Epicenter - Learn about Crypto, Blockchain, Ethereum, Bitcoin and Distributed Technologies - Siân Jones & Thomas Spaas: Is Bitcoin Subject to VAT? (European Consumer Goods Tax)

Episode Date: September 1, 2014

Thomas Spaas, director of the Belgian Bitcoin Association and an international tax lawyer in Antwerp, and our regulatory affairs correspondent Siân Jones, join us to discuss a Swedish court case on VAT, the European Value Added Tax. The case has made it all the way to the Court of Justice of the European Union and may set the precedent for how the sale of Bitcoin will be taxed. For 10% off Inside Bitcoins London on September 15 and 16, use the discount code EPICIBC14 Register for Inside Bitcoins London This episode is hosted by Brian Fabian Crain and Sébastien Couture. Show notes and listening options: epicenter.tv/037

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 Kutjou. And I'm Brian from Van Krain. 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 Sean Jones. We've had her on many time, and she's our regulatory correspondent, also the founder of,

Coinsalt and the chair of the regulatory working group at the UK DCA. We're also joined by Thomas Spass. 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, which is very relevant for today's episode. because today we're going to be tackling a Swedish court case on VAT and what its repercussions will be for Bitcoin. So thanks guys for joining us today.

Hi. Nice to be back again. Happy to be here. So, Sean, you're going to be at Inside Bitcoin's London. I am indeed, yes. This is one of the series of Inside Bitcoin's conferences that are run various places around the world. It's in London on the 15th and 16th of September.

And so it's a two-day event. It's got some really great speakers, people like Gavin Wood from Ethereum, the chief technology officer of Ethereum. In fact, there's quite a lot of focus this year on sort of blockchain two, a main subject. matter. There's a regulatory panel with some leading lawyers from the US and UK, also a German

lawyer and one or two of others. So it promises to be another very exciting one in the series of conferences. And so we're offering a, we're partnering with Inside Bitcoin's London for this for this conference. Sean is going to be there and we'll perform some interviews and create some content 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 on our SoundCloud page as well as on our website. And that will be up right after we post this episode.

So if you want to go to Inside Bitcoins, we'll have a discount code there for you 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. It's a topic that I think we've touched on a few times. And it's one of those kind of annoying topics in a sense, right? So VAT, I guess it's just a necessity of, you know, existing in the European economic system. And it's not as exciting perhaps as talking about Ethereum or things far ahead.

but it can be absolutely crucial when it comes to Bitcoin acceptance, Bitcoin success as a payment system in the near and medium term future. So I think it's really important that we're touching on this today because some important things are going on at the moment. But perhaps, Thomas, can you give us a bit of an introduction into what VAT is in the first place? Yeah, we would be happy to do. that and you'll see that you mentioned the word annoying and that's also how I see the entire problem already leaping ahead to to the conclusion if Bitcoin would become subject to VAT it would be very annoying but it wouldn't kill it and I'm now going to explain how it exactly works so

you have VAT in for international audience. Let me explain a little bit about the system. You used to have in the European Union, the different member states used to have sales taxes like you have in the US right now. And that would just be a very simple tax. Every member state would have its own rates. And each time you sold the product or your sold a service,

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

So how does this work in practice? In the European Union, in all member states, if you sell something, a product or a service, you need to apply VAT. So that's a percentage. And that percentage, it differs in all member states. So we have the same system all over the European Union. but you have different rates in all countries. Countries are still free to set their own rates. Now, in a business to business context, B2B, that tax is neutral because the philosophy of the system is,

is that only the final consumers should pay the tax. And when you have businesses selling products or services to each other, they would not be subject to the tax. So how does this work in practice? If you're a business selling something to another business, you have to apply VAT. So you apply an extra percentage on the sales price. The other company pays the price plus the VAT, but they are able to deduct the VAT that they paid. So it's important to see that in a business-to-bus context, in a pure B2B context, the VAT, is neutral.

