduct losses from regular currency deposits, either.
Here is a decision from the Supreme Administrative Court in a case where someone had converted 460 000 EUR to USD and later converted them back to EUR with a loss of 30 000 EUR and wanted to deduct the loss from their capital gains tax (Finnish): http://www.kho.fi/fi/index/paatoksia/vuosikirjapaatokset/vuo...
It was denied as there is no clause in the Income Tax Act allowing such a deduction.
Tax Administration guidance (Finnish): https://www.vero.fi/syventavat-vero-ohjeet/ohje-hakusivu/489...
Income Tax Act (Finnish): https://www.finlex.fi/fi/laki/ajantasa/1992/1992153
Whether you made a profit or not doesn't have to be a consideration as far as tax goes. You pay a percentage of the capital amount when you choose to liquidate your asset. It's effectively a wealth tax. There are lots of taxes around the world that work this way. It sucks if you've made a loss, but that's not really the government's problem.
Yes, you have to pay taxes on the gains when you liquidate but you can offset that with any losses too
It's not exactly a wealth tax, but it's also hard to consider a capital gains tax because you can't deduct losses. Treating other investment products this way would probably have horrific results, because it heavily disincentivizes taking on any risk.
If, on the other hand, you put down your money in bitcoin or at the online blackjack tables then you're gambling, not investing. Win or lose, your gamble creates zero domestic growth. Why should any government incentivize that?
Well maybe they shouldn't, but it's shitty to apply this kind of policy retroactively. (I don't know when they actually announced the fact that you can't deduct losses.)
"Generally, the Finnish legal system does not permit ex post facto laws"
> In civil matters, such as taxation, ex post facto laws may be made in some circumstances.
Instead, investing in stocks and cryptocurrencies benefit the economy in very similar ways. In both cases, companies hold on to these assets, and can sell them to raise money for doing projects, buying companies, hiring employees, etc.
But government's probably shouldn't be incentivizing or de-incentivizing any investing. Saving money is sometimes the best thing to do with it.
No, it's a 30-34% wealth tax! (Or better, transaction tax.)
Perhaps the government shouldn't incentivize their residents to make suboptimal investments.
"It's not really the government's problem if they impoverish their citizens and hurt their economy."
So in other words, if you buy Bitcoin for 1000 euros and sell it at 500, you have made efficiently 500 euros in "income." With the notion of the parent post, this makes trading unviable, because if you exceed 12K€ in income a year (in any form, be that employment etc.), you have to start paying back your living aids.
If we "can't afford" to offer a program to all qualifying people regardless of income that means we don't have the political will to make the program happen and should get rid of it.
For so many reasons. Chief among them, maybe, people are generally reluctant to support governments engaged in transfers of resources from themselves to billionaires.
> I'm not sure whether anyone would complain
Maybe the billionaires would complain? Or is their sacrifice necessary for your greater good?
I would also complain. It's unethical. And, we don't need yet another tax on the most value-bearing (and typically philanthropic) people in society, to be collected by the most violent organization in history, to dole out food stamps and other benefits in the most inefficient way possible.
If we assume for a moment that this is true, then why would this state of affairs be okay? Society cannot run on the philanthopy of billionaires.
Further, there's not very much evidence that this is actually true. In terms of largest individual contributions, yes, many billionaires make impressive donations and pay for valuable things, but that's the all-too-common fallacy of looking at absolute figures when it's relative figures that matter.
Ignoring that a lot of charity and philantropic work wouldn't even be _necessary_ in a world with less extreme wealth inequality, the idea that non-billionaires aren't proportionally charitable doesn't really hold much water.
Well, it doesn't run on taxes either. Successful societies runs on voluntary exchange.
Given how much of the taxes are paid by the ultra wealthy (most of them), how philanthropic they are (very), and how wasteful the government is (impressively), why would you assume that voluntary philanthropy cannot replace involuntary, state-managed welfare?
Everybody just submitting to the hope that billionaires will take pity on them might even work with a sufficiently benevolent overlord, but you get the same problem as so many alternatives to democracy have: If you concentrate all the power in one person, or a small set of people, it's a breeding ground for corruption. Even if your set of people is entirely benevolent, over time as that set of people change it becomes near certain eventually you'll get people who aren't benevolent, and then everyone is fucked.
Democracy, and taxation-based systems of governmental funding, are less efficient than the best possible case elsewhere, but are primarily valuable for massively reducing the risk and dangers of bad actors. Concentrating power among an elite class has historically always been a fantastic way of increasing the risk and dangers of bad actors instead.
