EB37 – Thomas Spaas & Siân Jones: Is Bitcoin subject to VAT? (European consumer goods tax)

Transcript

[Music] hello and welcome to epicenter Bitcoin the show which talks about the Technologies projects and startups driving decentralization and the global cryptocurrency Revolution my name is Sebastian kuu and I'm Brian fan crane today is August 30th 2014 and thanks very much for joining us for our 37th episode So today we're joined by two guests one of them you know very well her name is sha Jones uh we've had her on many time and she's our regulatory correspondent also the founder of uh Coin Salt and um the chair of the regulatory working group at the UK

DCA we're also joined by Thomas Spar he's the director of the Belgian Bitcoin Association and he's an international tax lawyer who's also won a student pleading contest before the European court of justice uh which is kind of very relevant for today's episode because today we're going to be tackling uh a Swedish coure case on vat and what its repercussions will be for Bitcoin so uh thanks guys for joining us today hi nice to be back again happy to be here y um so Sean you're going to be at inside Bitcoins London I am indeed yes um this is one of

the series of inside Bitcoins conferen that are run various places around the world it's in London on the 15th and 16th of September and uh so it's a two-day event it's got some some some really great uh speakers um people like Gavin wood from ethereum the the chief technology officer of ethereum um in fact there's quite a lot of focus this year on sort of blockchain 2 uh sort of a main subject matter there's a um a regulatory um panel with some leading lawyers from us and UK also a German lawyer and and one or two others

um so it promises to be another very exciting um one in the uh in the series of conferences and uh so we're offering a we're partnering with inside Bitcoins uh London um for this uh for this conference Sean's going to be there and we'll uh perform some interviews and and uh create some content for for future episodes so if you're interested in going to inside Bitcoins we're going to be offering a discount code it'll be in our show notes uh on our SoundCloud page as well as on our website and that will be up uh right after we post this episode so if you want to go to inside Bitcoins uh we'll have a discount code there for you uh so you can get a little

a few bucks off and you can pay with Bitcoin obviously well let's get started with our topic of today uh is this is a topic that I think we've touched on a few times and uh it's one of those kind of annoying topics in a sense right so vat it's a I guess it's just a necessity of you know existing in the European economic system but and it it's not as exciting perhaps as talking about ethereum or or things far ahead but it can be absolutely Cru crucial when it comes to bitcoin acceptance Bitcoin success as a payment system uh in the near and medium-term future so I think

it's really important that we're touching on this today cuz uh some important things are going on at the moment but perhaps um Tomas can you give us a a bit of an introduction into what vat is in the first place yeah would be would be happy to do that um and you'll see see that um you you mentioned the word annoying uh and that's also how how I see the entire problem um already leaping ahead to to to the conclusion um if um Bitcoin would become subject to vat um it would be very annoying but it wouldn't kill it um

and I'm now going to explain uh how how it exactly works so you have vat in for international audience uh let me explain a little bit about uh the system you used to have in the European Union uh the different member State used to have uh sales taxes like you have in the US right now and and that would just be a very simple tax um every member state would have its own rates and each time you sold the product or you sold the S uh or a service uh you would have uh sales tax on that uh on that uh on that sale um now um this system distorted uh

the economy somewhat so just imagine that you have to uh apply the sales tax at different rates each time you sell something um so they tried to come up with a more a smarter system that would also apply uh throughout the European Union uh and that is uh vat now V means value added added tax but that's actually uh a bit of a misleading name uh it's actually a consumption tax so the general idea of vat is that the final consumer of a product um or of a service is the person that will uh pay the tax um and all other parties that are not a final consumer are not subject

to that tax um so how does this work uh in practice um in the Europe European Union in all in all member states if um you sell something uh a product or a service uh you need to uh apply vat so that's a percentage and that percentage it differs uh in all member states so we have the same system all over the European Union but you have different rates uh in all countries uh countries are still free uh to set their own rates now uh in a busino business context B2B um that tax is uh neutral because the

philosophy of the system is is that only the final consumers should pay the tax and when you have businesses uh selling products or services to each other um they would not be subject to the tax so how does this work in practice if you're are a business selling something uh to another business you have to apply a vat so you apply an extra percentage on the sales price uh the other company pays uh the price plus the vat but they are able to deduct uh the vat that they paid so it's important to see that in uh businesso business context in a pure B2B context um the vat is neutral it is