It is neutral, but of course, there's a lot of red tape involved. You need to make the calculations. You need to put it, put it on your invoice, et cetera. And then so all throughout the B2B chain, people add and subtract VAT until we end up with the final consumer, which are normally, as a general rule,

those are the individuals, just regular people. when they buy they're the final consumer of the product of the service so they have to pay the VAT without having the right to subtract the VAT. So VAT is a consumption tax actually and the final payer or the one who suffers the VAT was the BAT is the final consumer. So that's the general philosophy of the VAT. the VAT system that we have in the European Union. Now, these rules are harmonized across the EU, meaning that member states are free to set their own VAT rates, but the general system, the general principles,

those are taken care of at a European level. So that means that in principle, the same rules should apply all across the European Union and member states can only the only input they have is to set their own rates now one of these print really a decision that would be at the level of the principles is the question of should Bitcoin be subject to VAT or not

now the problem is is that all these VAT regulations date from the 60s, from the 70s, from the 80s, where you used to have a very simple industrial society and maybe a little bit of a service sector, but those rules are not adapted to today's economy. So you have all sorts of new phenomena popping up, not only Bitcoin, but for example, also gift vouchers, carbon trade 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 the VAT directives that we have in Europe. And as long as there is no decision at the European level, the member states all have their own interpretations. and all member states do something different.

So specifically for Bitcoin, the UK authorities have said that, broadly speaking, that Bitcoin is outside the scope of the VAT. France has said that this would also be the approach that they will be taking in the future. other countries take no official position but they tolerate the fact that there is no VAT on the sale of Bitcoin. Those countries are, for example, Belgium and the Netherlands. And other countries are very explicit in levying VAT on Bitcoin sales. For example, Poland and Estonia, if I'm not mistaken. So we have different approaches in all member states. And the general feeling was that it would take a while, maybe five to ten years, for the European Commission or for the European Council to come up with a unified or unanimous view on how to treat Bitcoin for VAT purposes.

But to everyone's surprise, this decision will come a lot sooner. due to the court case, or at least the dispute that was started by Mr. Hedgwist of Sweden. Perhaps I'll explain now a little bit how this European process works. So when European regulation is at issue, such as VAT, all courts in all countries all over the European Union, they have the right to ask questions to the European Court of Justice in Luxembourg and ask the European Court of Justice in Luxembourg to clarify some aspects. So that is exactly what happened here. So you had a local Swedish dispute between Mr. Hedgrist and the Swedish tax authorities.

it ended up before all the administrative courts in Sweden. And now the Supreme Administrative Court of Sweden has asked the European Court of Justice to clarify the issue. When you sell Bitcoin to another person or company, do you need to charge VAT or not? I thought it was just on the fee. exactly exactly so the dispute started the discussion started it was indeed only about the fees so the mr headquist's original dispute started with a discussion about VAT on the transaction fee on the margin that he earns each time somebody buys bitcoin from its website so just to clarify this is not the transaction fee of the minor to be

distinguish this is the fee that he charges, for instance, one or two percent on top of the sale of the transaction? Exactly. Exactly. Yes, the case is specifically in Sweden, it's specifically about exchanges, fees and margins. And rather ironically, Mr. Headquist unwittingly kicked off this whole process because he simply got in touch with his local tax office to find out in advance to get an initial decision before he started trading on his website. I think it's Bitcoin.se. And he wanted an advanced decision in order to plan his business. And it's really mushroomed from there.

Yeah. So when a court, when a national court asks something to the European Court of Justice, they have some leeway in formulating the questions. And what we have here is that the Supreme Administrative Court of Sweden formulated the question so broadly that it's not only about the transaction fee anymore, but that it's about the VAT status of Bitcoin in general. So a local small Swedish dispute bloomed into a case that will determine 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 will VAT be applied to Bitcoin sales throughout the EU? Yeah, exactly. And not just transaction fees, but the actual sale of the Bitcoin. So if you sell $100 worth of Bitcoin, 100 euros of worth of Bitcoin, you would have VAT applied to that. So if you're in France, that's 19%.

If you're in the UK, it's whatever, 21%. 20%. Yeah, exactly. Exactly. Let me interject here with a question. So in Germany, there's also been a statement from the finance ministry recently. and they said in their view, or they recommended, I think, the different states that a VAT should be charged on the sale of Bitcoin. And their reasoning was that they basically looked at, you know, here is a law.

