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Could Cryptocurrencies be the Ultimate Tax Toevluchthaven?

Could Cryptocurrencies be the Ultimate Tax Haven?

More tax on you. That’s the core of the budget this week. They’ll do it via an extra 0.5% on the Medicare levy. They’ll bite you with a $6.Two billion tax on the banks.

It’s a budget attempting to get votes. And boy does the current government need those votes. It’s under fire from Labor. It’s suffering ter every opinion poll. Heck, Turnbull is even still under threat from Tony Abbott.

It’s fairly a shambles of government right now. And somehow, they think more taxes on you will help dig themselves out of this epic slot.

What makes it all worse is that under a Liberal government, you’ll end up being worse off. And if it switches to a Labor government, guess what…?

That’s right — you’ll still be worse off. No matter who’s running the showcase, you’ll be worse off. That’s through no fault of your own. You didn’t run up half a trillion dollars ter debt.

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But you’ll pay for it. Now with the fresh spate of taxes, the effective top marginal tax rate is 49.5%. That’s right. If you toebijten to be a high-income earner (overheen $180,000), smooch half of your income goodbye.

No wonder high-income earners attempt and head offshore to places like Singapore or Dubai.

You only need to look at France’s 75% supertax. Instead of pulling ter more revenues from the wealthy, it shoved them out of the country.

All it did wasgoed discourage investment and see tremendous capital flight. Entirely counterproductive to what they were attempting to achieve. Instead, the wealth went offshore.

Infamously, French actor Gerard Depardieu became a Russian citizen and moved to Moscow.

And Australia is on a tax increase spree.

So what can you do to keep some wealth outside of the grubby mitts of government?

Bitcoin to buy things…lots of things

Right now, the government has determined to ‘align the GST treatment of digital currency (such spil Bitcoin) with money from 1 July 2018.’

Purchases of digital currency will no longer be subject to GST. Score! What does that mean for cryptocurrency?

Well, it means the only time you’ll get taxed on your digital currency is when you spend it. And you simply pay GST on the goods or services you purchase with it.

If you own bitcoin and use it to buy things, then you only pay GST when you spend it. Bitcoin is money.

Now, spil wij understand it, that means that if you own bitcoin today and can buy $Two,000 worth of goods with it, then you pay GST on the goods you buy. Again, just like money.

Also, let’s hypothetically say that your bitcoin is worth the omschrijving of $20,000. And you use your bitcoin to purchase $20,000 worth of goods and services. Well, te that case, you pay GST on the goods you buy. Again, just like money.

Our interpretation is if you own bitcoin today, and its value goes up tomorrow, that’s fine. If you use it spil a method of payment, then you will only pay GST when you spend it.

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From the very beginning we’ve always said bitcoin — at its core — should be used spil a method of payment for goods and services. We’ve always stood by the fact that once you buy bitcoin, you shouldn’t aim to convert it back to fiat currency at any point.

Our view is that if you have it, hold it. Wij think the long-term purchasing power of that bitcoin will increase overheen time. Think of it like holding Aussie dollars and that, instead of buying a litre of milk with your $1, te the future you’ll be able to buy Ten years’ worth of milk with that $1. Sounds incredible, indeed.

Is this truly a ‘super’ tax toevluchthaven?

The core premise, however, is to use it spil a unit of exchange te the future. Not spil an asset to convert back to fiat money.

Ter that sense, yes, the government will take its clip — 10% ter GST, which you pay for goods and services. But recall, you also don’t have to use bitcoin or even store it ter Australia.

You can own and hold a bitcoin wallet te any country you like. That’s the beauty of it. It’s borderless and the government can’t take it from you — spil it won’t everzwijn know where you keep it.

Omri Y. Marian, from the University of California, published a paper last year titled ‘Are Cryptocurrencies “Super” Tax Havens?’

Te his paper, he points out:

‘…that some evidence suggests that Bitcoin may already be used for tax-evasion purposes. One probe found that many owners of Bitcoin wallets use them spil “savings accounts.” Such wallets are used only to receive but never to send Bitcoins. Earnings te such wallets, unless voluntarily reported, are beyond the reach of taxing authorities. Te addition, researchers have discovered that many Bitcoin users employ “fork and merge” patterns. Large amounts of Bitcoins are split into numerous petite accounts, evidently wielded by the same user, or large amounts are bought te puny batches using numerous wallets. Tax-evaders and money launderers regularly use thesis tactics to attempt to hide the sources, spil well spil the destination, of funds. Moreover, some taxpayers have openly acknowledged that they have considered using Bitcoins to avoid tax-reporting requirements.’

Wij certainly don’t advocate any of thesis measures. But wij do make note that thesis are methods some people presently use. It’s a grey area, and one wij don’t think government truly understands.

Again, wij stand by our reasoning that bitcoin and cryptocurrency have long-term potential to increase ter value. And that the idea is to one day use that cryptocurrency to buy goods and services.

Free Report: The crypto revolution is just beginning and the thickest gains could actually be available right now. Learn more.

How you choose to go about that is your call. And you should always get the advice of a professional tax tuut. Albeit wij think it’s going to be hard to find an registeraccountant with a clue about bitcoin and cryptocurrency…

Ultimately, while the government has little idea about it all, now might be the best time to get your share of it. And spil it becomes more widespread and mainstream, you’ll ideally be able to use it to buy more spil the purchasing power skyrockets.

Of course, wij could be wrong about bitcoin and other cryptocurrency. And te that event, you want to have some other measures te place to protect your wealth.

Wij think the best prep you can do is to get your arms on Vern Gowdie’s book, The End of Australia.

All of his protection measures are effortless to implement. And spil a basic wealth protection strategy, considering his methods is simply the brainy thing to do.

Even just taking on houtvezelplaat what Vern has to say is worth the minimal outlay for his book. It’s not that you should read it — you vereiste read it. Te our view, it contains the kleuter of information and strategy every Australian should be thinking about.

PS: Fund manager David Tice is known spil the insanely successful manager of the Prudent Bear Fund. He sold the fund to Federated Investors just spil the 2008 financial laagconjunctuur wasgoed unfolding.

Tice recently told CNBC: ‘“The market has tended to go down about every seven years. It went down te 1987, 1994, 2001 and 2008. During thesis periods after the declines, it rallies like crazy. But now bad things are about to toebijten again.”’

Vern Gowdie agrees. He shows you how to bunker down and prepare for those ‘bad things’ today. And how you can capitalise on the coming downturn once the dust lodges. To find out more, go here.

Sam Volkering

Sam Volkering is Editor for Money Morning and its small-cap, cryptocurrency and technology pro. Find out what he has to say here with all his latest articles.

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