neutral but of course um there's a lot of red tape involved you need to make the calculations uh you need to put it put it on your invoice Etc and then so all throughout the B2B chain uh people uh add and subtract vat until we end up with the final consumer uh which are normally as a general rule those are the uh individuals just regular people when they buy um they're the final consumer of the product of the service so they have to pay the vat without having the right to substract the vat so vat is um uh a consumption tax actually uh and the

final payer or the one who suffers the vat who has to Bear vat is the uh final consumer so that's the the the general uh philosophy of of the vat system uh that we have in the uh European union now um these rules uh are harmonized uh across the EU meaning that uh members member states are free to set their own uh vat rates uh but the general system the general principles uh those are taken care of at a European level so that means that in principle um the same rules should apply all across

the European Union and member states uh can only uh the only input they have is to set uh their own uh r rates um now one of these print uh really a decision that would be at the level of the principles is the question of should bit Bitcoin be subject to vat uh or not um now the problem is that uh all these vat regulations they date from the 60s from the 70s from the 80s where you used to have a very simple uh industrial society and maybe a little bit of a service sector uh but those rules are not adapted to uh today's economy so you

have all sorts of new phenomena uh popping up uh not only Bitcoin but for example also gift vouchers um uh carbon trade uh rights and so on and so on and there's always a question of how do we fit these new things within the old definitions of um the vat directives uh that we have in Europe and as long as there is no decision at European level uh the member states uh all have their own interpretation and uh all member states do something different so uh specifically for Bitcoin uh the UK

authorities have said that uh broadly speaking that uh Bitcoin is outside the scope of the vat uh France uh uh has said um that uh this would also be the approach that they will be taking in the future um other countries take no official position but uh they tolerate uh the fact that there is no VAT on the sale of Bitcoin those countries are for example uh Belgium and the Netherlands and other countries are very explicit in levying uh VAT on bitcoin sales uh for example Poland uh and Estonia if I'm not uh m taken so we have different uh approaches um in all member states and

um uh the general feeling was that it would take a while maybe 5 to 10 years for the European commission or for uh the European Council to come up with um uh unified or unanimous view on how to treat Bitcoin for vat purposes but to everyone's surpris um the this decision will come a lot sooner uh due to the court case uh that was or at least the the the dispute that was started by Mr hedquist uh of Sweden um perhaps I'll explain now a little bit how this U European process

uh works so um when um European regulation is at issue such as vat all courts in all countries uh all over the European Union they have the right to ask questions uh to the European court of justice in Luxembourg uh and ask the European court of justice in Luxemburg to clarify uh some aspects so this that is exactly what happened here so you had a local Swedish dispute between Mr Heist and the Swedish tax authorities it ended up before all the administrative courts uh in Sweden and now the Supreme

administrative Court of Sweden has asked the uh European court of justice uh to clarify the issue um are the sale when when you sell uh Bitcoin um to another person or company do you need to charge vat or not um also I thought it was just on the fee exactly exactly so the dispute started uh the discussion started um it was indeed only about the fees so the Mr hedquist original dispute started um uh with a discussion about VAT on the transaction fee on the margin that he earns each

time somebody buys uh Bitcoin uh from his website so just to clarify this is not the transaction fee of the minor to be distinguished this is the fee that he charges for instance 1 or 2% on top of the sale of the transaction exactly exactly yes the the cas is specifically um in Sweden is specifically about uh exchangers um fees and margins and and and and rather ironically um Mr head Christ um unwittingly kicked off this whole process because he simply got in touch with his local tax office to find out in advance to get a an initial decision before he started trading um on his uh

website I think it's bitcoin. uh and he wanted an advanced decision in order to to plan his business and it's really um mushroomed from there yeah so the when a when a court when a national Court asks something uh to the uh European court of justice um they have some leeway in formulating the questions and what we have here is that the Supreme administrative Court of Sweden uh formulated the question so broadly that it's not only about the transaction fee anymore but that it's about uh the vat status of Bitcoin in general so a local small Swedish

