Key takeaways:
The controversial new policy seems designed to deter Italians from investing in Bitcoin. Critics claim the tax hike is discriminatory and could actually generate lower revenues than the current rate of 26%. Fears are growing that other countries will increase BTC taxes as they try to plug financial black holes after COVID.Italy has unveiled plans to dramatically increase the capital gains tax paid by Bitcoin investors — hitting them hard in the pocket when cashing out profits.
While current rates stand at 26%, the right-wing government is plotting a 61% hike, meaning the taxman would take a 42% chunk out of any price appreciation realized.
The country’s deputy finance minister, Maurizio Leo, has appeared to suggest that the move is designed to dissuade consumers from investing in cryptocurrencies altogether.
He was quoted by Bloomberg as saying that the “phenomenon is spreading” — indicating officials are worried that growing interest in BTC could undermine the euro.
As you would expect, news of the planned rise has gone down like a lead balloon in crypto circles, with some Bitcoiners vowing to move to countries with friendlier tax regimes.
Others spoke of fears that this could lead to “brain drain” in Italy — as the country would no longer be attractive for talented workers in the industry.
But Laura Nori, who hosts the Bitcoin Explorers podcast, took a different view on X, and said she would be more concerned if her country was in favor of BTC.
Italy is the latest in a long line of countries to introduce crypto-specific taxes — eyeing an opportunity to tackle deficits and fill financial black holes as prices rise.
Over in India, income from the sale of cryptocurrencies and non-fungible tokens is subject to a 30% tax, meaning digital assets are in a similar tax bracket to gambling.
And to add insult to injury, a 1% levy is also charged whenever coins are bought or sold, adding a financial deterrent against regular transactions.
Research from the ESYA Centre, a New Delhi think tank, suggests volumes on Indian exchanges fell by a staggering 97% after these policies were imposed.
‘Absolutely Horrible’
Dario Giardina, an Italian Bitcoiner and NFT artist who lives in London, told Cryptonews that the tax hikes proposed by Giorgia Meloni’s government are “absolutely horrible.”
He argues that taxing digital assets more because they are witnessing a rise in popularity doesn’t make sense.
“Unfortunately, Italy is not doing well in terms of the economy. The public debt is among the highest in the world, so I am not surprised at all, they are trying to take money from wherever they can.”
Giardina argues that taxing BTC at 42% could end up being counter-productive too, as higher rates cause revenues to decline, or wealth to move across borders.
He pointed to how Germany exempts crypto investors from paying taxes if they hold digital assets for more than a year, while policies in Malta and Portugal are more favorable to those who invest in Bitcoin.
Luca Boiardi, who founded the Italian crypto tax platform Tatax, has written a letter to the government arguing the move could be discriminatory — especially considering other asset classes will remain at the current rate of 26%, including BTC-based exchange-traded funds.
He went on to warn that this policy could ultimately drive consumers to use anonymous exchanges where there are no Know Your Customer checks, putting them in danger.
Boiardi also stressed that this “disproportionate” taxation would imperil a rapidly growing sector that could create thousands of jobs in the years to come, and see local companies that have invested in Italy see substantial declines in their turnover. He wrote:
“If the maneuver would increase revenue in the short term, I am firmly convinced that it would penalize both us users and investors and the state in the medium and long term.”
Will the UK Be Next?
While Giardani is no longer based in Italy, tougher taxes could end up following him to the United Kingdom.
Investors are waiting with bated breath to see what the new Labour government will unveil in the Autumn Budget on 30 October.
Chancellor Rachel Reeves, otherwise known as the finance minister, has claimed she needs to raise £40bn ($52bn) through tax rises and spending cuts in order to plug a “black hole” inherited from the previous administration.
While the exact policies that will be unveiled are unclear at present, rumors are growing that there could be a significant rise to capital gains tax, in one of two ways.
At present, profits made when Bitcoin is sold are taxed at 20%, but reports suggest this could be about to rise by several percentage points — affecting BTC investors.
And although investors can currently earn £3,000 ($3,907) in capital gains without incurring any tax, this threshold could end up being slashed once again. Just two years ago, it was four times higher. Giardina told Cryptonews:
“Of course I am worried about England, but I am a long-term investor anyway, and I certainly don’t want to convert my precious and scarce Bitcoin into waste fiat currency.”
As public awareness about Bitcoin grows, so too does the taxman’s. And following an expensive few years, exacerbated by the coronavirus pandemic, governments worldwide are starting to rub their hands with glee at crypto bull markets — angling for a bigger slice of the pie.
The post Italy Eyes 61% Hike to Bitcoin Taxes. Others May Follow appeared first on Cryptonews.
