How would a Bitcoin tax be implemented?

So, if it's a fee tied to transactions, then that's how it’ll be viewed. Is the Bitcoin tax gonna hit exchanges or companies involved with Bitcoin? Or is it targeting those who gather user info from exchanges? If that’s the case, what’s the plan for keeping security and privacy intact?

If bitcoin related transactions could be tax then it will definitely be done on the CEX and not the non CEX, the CEX offer features where by you trade bitcoin for your local currency. and most of them have your information because you did KYC with them, so taxing users there will be just easy but for the non centralised ones I don’t think they could be taxed.

Depends on the country you're in. Bitcoin will fall under capital gains tax, you're being taxed on the profits you make at the time you sell the asset you hold. Some countries will have you fill your tax report and enter the amount you made in profit from sale of Bitcoin, the tax will then be determined based on the percentage of CPT. Exchanges serve multiple countries, so they cannot realistically follow different tax laws and enforce the taxes that their users should pay.

Even if the government could link your on-chain activity to your identity, they would still tax it. So it depends on how sophisticated the government's intelligence tools are to reach you. Both are your rights, but it's not the government's obligation to actively enforce them.

Thats not really how taxes work.  Most countries dont bother trying to “tax the protocol” itself.  They just cant.  What they actually do is treat Bitcoin like property or a capital asset. Anytime you sell your Bitcoin for cash, or even trade it for another coin, that counts as a taxable event.  If you made a profit since you bought it, you owe taxes on that gain.  how much depends on where you live.  And if you get paid in Bitcoin or mine it, governments treat that like regular income.  They tax you based on what its worth at the time you receive it.

There's no fully transparent and understandable way to tax bitcoin yet, so we're exploiting every loophole in the situation. This fact is very frustrating for many politicians, as the cryptocurrency tax system is still incomplete and has many loopholes. Moreover, they need bitcoin and other cryptocurrencies to launder corrupt money. How to draft laws so that they can collect taxes from the population without interfering with their own plans remains an unsolvable task for them.

BTC is taxed as a property or commodity, so you pay tax on your profit when you sell, spend or trade BTC. However, this method may be easier to calculate for long term holders, people who buy BTC and hold it for a number of years before selling, though some countries exempt their citizens from paying CGT if they have held BTC for a certain number of years. But my point is, calculating how much tax you owe becomes complex for people who often spend BTC. If you spend BTC daily, you may have a headache keeping accurate records regarding how much tax you ought to pay, and that could pose as a challenge when taxing BTC.

As far as I know, different countries have different ways of treating the Bitcoin withholding tax system, as I quote below. The government collects Bitcoin tax on exchanges, even though it is taken from the users themselves in the transaction method. I think although they take from transactions, but it is different, transaction fees are clear and taxes are clear.

It depends on where you live, it can vary, since every country has its own Bitcoin tax system. In my country, taxes on Bitcoin and altcoins are applied when you sell or trade coins on an exchange. The exchange will automatically deduct 0.21% from the total transaction value, and this applies only to sales, not to purchases or gains. You’ll receive a tax report from the exchange, which you’ll need to include in your tax filing. If you ask about security and privacy, exchanges and the government will say that they will protect your security and privacy. But we don’t know to what extent that commitment is actually being upheld.

A bitcoin tax will work exactly as any other asset; capital gains tax. You are required to report at which price you acquired an asset and, if you ever sell it, to record and report the price you sold it. You will be taxed according to the difference, considering it is positive. It doesn't make sense to have any other tax, unless bitcoin becomes legal tender, and people are paid in bitcoin, at which point it you would be taxed on your reported income etc.

Exchanges don't have to pay taxes on behalf of their customers because they just can't manage that if they are too big and have millions of customers, but I think it would be easier for customers this way. Because they would not have to fill out their tax forms manually, as some countries ask for the price you bought at and the price you sold at, and they can check it too if they want. So basically, you have to fill everything out correctly. But I like the way it is now, by filling out forms. Exchanges are the ones collecting data, who else would it be? Brokers and others are just providing liquidity to these exchanges, and they have their own way of dealing with tax. As individuals, meaning us, we have to fill out our tax forms and mention our crypto gains, and then they will be taxed. I think the highest tax was in Japan, but they have also reduced it by 50%. The Netherlands, on the other hand, also passed a bill to tax unrealized profit.

In reality, you should expect the government to always target the easiest layer which is the exchanges. Since they act as connection between crypto and fiat, that's where taxes will be easily enforced. It is from data collected from the exchanges that the government authorities will use to track gains and apply taxes appropriately. Without those links, it becomes very difficult to do anything. Security will likely get better on regulated exchanges but privacy I think will take a hit. The more compliant the system gets, the less private it becomes for users.

That bill faced a lot of criticism and backlash from their citizens and i believe that the authorities have bowed to the pressure and gone back on that one. It is ridiculous to tax unrealized gains at a flat rate of 36%. Doing so is effectively forcing people to sell their assets when they do not want to, in order to pay for paper profit. Sometimes you have to wonder if those in authority think things properly before coming up with stuff such as this.

Crypto taxation works differently in each country, in some local exchanges they might deduct the taxes for every report but I never used them personally but if you are using Binance like exchange you are the one who is responsible to report your gains frpm the crypto and for the exchange they will report the data to the respective tax agency and if you fail to pay the necessary taxes then the tax agency will come after you with a penalty or whatever the law in your country says.

Exchanges already have your data. If you are concerned about privacy, you should not be using centralised exchanges to buy bitcoin. Sort out other means to do that.  When you talk about tax report, just like other assets, you don't have to worry about security as you are liable for protecting yourself. All you are doing is reporting your purchase price and profits made on sales and the amount to be remitted as tax will be calculated based on your tax law. You are not given out your wallet access you are only going to pay the tax, I don't see security bridge here.

Our local exchange deducts tax directly every time we trade from crypto to IDR, so we don't self-report for tax, if for example holding BTC in a personal wallet it is not taxed, but I heard bitcoin is included in investment so it must be reported in annual tax, I myself did not do it. But I don't know about taxation on global exchanges, as far as I know it is not taxed unless you want to exchange it to local fiat then it could be that some countries apply taxes.

Some countries may even consider crypto to crypto trade as taxable even if you made any profits in it, so it is better to contact someone in your country who deals wtih crypto taxation because every country got different laws so asking one globally will not work. And Binance can be a global exchange but it must be complying with your local laws if they are operating so you may need to report those profits you made or the tax agency will come after you.

What a load of nonsense—the question isn't “how they would work” but how they actually work. As if taxes weren't already being paid every year on Bitcoin transactions, and even on holdings, in the few countries that have a wealth tax. The OP would learn more if he simply searched "how bitcoin tax works" which would lead him to articles like this one: Understanding crypto taxes And as for privacy, anyone who uses a CEX doesn't have any. If you manage Bitcoin with your private keys, then yes, and some people choose not to disclose what they have—after all, Bitcoin wasn't created for that purpose. I've got the guy you are quoting on ignore—I guess because he talks too much nonsense. Dutch Government Cancels 36% Tax on Unrealized Gains After Public Backlash New Dutch Cabinet pulling back Box 3 asset tax plan over unrealized gain tax fears