dispute uh bloomed into yeah the the a case that will determine the the fate of Bitcoin in Europe that's what happened so essentially all of these questions that countries have been asking themselves about whether or not vat will be subject to bitcoin transactions is now being put on the table and this will be definitively the answer on um will vat be applied to bitcoin sales throughout the EU yeah exactly so and not just transaction fees but the actual sale of the Bitcoin so you sell $100 worth of bitcoin 100 euros worth of bitcoin you

would have uh vat applied to that so if if you're in France that's 19% if you're in the UK it's whatever 21% 20 20 20% yeah exactly exactly um let let me interject here with a question so in Germany there's also been a statement from the finance ministry uh recently and they said in their view or they recommended I think the the different states um that a v should be charged on uh the sale of Bitcoin and the their reasoning was that they basically looked at you know here here's a law there are different categories of um of services that are exempt and Bitcoin isn't

classified as any of those so hence it falls out of those categories and there is a category of as other services so they said because it's none of those other things it has to be another service and vat needs to be charged on other services hence vat needs to be charged so I'm curious if there's going to be something on the European level how does that interact with something like that does that mean they will have to also Define what Bitcoin is in order to say whether vat needs to be charged on it or not that's precisely the implication of this case that's before the uh European court of justice um

it may well flow from this decision uh a decision about what is bitcoin what are virtual currencies and this is something which is not established in any Court anywhere in Europe there are decisions so far about how it should be treated in some member states for tax purposes in fact the UK was the first country to really make a um take a position on this back in in March this year and a very aable one in which it it decided that Bitcoin works like money so should be regarded like money even though it isn't actually

money um and as a consequence of this um one is able to take advantage of certain exemptions that apply to financial type Services other um member states as Thomas has mentioned um have said quite the opposite um but along the way to reaching this tax decision the court May well make statements or clarify precisely in legal terms what this thing called Bitcoin or cryptocurrencies or virtual currencies is and that has huge implications so to what extent is the

the question of what Bitcoin is to what extent is that a question that will be answered by uh courts versus uh the European Parliament is that something that maybe the parliament is going to come back to and say no this is different or is it likely that whatever the Court decides will for the foreseeable future also be the way is treated well the way that it works is that laws are made by um the European Parliament and the council um the European Council which is essentially representatives of the governments of each of the member states and it's a it's a a complex system um between those

two entities but it's essentially a a democratic system for making laws a parliamentary type system the the laws are then interpreted if necessary if they're not clear as is the case here with Bitcoin Bitcoin didn't exist when that Direct Ive was um decided and some many years ago and so it falls on the courts if it's referred to them to make a decision about how to interpret this new thing against the existing laws and that interpretation what the courts decide will remain the case until the law is changed if if if

if it ever is by again a a parliamentary process so the courts May well decide one thing um and we need to all understand typically the European court of justice can take one two years even more sometimes to reach a decision but once it makes a decision that decision will uh apply um forever or until the law is then Changed by um by the uh by the parliament yep exactly uh um so and and it could there it's very difficult to to predict uh the uh the decision of the

court at this point um they may rule uh on all aspects of Bitcoin uh they may Focus uh on just a few aspects um they may uh have a very brief decision uh and send it back to the uh National Court to decide so right now uh everything's on the table everything's possible uh today at this point Thomas you said it exactly earlier on the the question as it was posed by the Swedish uh Supreme administrative Court to the European court of justice is in such uh broad terms that

it it gives leeway and maybe it was intentional maybe it was unintentional but it gives leeway for the European uh Cent uh sorry the European court of justice to decide in the most narrow terms in other words in the terms that the Swedish case is about or in the broadest terms in other words right the way through to a decision as to what is exact what is Bitcoin in legal terms and we have no idea how how it will be addressed by the court they have huge discretion in looking at a question and uh what they decide they're going to decide on exactly exactly yeah so uh assuming that it does happen and they say vat needs to

be charged on bitcoin and not just the the fees that exchanges charge but generally when you sell Bitcoin uh what would the repercussions be of that what would um bitcoin's use as a payment system look like could Merchant still say we accept Bitcoin uh can you guys speculate on that uh yeah I um well the main impact according to me would be for uh consumers the main impact would be for people uh who buy uh Bitcoins from uh a website for example uh they would have to pay V then of course a whole uh host of of different issues arises uh at what rate