There are different categories 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 in other services hence VAT needs to be charged

so I'm curious if there's going to be something on a 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 European Court of Justice. It may well flow from this decision, 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 moment. States for tax purposes. In fact, the UK was the first country to really make a, take a position on this back in March this year and a very favorable one in which it decided that Bitcoin works like money, so should be regarded like money, even though it isn't actually money. And as a consequence of this, one is able to take advantage of certain exemptions that apply to financial type services. Other member states, as Thomas has mentioned, have said quite the opposite.

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 question of what Bitcoin is, to what extent is that a question that will be answered by courts versus 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 it is treated? Well, the way that it works is that laws are made by the European Parliament and the Council, the European Council, which is essentially representatives of the governments of each of the member states. And it's a complex system between those two entities. but it's essentially a democratic system for making laws, a parliamentary type system. 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 directive was decided 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 it ever is, by, again, a parliamentary process. So the courts may well decide one thing, and we need to all understand, And 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 apply forever or until the law is then changed by the Parliament. Yeah, exactly. So and it could It's very difficult to predict the decision of the court at this point They may rule on all aspects of Bitcoin They may focus on just a few aspects They may

Have a very brief decision And send it back to the national court decide. So right now, everything's on the table. Everything's possible today at this point. Thomas, you said it exactly earlier on. The question as it was posed by the Swedish Supreme Administrative Court to the European Court of Justice is in such broad terms that it gives leeway, and maybe it was intentional, maybe it was unintentional, but it gives leeway. for 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 Bitcoin in legal terms. And we have no idea how it will be addressed by the court. They have huge discretion in looking at a question. what they decide, they're going to decide on. Exactly, exactly. Yeah, so assuming that it does happen, and they say VAT needs to be charged on Bitcoin,

and not just the fees that the exchange is charged, but generally when you sell Bitcoin, what would the repercussions be of that? What would Bitcoin's use as a payment system look like? Could merchants still say we accept Bitcoin? Can you guys speculate on that? Yeah, well, the main impact, according to me, would be for consumers. The main impact would be for people who buy bitcoins from a website, for example.

They would have to pay VAT. Then, of course, a whole host of different issues arises at what rate? If I buy it from a website in my own country, it's still quite clear that it should be the local, VAT rate. If it's from a website in a different country, are we talking about a distance sale as it's called in VAT

Lingo? So that would open up a whole host of extra questions. But the main implication would be for individuals buying something of a business. Different.

It would be different. Wouldn't that just mean that people would only buy VAT? from exchanges that are outside the EU? Yeah, but if I were the tax authorities in such a case, I would try

to make even those providers outside the EU. I would try to find a way to still charge my VAT on the local rates. I don't know how they would do this, but that's probably the response of the tax

authorities. Now, there is another very interesting aspect. I'm talking to about a company selling to an individual. Now if it's a sale between individuals, then it becomes more interesting because it could be argued that if when you have a sale between individuals, as long as those individuals don't make it their business or their main business to sell Bitcoins and stay below some thresholds which are different from country, which are different in every country. 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 website that offers second hand products. If I buy some old furniture from another individual, there will be no VAT on that. And even if Bitcoin becomes subject to VAT, I believe the same principles should apply if you have sales between individuals. Those sales should still be VAT exempt. So does that mean if a company bought Bitcoins from an individual,

they would not have to pay VAT on that? I mean, the individual would not have to charge the company VAT and that, of course. That's correct, yeah, I think so. So what kind of arbitrage opportunities? Would such things arise here that you could essentially scam the government? Of course. And now it's worth looking at the VAT system in general again. There is a reason that financial instruments, such as securities and regular fiat money,

there is a reason why trading in those transfers. horrible 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 arbitrage opportunities. And also because it's very easy for fraudsters to pocket the VAT themselves. You could have in a very simple, a very simple way. this could work is saying, okay, I establish a company just for a month. I'm going to sell Bitcoin

to consumers with VAT. And I just pocket the VAT myself and I'm gone. And if you do this in a cross-border context, you have what is called the VAT carousel. So if we would make Bitcoin subject to VAT, I don't think that governments will raise much money from it. It would mainly create a lot of hassle, red tape from everyone and yeah, we'd just make it difficult for everyone and the national treasuries might even lose money.

