Financial experts in Brazil have raised concerns that more people will start using Bitcoin to avoid taxes with the implementation of a controversial new tax system proposed by president Jaír Bolsonaro.
According to Paulo Skaf – president of the Federation of Industries of the State of São Paulo (FIESP) – the new tax system, if implemented, could force people to turn to Bitcoin as most standard transactions will be heavily and harshly taxed.
He said: “To combine all taxes into one, whether on the billing base or the means of payment, we would have absurd [high] taxes.”
“This would naturally lead to a migration to other forms of payment, such as cryptocurrencies. It’s going to be unfair: those who trade in cryptocurrency don’t pay, and those who trade in reals will pay.”
New tax scheme being studied
The newly proposed tax scheme would, in essence, compile disperse taxes into one unique tax, which would likely be applied at the transaction level. According to some reports, the new tax scheme could be up to 15% per transaction.
Given the high unemployment rate in Brazil – about 13%, which represents over 13 million people – and the fact average income is decreasing due to less real production and higher inflation, Skaf argues that having high taxes could lead to more people trying to avoid paying them.
Brazil’s recently updated crypto regulation
New Brazilian crypto tax already in effect. https://t.co/BoSNrHKDaQ
— Pedro Febrero (@Febrocas) August 19, 2019
As Coin Rivet reported last week, Brazil has recently implemented updated regulation for cryptocurrency taxation. According to the Department of Federal Revenue (RFB) website and government portals, this new regulation covers all kinds of crypto-related activities such as buying and selling, donations, barters, deposits, withdrawals, and other such activities.
This rule applies mainly to businesses – especially crypto exchanges – although any individual who transacts more than R$30,000 on a monthly basis, or around $7,000 at the current rate, will also have to send this information to the RFB.
The measure requires entities to provide monthly reports by the end of the month following the month when the crypto-related transactions occurred, the report notes. As such, any information for the month of August should be provided by the last business day of September.
High taxes could mean high tax evasion
If the new approved tax scheme is put into action, and Brazilians do feel it’s not as beneficial to use their local currency, we could see a shift towards Bitcoin and other cryptocurrencies.
As the new crypto tax system only requires certain amounts to be reported (and taxed, apparently), this could lead a larger percentage of the population to adopt cryptocurrencies to avoid paying high transaction taxes.