Australia and Japan will remove sales tax from digital currency trades starting 1st July. What impact will it have on the local industry in those countries?
Sales tax on bitcoin has been an issue in key markets like Japan, Australia and Singapore. It’s often called a “double tap” — the government receives sales tax first on the conversion to BTC, and again on a purchase when a user spends the bitcoin.
Australia’s sales tax (goods and services tax, or GST) is 10 percent and in Japan it’s 8 percent.
For Australia, End of Three Year Battle
The Australian federal government announced in May that it would remove the GST from bitcoin sales. This came after more than two years of lobbying from the industry.
The Australian Taxation Office (ATO) first hinted it would apply GST to bitcoin sales in March 2014, after a request for a specific case ruling by one Dr. Craig Wright. In August and December that year the ATO further clarified its position. The agency seemed most concerned with larger business transactions and capital gains income on bitcoin investments.
While Australia’s Treasury department is still finalizing the details of its law, it will apply it retrospectively from 1st July 2017. A statement said “digital currency will be treated just like money for GST purposes.”
However most exchanges in Australia and Japan didn’t highlight the sales tax amount on their platforms, and never separated it from the listed exchange rate. Therefore, many users may not have noticed it was there.
Exchange CoinJar relocated from Australia to the U.K. in December 2014. Some cited the GST as a factor. Although the company did mention in a blog post that GST would no longer apply to its trades, it was never clear if this was the primary reason for the move.
The new conditions apply only to GST — taxes on large bitcoin investments and income will apply as before.
Will Business Grow Once Sales Tax Is Gone?
Bitsonline asked a number of Bitcoin businesses in both Australia and Japan whether removing sales taxes would have a noticeable impact.
Adam Poulton, CEO of Australian bitcoin wages startup Get Paid in Bitcoin, said it was “a huge step forward in the long road to mainstream adoption of this technology.” He expects an uptick in business.
“It removes a layer of complexity and uncertainty from Australian based bitcoin service providers and adds a new level of trust to the consumer who was worried about uncertain future tax obligations. Get Paid in Bitcoin has seen a strong rise in registrations since the announcement with an expected surge in wage transactions in July.”
Over in Japan, the response from exchanges was mixed. BTCBOX chief marketing officer Moe Yanagisawa said:
“We think it will bring a big increase in the Japan market after removing tax, but also we think it will bring risk from overseas, depositing and withdrawing (money). At BTCBOX, we welcome customers from all over the world, and follow the laws.”
Other exchange operators said “technically yes” to the question of an increase in demand. However they expect to see a larger impact in October, when the Financial Services Agency (FSA) announces the first batch of registered exchanges.
Cryptocurrency businesses there were given six months to comply with new laws that took effect on 1st April 2017. Although the laws gave digital currencies greater legitimacy, they also introduced strict new consumer protection and KYC requirements.
Do you think businesses in these two countries will grow? Let’s hear your thoughts.
Images via Dynamic Business, Pixabay