Zimbabwe Wants To Collect Bitcoin & Crypto Tax Revenue
Zimbabwe is probably famous for two things Victoria falls and hyperinflation, the South African nation has been plagued by some of the worst central planning the world has ever seen. As dictatorships go, under Mugabe, wealth was systematically stripped from the generation population under the guise of redistribution, but it fell a lie.
Now dictatorships aren't the best system for civil and economic freedom but some still function in spite of it, however, Zimbabwe took it to the extreme and show us what happens when you think money printing will solve everything.
The eventual outcome is destroying wealth and having to rebuild. Zimbabwe is in a period of correcting some wrongs, not that there isn't corruption today, but there is far less to steal than before.
So they need to look for new avenues of revenue.
It's no secret the country has embraced bitcoin having been a multi-fiat currency nation for years. Having the ability to store wealth in bitcoin and avoid banking restrictions and regulation has seen more Zimbabweans opt for bitcoin.
To acquire bitcoin, however, they still need to interact with service providers that can be tracked and regulated. Zimbabwe shut down its only local exchange a year ago, while the country also outlaws banks from cryptocurrency transactions. so people rely on international exchanges instead. That decision sees money leaving the country instead of cycling within it and now Zimbabwe wants to claim some of it back.
According to the latest reports any E-commerce, cryptocurrency transactions or content creators using bitcoin or cryptocurrency will be taxed based on the local tax brackets for capital gains and income tax in Zimbabwe.
"The Republic of Zimbabwe entered into a public-private partnership agreement with Daedalus World Limited of Tortola, British Virgin Islands, in terms of which Daedalus World Limited will assist the Republic of Zimbabwe by providing a revenue collection service through taxing qualifying companies that provide digital advertising, content, cloud computing, e-commerce [and] gambling,"
A part of a general notice published by Zimbabwean ICT Minister Jenfan Muswere on 19 January.
The notice specifically targets sites and services offering "betting, gaming and cryptocurrency services to persons and organizations". The new tax revenue collection agreement will also target digital companies such as YouTube, Google, Facebook, and others in addition to e-commerce entities.
A play that is not uncommon as neighbors South Africa has already added VAT tax to all digital products such as advertising and subscriptions.
All revenue from these new taxes will be collected by Daedalus World a third-party service.
The move to include bitcoin cryptocurrencies into the list of companies to be taxed has raised expectations that Zimbabwe will be joining South Africa that already taxes such transactions.
A benefit to holders
It's obvious that both Zimbabwe and South Africa see bitcoin and crypto as a new form of income, but I think these regulations will only push more capital out of the country's ecosystem. If you're getting taxed on your bitcoin purchases or transfers you would be less likely to use it and hodl instead to borrow against your bitcoin later which is far more tax efficient.
What I would be interested to see is how much of this revenue if any will be kept in bitcoin to build a treasury or will they be dumb enough to liquidate back into fiat.
My feeling is they would be liquidating to access the funds and this could put further selling pressure on local exchanges for example in South Africa. This could provide a tasty arbitrage situation as governments may be price incentives when moving to sell bitcoin.
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