To Tax or not to Tax?

Since the higher-ups at the BIR are ‘Boomers’, it is safe to say that it would take years for them to know how to tax Crypto. 

As we live in the digital age, more and more transactions are now being made online. Online shops are being made each day and online banking is now the trend when depositing cash. But even if the country may seem to be in a golden age of online activity, there exists one problem—Taxation. Specifically, the taxation of one of the most elusive ways of earning income—Cryptocurrency trading. 

From being called Pyramid schemes to becoming one of the world’s most heavily traded currencies, Crypto has cemented itself as an alternative to fiat currencies. As the currency is fairly new to the country, many, especially those in the Bureau of Internal Revenue (BIR), are wondering as to how prevalent and taxable the use of Crypto is within the country. Since the higher-ups at the BIR are “Boomers”, it is safe to say that it would take years for them to know how to tax Crypto. However, I could be wrong and many of them could be investing into Crypto and using it for their nefarious ways. Who knows?

Although Crypto is regulated by the Bangko Sentral ng Pilipinas (BSP), it only does so “when used for delivery of financial services, particularly, for payments and remittances, which have material impact on anti-money laundering (AML) and combating the financing of terrorism (CFT), consumer protection and financial stability,” as stated in Circular No. 944 dated January 2017. In other words, the BSP only regulates Crypto if it is being converted into Philippine pesos or being used in payments and remittances. Nowhere does it say that it regulates Crypto-to-Crypto transactions or trading. In the BIR’s case, they stay silent on the matter, with no rulings nor bulletins whatsoever.

If, by chance, the BIR were to tax Crypto, how would they do so? It could be postulated that since Crypto trading is similar to Stock trading, it could be taxed the same as well via brokerages. This could be a possibility since some Philippine brokers are already being taxed via their commissions. However, since there is no law stating Crypto is the same as Stocks, many brokers use this as a loophole to not add taxes. For foreign and online brokers, it becomes even more complicated. The same can be said for Non-Fungible Tokens (NFTs), a commodity that is related to Crypto.

Another alternative is to tax it as a property and any gain realized in sale or exchange of such is taxable. The United States Internal Revenue Service (IRS) is already doing this. However, since Crypto is anonymous in nature, it would be extremely hard for a third world country to track or even access blockchains and wallets of Crypto users for transparency and tax purposes.

Cryptocurrency is an extremely intricate topic in terms of taxation since the country has no means to regulate it for tax purposes. An army of tech-savvy people is required to audit and track down each and every Crypto user within and without the Philippines. However, there will come a time when Crypto will be taxed and when that time comes, be ready to pay taxes not because you are required to do so, but because it is the lifeblood of the Republic of the Philippines and our nation cannot survive without it.

LAYOUT BY: Sigrid Deryll Q. Dy