Presuming you're talking about value-bearing in terms of job creation, this statement is tautological. In a society where a handful of people own the vast majority of the wealth, of course they're also the most value-bearing and philanthropic: they're the only ones who can be!
Then it becomes two questions: is the cost of enforcing the thresholds greater than the cost of just giving it to everyone, and can the public be made to understand this rational tradeoff.
I agree you can get some efficiency gains from eliminating thresholds.
Back of the napkin, though, you're talking about an implementation cost delta (ie, only threshold determination costs) that swamps the benefit-and all other implementation costs-by several multiples, maybe an order of magnitude, depending on the size of the targeted group.
But ok... Although it's not my intuition that threshold costs would significantly outstrip the savings from targeting, it's just a factual question. For the sake of argument, say that happens in a case.
Then yeah, that's a great candidate for universality.
If those are the cases you want to focus on... Are we then agreeing that universality is preferable only in those cases where it pays for itself?
Because that is totally consistent with my position. If you only want universality when it's cheaper then we already agree and can just defer to the CBO.
No, I am not trying to argue it will be cheaper. It will likely be more expensive and/or worse for everyone involved but I think it will bring us all together. I think it is worth the extra cost or degraded service.
So say you put money into an index fund, but something unexpected happens. If you need to liquidate your savings while being a student, the government will slap your fingers for trying to think long-term.
Either way, I admit this only affects the poor -- if you are a bit better off you should be able to afford to incorporate an LLC for 2500€ (half a year rent where I live). By making yourself the sole owner of the company, you can get around all these problems, as juridically the LLC is a separate entity from you doing all the trading. This kind of setting is legal, but practically off limits for many.
Government aid for students is also practically unconditional in Finland and usually covers your rent and then some, basically making your own life instantly ramen profitable. This sounds utopistic to many, and it certainly is, but I think so much potential is lost by the government discouraging young people to take risks on their own.
Not really much of a concern, as you would have to be wealthy enough to have spare money to put into an index fund while retaining enough liquid assets to cover your living expenses.
By making yourself the sole owner of the company, you can get around all these problems, as juridically the LLC is a separate entity from you doing all the trading. This kind of setting is legal, but practically off limits for many.
Not even remotely true. SMLLCs are disregarded entities for tax purposes, so their transactions are taxed directly to their owners. And legally, the concept of veil-piercing applies to SMLLCs generally, and especially to undercapitalized SMLLCs (meaning any LLC without sufficient independent assets to pay off all liabilities against it).
This is true in Finland, which has fewer forms of corporations than the US for example. The corporation can decide to not pay out all of its earnings to its sole shareholder, but in such situation, the company needs to pay an additional 20% tax for the retained amount of money, for conducting a successful year of operations. This is rarely a good idea, but in this case where the owner is subject to constraints of personal income imposed by the government, it might make sense.
But regular currency trading losses are not deductible either (per KHO:2015:178), so I guess crypto is not really unfairly discriminated against in this case.
Either way, it would make sense to tax cryptocurrency trading by using the same tax code as other kinds of overseas online gambling.
The tax authorities interpreted cryptocurrencies not as a currency or as a financial asset, but as "trade agreements", which allowed them to take this stance. I'm not sure why they would skew the taxation so far against taxpayers' favor.
Kind of like lottery winnings are taxed where they are taxed. Or is there a country that not only taxes lottery wins but also makes lottery tickets a deductible expense?
My personal experience is that most Finns whine about taxes, yet they also complain if healthcare and infrastructure and education isn't perfect and completely free. I feel that as a smart responsible adult it's better to be happy that I have income to pay taxes for, and be grateful of everything the taxes pay for. If I didn't like the way things are done in Finland, I'm free to move elsewhere (or take up politics, get elected and change everything the way I like it).
Which, tbh, seems perfectly fine to me.
Citation needed.
https://translate.google.com/translate?sl=fi&tl=en&js=y&prev... (from https://www.vero.fi/syventavat-vero-ohjeet/ohje-hakusivu/484... )
"Example 1: One person has in the past bought 1,000 bitcoins for 500 euros, ie one Bitcoin cost EUR 0.5. He later bought more 500 bitcoins for 500 euros, which means that one euro received one bitcoin at that time. After purchasing, he holds 1 500 bitcoins.
He sells 1 200 bitcoin at a time when one Bitcoin costs 1.5 euros. The sale of virtual currency realizes the taxation of the change in value, giving him a taxable income of EUR 1 800 - (EUR 500 + EUR 200) = 1,100 EUR. After the transaction, a person still has 300 bitcoins purchased for 300 euros. "
"Example 2: One person has in the past bought 1000 bitcoins, with one euro receiving two bitcoins. One Bitcoin cost EUR 0.5. After acquiring, he has owned 2,000 bitcoins.
