Recently seen as a general trend that although governments across countries make legal tender to cryptocurrencies in process, they also put on heavy taxes
The Government of Venezuela recently has made approval for a new tax after which transactions and payments in both cryptocurrencies and foreign currencies would be applicable for 20% tax over them. The tax has been named a ‘large financial transaction’ approved by the national assembly of Venezuela.
What made Government put tax
The motive behind such steps is to encourage the use of national currency which is losing its relevance. For a very long time now Venezuelan citizens have been using any currency, be it foreign currency or cryptocurrencies, other than the country’s currency Bolívar. Because of the hyperinflation situation in Venezuela which the traditional fiat currency of the country has lost its huge value and eventually trust among people as well.
Adopting blockchain technology and following people’s interest in cryptocurrencies, the government also took some actions in the direction earlier. In 2018, the Government of Venezuela introduced its own digital currency along the lines of cryptocurrency. But the efforts did not result as they thought and the project experienced ignorance of people continuing use of cryptocurrencies and foreign currencies.
So the recent step of the government-approved to put a tax of 20% over the transactions in any country other than their digital currency. Although the tax regime will be applied with some conditions aligned. The nature of transactions and companies or people behind the transactions will also be considered before putting the tax. The percentage of transactions to be paid will be established by the government soon after the official publication of the law. But it has also been made clear that at first only 2.5% of tax will be imposed on the payments.
How the steps have been taken and assumed to be taken by the people of Venezuela
Various experts, inside the country as well, are seeing this step as not too much of a practical approach. A Venezuelan economist, Jose Guerra put his thoughts that the step will be a hit on the pockets of the country’s citizens who are using foreign currency and digital assets as their store of savings. He stated that earlier those alternative options have solved the common cash problem inside the country.
Some believe that people will find other approaches or even move towards illegal or blackmarkets to make their payments possible in order to avoid taxes.
South American Country with the largest oil reserves in the world, once was a fulfilled economy and one of the leading oil exporters. But later Government over-dependence on oil and natural gas and in order to provide subsidies, the government overflowed the market with cash which resulted in hyperinflation. To deal with the severe situation, people in Venezuela themselves found the solution using cryptocurrencies, which are considered to be volatile, and are comparatively less volatile in comparison with native currency due to inflation. But now governments step in to regulate that medium, which might not satisfy users and people in the country.
Andrew is a blockchain developer who developed his interest in cryptocurrencies while pursuing his post-graduation major in blockchain development. He is a keen observer of details and shares his passion for writing, along with coding. His backend knowledge about blockchain helps him give a unique perspective to his writing skills, and a reliable craft at explaining the concepts such as blockchain programming, languages and token minting. He also frequently shares technical details and performance indicators of ICOs and IDOs.