Zimra seeks to cash in. . . as Bitcoin soars to $12 000 locally

03 Nov, 2017 - 00:11 0 Views
Zimra seeks to cash in. . . as Bitcoin soars to $12 000 locally

eBusiness Weekly

By Jeffrey Gogo
As the price of Bitcoin on the local exchange Golix.io this week hit a world record $12 000, almost twice the global rate, tax collector Zimra is now looking at ways to claim its share of the bounty — but it won’t be that simple..

“Income earned out of disposal of the bitcoins is subject to income tax” Canisio Mudzimu, who heads Zimra’s corporate communications, said in response to an enquiry by the Business Weekly on the tax implications for trade in the digital currency.

“The disposal of the bitcoins is subject to value added tax,” he added, eyeing the average 110 bitcoins traded in October on the local exchange, or the equivalent of $1,3 million at current prices.

It is hard to say whether the Zimbabwe Revenue Authority (Zimra) has earned money from bitcoin related activities. Mudzimu’s explanation is broadly generic and Zimra’s tax reports don’t back up his claims.

But bitcoin’s soaring price on the local trading platform Golix.io has charmed even a tax system most mundane.

In just about two weeks, the virtual currency has climbed 20 percent to $12 000, and is up nearly 1 200 percent year-to-date, spurred on by high demand.

By early yesterday (Thursday) morning, the asking price had dropped to around $11 800, with bids much lower at $11 100. Worldwide, bitcoin rose to $6 880 early yesterday, up 21 percent from a week earlier.

The local price trades at a premium of about 90 percent to the global rate, and analysts aren’t seeing an end to the skewed prices due to a shortage of liquidity for locally traded coins or those earned through a process called bitcoin mining.

“There is excess demand in the Zimbabwean market due to the liquidity constraints in the economy and as people are now looking at ways to preserve wealth,” said an investment analyst, whose stock market-focussed company has only started to redirect attention on virtual money.
Bitcoin is like cattle sold
There is no bitcoin-specific tax in Zimbabwe. The digital currency does not belong to any specified asset class as you will find say with equities or property.
That means taxes such like capital gains which are levied on the sale of assets do not apply to bitcoin, perhaps, only yet.
Zimra’s Mudzimu attempted an analogy on how other taxes have been applied on the virtual money.
“The tax design is generally not based on types of goods or services but transactions and income realised,” he said, via email.
“The use of bitcoin is similar to owners of cattle who sell the cattle, or use them as a medium of exchange. Tax is not about the cattle but the value created, the income created, and the transactions generated.”
Therefore, said Mudzimu, “the current legal provisions capture the trading of the bitcoins.””
Mudzimu makes it seem straight-forward, but it’s a bit more complex than that.
He doesn’t say whether the authority has indeed collected tax, and how much, from bitcoin-related activities, which have enjoyed a modest growth since September 2015, when local trade began.
Take, for example, how VAT and capital gains tax are clearly spelled out on the sale of shares on the Zimbabwe Stock Exchange.
Bitcoin investors selling their coins on Golix.io do not pay such taxes apart from the 0,5 percent to 2 percent levies paid to the exchange.
Also, Zimra’s tax reports are silent on bitcoin-linked revenue as an emerging tax-head, as it does say for other capital markets-related taxes.
“In terms of taxing the buyer (or seller) of virtual commodities, no one is being taxed for buying bitcoins, just as much as no one is taxed for buying MP3 files online,” Soul Kabweza, technology analyst at online magazine TechZim.com, told the Business Weekly by phone.
Missed opportunity
After several years of fiat currency woes, Zimbabweans can be forgiven for pricing bitcoin so high.
They are looking for ways to create and store value for the money that legacy banks aren’t issuing in sufficient quantity, if at all.
Citizens want to pay for good and services like university fees abroad, but Reserve Bank controls on foreign currency are stifling trade.
Now, what better way to do that than speculate on bitcoin, a digital currency readily accepted by companies like BeForward, a Japenese car dealer that exports thousands of vehicles to Zimbabwe each year.
“Globally, bitcoin is still not mainstream. It is still much an enthusiasts, specialists or speculators field,” said Kabweza.
“The interesting thing though is that because of the current currency problems in Zimbabwe, some really creative things are starting to happen around bitcoin.
“Zimbabweans are now more willing to take risk with bitcoin because they are already in a tough situation. So the appetite for bitcoin is starting to seem healthier.”
Forced to the periphery of global trade due to economic sanctions, Zimbabwe’s lack of recognition of bitcoin as legal currency is a missed chance.
“It is regrettable that there hasn’t been any investigation by the Government or by financial technology experts that feed into Government policy on the advantages of bitcoin use, not necessarily as the main currency but as an additional means of payment,” said Kabweza, the technology analyst.
“Globally, bitcoin adoption is growing each year. The currency hasn’t been hacked since it started trading ten years ago. Bitcoin is not subject to any sanctions or any international geo-political power dynamics.”
Kabweza added: “A lot of countries like Japan, South Korea, North Korea, China, Russia and others are investing into how they can understand bitcoin and invest in it. If we followed the same path, bitcoin can be a means for Zimbabwe to lift itself out of the current currency crisis. There has been a technological shift globally, we need to wake up and realise this.”

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