uh if I buy it from a website uh in my own country it's still quite clear that it should be the local vat rate um if it's from a website in a different uh country are we talking about uh a distance sale as it's called in in V8 lingo um so that would open uh up a whole host of of of extra questions but the main implication would be for individuals buying something of a business different uh it would be different yeah wouldn't that just mean that people would only buy vat uh firm exchanges are outside the EU um yeah but if I were the uh tax

authorities in such a case I would try to make even those uh providers outside the Au I would try to find a way to to still uh charge my VAT on the local rates I don't know how they would do this uh but that's probably the response of the tax authorities now there is another very interesting aspect I'm talking about a company selling to an individual now if it's an if it's an a sale between individuals then it becomes more interesting because it could be argued that if when you have a sale between individuals uh as long as uh those individuals don't make it their business

or their main business uh to sell uh Bitcoins and stay below the some thresholds which are different from country uh which are different in every country um if you would have such a sale between individuals that you would still have no VAT on those Bitcoins you can compare it to buying something of a second a website that offers secondhand products uh if I buy some old furniture uh from another individual um there will be no VAT on that and even if Bitcoin uh becomes subject to V I believe the same principles should apply uh if you have sales between individual ones um those sales should still be uh V exempt so um

does that mean if a company bought Bitcoins from an individual um they would not have to pay VAT on that or I mean the individual would not have to charge the company VAT on that of course that's correct yeah I think so so what kind of Arbitrage opportunities would such thing things arise here that you could essentially scam the government of course um and um now it's it's it's worth looking at the the vat system uh in general again there is a reason that financial instruments such as Securities and uh regular Fiat money there is a reason why trading in

those uh um uh transferable stuff why they are exempt they are not exempt from vat because the government wouldn't like to tax them as a general rule governments like to tax anything that moves but they are exempt because it's so easy to create uh Arbitrage opportunities and also because it's so because it's very easy for uh uh frauders to uh pocket the V themselves you could have in a in a very simple very simple way this could work is saying uh okay uh I establish a company just for a month I'm going to sell Bitcoin to Consumers with vat and uh I just pocket the vat

myself and I'm gone um and if you do this in a crossb context you have what is called the vat Carousel um so if we would make Bitcoin uh subject to vat I I don't think that uh governments will raise much money from it it would mainly create a lot of hassle red tape for everyone and um uh yeah we just uh make it difficult for everyone and uh the national treasuries might even lose money there there's examples um in the past of of exactly that happening um uh it was very popular at one point in time to move um very small size um uh electronic components like chips across

borders and um perform these kind of Carousel um frauds um they coton on to this but after losing probably hundreds of millions if not more in um in that fraud and uh because they were physical Goods there was a little bit more control but you can imagine um goods and services that travel over the internet are much harder there are no real borders and so it's very much easier to perpetrate these kind of frauds and the most recent example of that I think was in um carbon trading um and billions were were lost by the um you know

cumulative cumulatively by the member states uh of the EU in exactly this kind of Fraud and there's the risk the very real risk that if Bitcoin became um subject to vat positive rates of vat that a similar thing would uh would happen um and that certainly would not be good for for for Bitcoin um generally probably lead to the government's having to to to do what they did with carbon trading I believe which was to then make it um uh exempt is that right Thomas yeah so in some countries they already Exempted it uh in other countries they try to find diff uh uh different solutions but what is clear is

that they uh if you make fast moving uh consumer goods um which have a high value when you make them subject to vat uh you are opening a lot of opportunities for uh for criminals to uh pocket of vat themselves so even from a government perspective there are very good reasons uh not to make Bitcoin subject to V I just want to go back to what I was going to say earlier I think it's important to perhaps even recognize the difference between a Bitcoin exchange and an over-the-counter Bureau like Co base for instance um and this this is something that somebody pointed out earlier in in an email conversation

we had Thomas um that an exchange doesn't actually sell Bitcoins an exchange is simply a matching uh an order book matching engine and to and and they don't ever take ownership of those Bitcoins the Bitcoins don't belong to that exchange so they're not in fact selling them they're just providing a service which is order matching uh which is contrary to coinbase for instance where they actually sell you the Bitcoins they own the Bitcoins and they sell them to you so it it would seem logical that Bitcoin exchanges would not be subject to vat for the sale of the Bitcoins but only for the for the service that they provide which is transactions which I I think what uh what this uh this Swedish gentleman was

