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It has been announced that the Venezuelan government has approved a tax bill focused on cryptocurrency, according to local sources.
The new tax bill for the country is said to be designed to collect up to 20% in taxes made from cryptocurrency transactions, with a focus specifically on targeting larger transactions for assets like Bitcoin, Ethereum, and other larger volume altcoins. According to a local news source, the new bill is set to tax cryptocurrency similar to foreign exchange transactions coming into the country, such as the US dollar or GB pound. As per the report, cryptocurrencies coming into the country will be hit by a tax equal to or higher than what might be paid in bolivars (the Venezuelan fiat currency). The rationale behind the new bill is to provide citizens with a greater incentive to use the national currency and to mitigate the use of unconventional transactions through cryptocurrencies and digital assets.
The drafted law was initially filed on January 20 2022, and it states that it will aim to collect anything between 2% and 20% on any transactions made in assets other than the currencies set by the Bolivarian Republic of Venezuela – ie: cryptocurrency transactions and other foreign currencies.
Why is the Venezuelan government hitting crypto so hard with tax?
It has been reported that the Venezuelan bolivar shed over 70% in value over the last year alone and that it has been consistently slipping in value over the decade. Facing enormous inflation, the government is attempting to instil confidence back in the country’s national currency. According to the bill, the government’s intention is to make the bolivar or the country’s oil-backed cryptocurrency, El Petro more favourable to transact with:
“It is necessary to guarantee treatment at least equal to, or more favorable, to payments and transactions made in the national currency or in cryptocurrencies or crypto assets issued by the Bolivarian Republic of Venezuela versus payments made in foreign currency.”
Cryptocurrency adoption in Venezuela
The bill also comes as a response to Venezuela’s surge of adoption over the past few years. To avoid inflation and secure their assets, Venezuelans have been flocking to cryptocurrency. Thousands of businesses have been shifting to accept cryptocurrencies since 2020, with 2021 bringing in increased adoption as Maiquetia, a major airport in the capital of Venezuela, made plans to accept cryptocurrency payments for tickets and services. According to the airport director, Freddy Borges, adding cryptocurrency to its payments platform would increase the accessibility for customers coming from other countries as well as drive innovative means to increase tourism. Borges reportedly stated:
“We must advance in these new economic and technological systems to be accessible.”
Other countries considering cryptocurrency tax
Venezuela isn’t the only country to be introducing stringent tax laws targeting cryptocurrency. As reported, the Indian government has introduced a massive 30% tax law on digital assets and cryptocurrencies coming into the country. While this does not mean India is accepting cryptocurrency or reimplementing new infrastructure related to blockchain-based assets, the nation is similarly trying to implement incentive to citizens to use the rupee. The Indian national bank is also working on launching a central bank digital currency (CBDC) to offer citizens a way to transact using digital currencies without relying on traditional means only and without using crypto too.
Recently, Thailand decided to throw out the cryptocurrency tax – a 15% rate charged on crypto transactions – following backlash from the cryptocurrency community and retailers in the region.
As more citizens across different coutrnies look to use cryptourrencies to avoid increasing inflation, we might start seeing more and more countries introduce cryptocurrency taxes.