He buys goods at a total of 1,000 bitcoins at a time when bitcoins cost ten euros per piece. He therefore purchases goods worth a total of EUR 10,000.
The acquisition of goods realizes the taxation of the change in the value of a virtual currency, giving him taxable income in this case as a capital income of EUR 10,000 - EUR 500 = EUR 9,500.
After purchasing the shop, there were still 1,000 bitcoins remaining for the purchase price of 500 euros. "
etc. There's another example which shows making a loss is not a taxable event.
What worries me more is that this is an "instruction", but the tax authorities are not bound by instructions. And they are known to do as they want, even flouting European law (particularly when it is to do with car taxes, although not so much related to bitcoins.).
You can lobby to have tax treatment of cryptocurrency changed, of course, but you are still bound by the law(s) under which you are tax resident. And they all have weird corners.
Additionally, Example 3 is given to show how an actual loss of 500€ is not considered a loss in taxation and is not deductible.
The Finnish tax authorities use a First In First Out principle in crypto taxation. So if you buy 1 BTC for 10€, and later 1 BTC for 1000€, and later sell the 2 BTC for 20€, you have to pay taxes on the 10€ "profit". Even though you lost 990€ on the second BTC.
Yep, sounds like taxes. You can either pay them, or see how a judge responds when you refuse and call them flawed and unjust.
Here comes the new financial system, same as the old one, with added bugs.
The worst part isn't that you pay 1% on transactions where you lost money. The worst part is that you are supposed to fill and send the tax form for each individual transaction. Now imagine automated trading, making hundreds of transactions per day - I suppose the cost of paper for printing those tax forms would outweigh any potential gains.
Honestly, this doesn't bother me.
Why not just do a 10% wealth tax on all of a person's assets on top of their income tax
With a digital transaction record keeping is less burdensome, too, so it’s more likely that if a substantial number of people started using cryptocurrencies the tax authorities would simply require reporting both sides of the transaction so they could confirm that the other party is reporting accurately as well.
If you're making a lot of unreported income, there are ways for the tax authorities to know, in the same way they do with income from illegal activities that you're not reporting or large amounts of cash payments you're hiding, or just unreported income in general.
They don't need to match your identity to your Monero addresses. If you're using your Monero in any way that interacts with the real world they're going to ask where the money in your accounts came from, where the money for these assets you've been buying but don't seem to have a way to afford came from, where the money for these investments you've been making came from...
Even if you can somehow obtain things without converting out of the cryptocurrency, you're still acquiring assets, investments, and the like that require registration and disclosure, which will then lead to the same questions. Paying your monthly rent directly in cryptocurrency? If anyone audits or investigates you're going to have to explain how you're affording it when your reported income doesn't seem to support it.
And the sellers/landlords/etc will themselves have records, so you better hope they're also completely committed to protecting you if they themselves get audited or investigated.
The whole idea of income tax is flawed.
Define richer (poorer) as having more (less) wealth: unit is say dollars.
Define net income as the time-derivative of wealth: unit is dollars per day.
Now conflate income and wealth in school. Justify taxing income as if it was redistribution from rich to poor, while it is in fact redistribution from high incomme to low income: i.e. a rich person with substantial capital, who has lost his job, can apply for income support, even though he still has money in the bank. In order to get out of poverty a poor person has to earn money at a faster rate than average, so will be heavier taxed.
Income taxation is not a redistribution from rich to poor, it is a means to slow down changes to the status quo. It is a brake on social mobility.
With decentralized ledgers, we can easily tax all wealth equally by printing money. The problem is not that money is being created out of thin air, but that this freshly minted money is not considered property of the group, instead it is property of the central banks, which act like unions for private banks.
Taxing by freshly minting is much cheaper to implement, and removes the whole legal loopholes with secret walkthroughs etc. i.e. people can focus on providing a service and earning money (roughly twice as fast since no income taxation) instead of puzzling through all the rules and exemptions in order to be able to do their job.
Even if there were nothing but cryptocurrency, tax authorities have ways of estimating someone's income from investigating their lifestyle. That is to say, find people who are leading lavish lifestyles (living in upscale neighborhood, driving expensive cars, taking expensive vacations, ...), yet claim low income. That's just very inefficient to do if you have to actually put gumshoes onto individual people because you have no electronic access to any transactions.
Maybe Mods can edit the title again.