trying to uh to to to get at but uh got entangled in this whole question of do do those Bitcoins have to be subject to vat but if if you look at it you know if you if you take a step back and look at it The Exchange doesn't own them so why would they have to sell to to charge V on those transactions uh no I I agree uh so so it's it's logical that an exchange uh that never takes ownership of the Bitcoin uh only has to deal with fat uh on the on the transaction fee uh that they charge uh but on the other hand for the uh the client uh of the exchange uh that opens a whole host of of issues for example

uh let's say that I'm a company offering uh offering my Bitcoins on that exchange um uh so that other people can buy them uh what happens uh when a consumer uh in Belgium buys something of a company in Sweden through an exchange in France uh I think that's a vat nightmare um and it's not only a nightmare for the the seller and and the consumer uh but it would also be a nightmare I think for the exchange because probably uh they're going to try to enforce their vat rules uh by um making the uh Exchange in some way responsible for U compliance with vat rules so I agree that uh the

exchanges are not directly impacted but they could very well be impacted uh because all the compliance burden uh would be shifted to them so yeah they are concerned and of course you could have that uh an exchange has both business customers and individual customers and one you know the businesses would have to charge vat and theats wouldn't and then you have like two different you could buy Bitcoins to two different prices on the exchange so it's it's a nightmare also for exchanges I think and and it's not just limited to intra European trading it undoubtedly would affect Trading between European member

states and um countries jurisdictions outside there are examples of this having been the case with other forms of electronic trading so um for example software downloads um uh where um you know that it was similarly borderless in terms of you know it was delivered over the Internet so it didn't really matter maybe you didn't even know where where it was being downloaded from um but uh gradually um so much revenue was being lost um in vat that um countries began to impose the requirements

on um Traders outside the European Union so they would say to a software company in the United States for example if you're selling or when you're selling your software for download to somebody in the European Union then you needed to apply vat and if necessary become registered for vat somewhere in the in the European Union or get someone to do it for you to account for it and so on and that makes it even more of a nightmare I have a question now you you said earlier that uh you V rules were established in in the 1960s and70s were when our economy was mostly based on on on industry and

none of this new stuff this now coming up uh existed as Services become even more complex and we have more international trade and on and bring on top of that decentralization and peer-to-peer services so take for instance store J when you're not buying you're not buying directly from a company but you're potentially buying from dozens or hundreds of of of different people uh for like you're buying hosting space essentially from from other people this this vet question question is going to be coming up again and again and again and again on all these new types of services and and and and and markets that are that are emerging are we going to need to just flat out V reform at some point to to uh reset all

these rules that so that they can apply to these new economies well then we're we're more talking about uh I think the tax system in general not only about VAT but also income taxes all these new types of services that are popping up like for example uh uh not only decentralized services but also services in the sharing economy like you have Airbnb Uber uh and all that other uh all those new things from a from an income tax and from a vat perspective uh it will become uh quite difficult for governments to uh apply the current systems uh to these new phenomena and especially as a lot of

those transactions will move to crypto would presumably move to cryptocurrencies I mean we can assume that in maybe 5 10 years from now a lot of those uh of those peer-to-peer sales would be done withit Bitcoin yeah absolutely so it is a it is a if if we take the position that we still want to have some form of government I don't I I know that not everybody in the Bitcoin Community agrees with this position uh but let's take the position that we still need a government that would still um needs to be able to raise taxes uh you can look at other other systems in the world uh which may be more effective uh if we take for example uh

Hong Kong it has a very simple uh income tax uh system it has uh I there was a discussion about a general sales tax but I didn't know I don't know if that go true yeah they have it they have a GST yeah they have it now um but the the general IDE is uh you can still raise revenue uh from things that are easily visible uh and are easily texed and then I'm thinking about uh Homes real estate for example uh and Big Ticket uh items uh your Ferrari your uh your your car uh what have you and what will probably happen is that as governments become more and more powerless to uh raise

revenues through their traditional taxes that uh they will move towards uh some sort of tax onsite system uh because even if you have a lot of Bitcoins at a point in time you will want to live in a in a nice house and drive a nice car and so on so it can be expected that that will be the point uh where you pay the most taxes so that's the tax shift uh you're probably going to see as a result but that's yeah that's about the philosophy of the system in general I want to correct something I don't think actually it was Hong Kong that went ahead with GST I think they dropped it but um number of other particularly around the Asian regions there were similar types of attacks

proposed and and and brought in in fact one of them is Australia and maybe we'll have time at the end just to to talk about that um because it has similar implications there so before we uh move on uh just very briefly do are we going to know anything during that decision making process or we just basically going to be totally in the unknown on till uh a year from now or something like that there will be a decision uh no so you will have an advanced warning uh because first uh you have um a specialist uh which is called The Advocate General and The Advocate

