UK authorities better figure out a way to tax digital currency transactions quick – service starts from the 10th of February
We have gotten used to the fact that Bitcoin is here to stay all over the news wires and the latest batch comes from The Telegraph that has reported yesterday that PayPal’s parent company eBay has created a new category to accommodate the needs of its customers. The “virtual currency” category will be launched in its classified advertising platform allowing people to trade between themselves without eBay’s intervention.
Expectations are for the category to be made available on the 10th of February in the UK. Considering eBay’s recent patent application regarding “gift giving” of tokens this could well be a test hub for the company of some future products that it is planning to offer. The other obvious deduction that we can make is that this way the company positions itself as a Bitcoin exchange – an event that can reshuffle the whole industry.
Recently worries regarding the virtual currency have surfaced from UK tax authorities. Not that they are so eager to get their hands on your digital stash, but you will have to part with some digits to keep them happy.
The most likely outcome according to legal experts cited by the Wall Street Journal is that it will be taxed in a similar way that gold is. That is to say that only commissions during the transaction would be charged with VAT. At the same time the UK excepts currency transactions from VAT, however the currency has to be ‘legal tender’. Is gold still legal tender? Then why shouldn’t Bitcoin be one…
All in all, Europe will have a hard time to figure out how to tax the digital currency. With the VAT system in place, it will be tough for authorities to devise a proper taxation mechanism. If capital gains tax is applied, then any restaurant that accepts dealing with the digital currency will have to pay VAT on the commissions charged during the process of converting Bitcoin to fiat money.
It’s in the best interest of authorities to find a viable solution to this problem as the Napster of the financial system keeps charging ahead and shaking the grounds of the establishment. Meanwhile despite the negative feedback form the Bitcoin community, Paypal and eBay are surely to get a piece of the digital currency exchange pie. They simply have the necessary infrastructure and resources to get in the game.
For more on the global Forex industry see the LeapRate-Dow Jones Forex Industry Report.