General is first going to write uh his or hers uh opinion uh on the matter can we put specialists in air quotes yes with with regards to bitcoin no no no no no I wouldn't I wouldn't under underestimate uh these people um I think they they they um often they they make good points but um they will first write a report uh and in most cases the court will uh follow uh the conclusions of The Advocate General um so timing wise I talked to multiple experts and we're talking about uh a year from now or so and then everybody expects that we will know more or less uh where we're at but

they won't be the the member states won't be able to to do anything about it until the court as a whole has ratified that decision or modified it although as you're absolutely right Thomas there's very few cases where where the court even adds anything to it it's really a rubber stamp of the of the advocate General's um U recommendation isn't it so can we can we start a a funding campaign to purchase some uh some judges on the European court of justice uh they're very well paid so uh everything's possible but of course they are they sit in

Luxembourg no but is there a way that because the this gentleman in uh in Sweden uh is is taking this court uh to to the EU level and is paying lawyers to do that and so is there a way that uh the community can support him in doing that well actually it's interesting because he he um opened up the the need for crowdfunding his defense he didn't actually take it to to to Europe he just asked his local tax office what you know what what what's the situation here and they said well we're not really sure we think yes the exchange fees should be and there was a little sort of discussion and dispute about that and so

they said well let let the administrative Court decide this was still within Sweden and they said they looked at the rules and they said well we don't know so uh these things didn't exist when the vat exemptions were defined so let's ask the court in in Luxembourg to uh to interpret the law and um he's almost been sucked into this process of going to the European court because um you know he was a small business asking a little local question that now he's having to fund um a case uh where he needs to be represented in order to submit his observation if um if

he doesn't um submit an observation to the court the court can't consider it the court can only consider those things that are put before it in the case so obviously the Swedish tax Authority will put its observation before the court court already has the the papers from the Swedish court that essentially say what the case is about and what it is they want to want some sort of decision on and so it's really up to Mr hrist to come up with if you like the counterargument um even though he's even not yet started his business so uh a

little over a week ago he posted on Reddit and one or two other places um saying look I I've been sucked into this thing I it I don't have this kind of money that's needed to go to the European Court can um you know let's start a crowdfunding exercise to pay for lawyers who could do this and he managed to secure an as yet Anonymous uh donation earlier this week uh to at least fund it through the first stages um he had a lot of offers of support from legal experts I think Thomas you and and others in in conjunction with you were um involved in offering various Services pro bono if he

wasn't able to raise the funds um so that it wouldn't go unanswered that his position wouldn't be put before the court and fortunately he's been able to uh to get some funding to to at least take it to the first stage where he can put in written trans uh sort of written submissions so should we uh perhaps move on to uh other topics with regards to legislation and taxes like Australia for instance uh yes Australia is um sort of very um came out with its decision on its version of vat they call it the goods and services tax GST uh just in the last week or so and basically the questions that they

were having to consider were pretty much the same thing is this thing money in which case it's treated as one thing if it's not money does it fall under any of the exemptions for financial services they're not identical to the to the to the exemptions in Europe but very similar and it's been mulling over this question for around about I think 3 to six months now and um it promised to come up with a decision in the summer it was a few weeks late but essentially um it looked at the definitions and found that under the definitions in Australian law Bitcoin doesn't and can't be classed as money as

it's currently um uh in force um money for these purposes in Australia can only be legal tender and it doesn't fall under any of the existing Australian exemptions for financial Serv services and so it came to the inevitable conclusion therefore that as GST is otherwise applicable on all goods and services that vat would need to be charged and so here is an example of this double taxation effect um if you're buying a cup of coffee there's the GST on the cup of coffee um but equally if you're paying for it with Bitcoin there's also VAT on

the Bitcoin as well uh because it's like a Bara transaction and indeed that was the conclusion the Australians came up with now it's only a preliminary decision right now the um well it is a decision but it's up for a comment um I believe there's a a matter of more than just a few weeks but certainly there's a little bit of time for Australians to make their views known and for the matter to be reexamined but barring um somebody coming up with something that the tax lawyers working for the tax Authority in Australia coming up with something

that's been missed which is unlikely um I doubt that it's going to change the interpretation of the law as it stands so what would this mean for a company like coar that has been selling Bitcoins uh to individuals for several years and has been doing merchant processing as well so as it's a business and as with vat in Europe it only applies to people who are selling Bitcoin as a as a business as a trade um then that subject yes it would be so yeah that that would be the case here right so would they have to go back uh uh two years or for however long

they've been operating and pay the sales tax on all the past uh Bitcoin trades I mean in that case they probably have to shut down the company I presume I honestly don't know Thomas do you know whether it's retrospective um I don't think so so in the past we we've had uh similar uh situations where the European court of justice for example decided um uh that uh the vat did apply to some transaction or other uh I don't think um that uh this was a huge problem uh for businesses uh they can always say well I I based what I did was based on

on on my national regulations so uh I don't think um I don't think that's um uh a reasonable uh scenario I think um uh no I doubt it I doubt I doubt it that that it would work retroactively I haven't seen anything um yet from the uh Australian tax authority to suggest that they're looking to go back over time to make it retrospective in fact I I I always like looking at the nuances um underpinning um the the statements that are put out by various um official

entities and I I I get the feeling from the way that some statements have been made by the um commissioner for for tax um in in in in Australia uh he I think his name is Chris Jordan and he gave an interview to coin Telegraph recently in which he suggested that um you know this in fact he made it quite plain that that this is an interpretation under the existing law um but really opening up the possibility that the law could be changed if Bitcoin um gained enough traction to make it you know to get enough focus on it

now to me that suggests for him to make that kind of comment he's really suggesting that he may not really totally agree with it that this is the right thing it's just how it is under the law at the moment and almost pointing policy makers in the direction of changing the law and this comes back to um Brian your earlier question about um you know do courts make decisions in this case a form of regulator the tax authori is making a decision based on its interpretation of the law um but it can all the law can always be changed if it um you know to address new situations and um as Thomas said earlier you know we've got all these new

phenomena and the law is is is always working in areas the law is always working on how it is or indeed how it was yesterday before it gets round to addressing it meanwhile we've already moved on and you know this whole subject is wider than just fiscal policy in other words taxes it's wider than currencies and money it it stretches throughout all kinds of Law and with things that are on the horizon the the blockchain 2 Technologies with what ethereum and others are doing with smart contracts and distributed organizations uh the law I can predict one thing the law has a huge amount of

catching up to do over the next 5 to 10 years a huge amount to to catch up with because everything is changing yeah I agree and a lot a lot of this regulation stuff that we see and that that we see happening and we kind of find just mind bogglingly stupid because we feel like governments are not getting it it's just because they're applying it to existing regulatory Frameworks and existing incumbents but when this all starts taking shape and taking more importance within our society that's when really we're going to start seeing serious serious changes in the way that things are taxed and the

way that laws work and the way the governments work etc so I think it's only a matter of time until we have that shift and it's it's going it's it's happening faster and faster yes and governments are are are actually facing um a measure of redundancy and I'm not talking about this from this of um libert Arian perspective but rather just the pragmatic one that a lot of the things that they do like raising taxes and um regulating entities and controlling and authorizing entities to to function in their jurisdictions a lot of these things are actually just being democratized and taken away from them or will be over these next few years now sh

you want toh talk about bit license I know this is a topic that we've covered extensively before but there seems to be a always some new things happening with bit license so oh only very very briefly to say that um uh it's raised so many controversial questions in New York um that the New York Department of Financial Services and the financial superintendent Bowski have decided to extend the feedback period there was a a period of um 45 days uh from when it was published officially published uh that's due to expire at the end of this coming

week uh I think around 6 7th of September and that they have given into pressure to extend the feedback period and add another 45 days so we've got well into October for folks to let their views be known and then start blocking New York companies well it's it's it's it's actually a little bit more complicated than that uh one of the reasons it's more complicated is that the the way particularly that the New York regulations as they're currently drafted will apply they have huge extr territorial reach and they apply to more or less uh any kind of connection with New York so let's say I I live in um I

live in China but I I I spend um a few weeks a year in an apartment that I own or rent in New York where I run a um or where even I'm just an investor in a in of course an upcoming Bitcoin company and um I just happened to uh to visit there but for slightly extended periods but not necessarily enough to to qualify as a a full-time s legal resident of the US but just enough to be associated with New York and I I come to to to to Le and um I want to exchange some Bitcoin um but because of my association with New York uh you would have to treat

me as a a New Yorker Even in our face-to-face or local transaction and that has huge huge implications because you know if you were to sell me some Bitcoin um other than an exchange for some goods or services in other words just a as a merchant but as a as I say an exchange transaction you Sebastian would would would be breaking New York law and uh when you go and visit your old aunt in um in Canada and you stop over in New York to change planes uh you could get arrested if they knew about you I'm exaggerating here to make a point but it has happened in the past in other fields

but a very good point and it has happened in the past yes I mean this is this has happened with a bank accounts already to an extent you know uh I was fing out um this bank account transer fored the other day and you know one of the questions on there is you know were you born in America or are you an American and I know for example you know in Switzerland basically they made all Americans close uh their bank accounts and I I think even if you're an expert in Switzerland as far as I know I could be slightly wrong it's very difficult to get a a national bank account because it's so risky for the banks and and it's such a nightmare so um yeah it's a it's a big mess but of

course I think you know one thing is to try to make this apply in some sort of oldfashioned system like with banks where they do kyc anyway uh it's a totally different thing to try to make this work of cryptocurrencies which I just don't think there's any way you know this is just the start and who knows where this thing's going to go so New York proposals are very broad reaching and and I know folks outside of the states and outside of um New York in particular um folks in Europe and elsewhere probably think that it's not a big deal for them uh they'll just block New York IP addresses um it really depends on your business model and

whether you ever plan to go to the states again as to whether you want to to take certain risks I think folks outside of the US at least need to be aware of it need to be informed that there are implications of these proposal from these you know that flow from these proposals and should at least weigh them up and if nothing else make their views known um the on the New York um DFS website there's information about how you can Lodge your feedback and and it would certainly you know be good to add add one's voice if you feel that this extr territorial reach is um is excessive interestingly enough um it was also announced this last week that North

Carolina um another of the US States has determined I think it was it's their sort of board of banks um sort of its banking supervisor has decided that um actually their existing money transmitter laws already apply to um certain kinds of Bitcoin business nowhere near as far reaching an applica scope as New York uh but that the you know they don't need to come up with any new um Bitcoin specific technology specific regulations they they they argue that they already exist and again they do have some extra extr territorial

reach in that if you do business with somebody who is a um North Carolina resident uh you may be subject to them even if you or your business is not in um North Carolina so you know where do we stop U blocking IPS uh how extent of a set of questions do we have to ask of folks who may have some sort of American connection it it's um it's it's quite worrying in a sense yeah absolutely well I think we've kind of come to the end of our show but uh thanks so much for joining us today to talk about this topic which I think is going to be a very important topic for uh the future

of Bitcoin especially in this kind of transition period I guess as we go from the traditional Financial system to um a decentralized cryptocurrency system um now if guys want to learn more about you involved Tomas is the what's the best way to reach you uh you can reach me through the the website of the Belgian Bitcoin Association which is www. Bitcoin association. be and there you can find more information and you can also reach me there and we'll link to that in the in the show notes yeah will link to that and of course uh Sean people can reach you at at your website which is yes coin

coin. euu uh c i NSL t.u we're busy at the moment um setting up uh a public affairs office in Brussels to address ourselves at the European commission and the European Parliament there's so many things going on in Europe and we're also is setting up a Regulatory Compliance office in the aisle of man which is a a very interesting new jurisdiction so we're very busy this Autumn excellent well thanks so much for listening uh we look forward to being back next week if you want to support the show what you can do is leave leave a iTunes review helps people find it and it helps us a lot you can also leave us a tip uh of course we

accept Bitcoin tips and you can do that atb.com tips um finally if you're interested you can subscribe to our newsletter which goes out every Friday it discusses what's been going on in the Bitcoin world and you can do that sender bitcoin.com newsletter so uh thanks so much for tuning in and we look forward to being back next week bye guys thanks for having me bye-bye thank you very much [Music]