There's examples in the past of exactly that's happening. It was very popular at one point in time to move from a very small size electronic components

like chips across borders and perform these kind of carousel frauds. They cottoned on to this, but after losing probably hundreds of millions, if not more, in VAT fraud. Because they were physical goods, there was a little bit more control. But you can imagine 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 carbon trading. And billions

were lost by the, you know, cumulatively by the member states of the EU in exactly this kind of fraud. And there's the risk, the very real risk, that if Bitcoin became subject to VAT, positive rates of BAT, that a similar thing would happen. And that certainly would not be good for Bitcoin generally. Probably lead to the governments having to do what they did with carbon trading, I believe, which was to then make it exempt. Is that right, Thomas? Yeah.

So in some countries, they already exempted it. In other countries, they tried to find different. solutions but what is clear is that they if you make fast moving consumer goods which have a high value when you make them subject to VAT you are opening a lot of opportunities for for criminals to pocket the VAT themselves so even from a government perspective there are very good reasons not to make Bitcoin subject to VAT 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 Coinbase, for instance. And this is something

that somebody pointed out earlier in an email conversation we had, Thomas, that an exchange doesn't actually sell Bitcoins. An exchange is simply a matching, an order book matching engine. And to, and they don't ever take ownership of those Bitcoins that 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 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 think what uh what this this swedish gentleman was

trying to get at, but got entangled in this whole question of, do those bitcoins have to be subject to VAT? But if you look at it, you know, if you take a step back and look at it, the exchange doesn't own them. So why would they have to sell to charge VAT on those transactions? No, I agree. So it's logical that an exchange that never takes ownership of the Bitcoin only has to deal with VAT on the transaction fee that they charge. But on the other hand, for the clients of the exchange, that opens a whole host of issues. For example, let's say that I'm a company offering my bitcoins on that exchange so that other people can buy them. what happens when a consumer in Belgium buys something of a company in Sweden through an exchange in France?

I think that's a VAT nightmare. And it's not only a nightmare for the seller and the consumer, but it would also be a nightmare, I think, for the exchange. Because probably they're going to try to enforce their VAT rules by making the exchange in some way. responsible for compliance with VAT rules. So I agree that the exchanges are not directly impacted, but they could very well be impacted because all the compliance burden would be shifted to them. So, yeah, they are concerned. And of course you could have that an exchange has both business customers and individual

customers and one you know the businesses would have to charge VAT and the major list wouldn't and then you have like two different but you could buy bitcoin 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 countries jurisdictions outside. There are examples of this having been the case with other forms of electronic trading. So, for example, software downloads where, you know, it was similarly borderless in terms of,

you know, it was delivered over the internet, so it didn't really matter. And maybe you didn't even know where it was being downloaded from. but gradually so much revenue was being lost in VAT that countries began to impose the requirements on 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 some. somebody in the European Union, then you needed to apply VAT and if necessary, become registered for VAT somewhere 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. Now, I have a question. Now, you said earlier that VAT rules were established in the

1960s and 70s where our economy was mostly based on industry. and none of this new stuff that's now coming up existed. As services become even more complex and we have more international trade 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 different people, like you're buying hosting space essentially from other people. This VAT question is going to be coming up again and again and again and again on all these new types of services and and

and markets that are that are emerging. Are we going to need just flat out VAT reform at some point to reset all these rules that so that they can apply to these new economies? Well, then we're more talking about 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, not only decentralized services, but also services in the sharing economy, like you have Airbnb, Uber, and all that other, all those new things. From an income tax and from a VAT perspective, it will become quite difficult for governments to apply the current systems 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 five, ten years from now, a lot of those of those peer-to-peer sales would be done with Bitcoin. Yeah, absolutely. So it is a, it is a, if we take the position that we still want to have some form of government, I don't, I know that not all everybody in the Bitcoin community agrees with this position. But let's take the position that we still need a government that would still

needs to be able to raise taxes. You can look at other systems in the world, which may be more effective. If we take, for example, Hong Kong, it has a very simple income tax system. It has, there was a discussion about a general sales tax, but I didn't know, I don't know if that good. Yeah, they have a GST. Yeah. They have a GST. they have it now. But the general idea is you can still raise the revenue from things that are easily visible and are easily text. And then I'm thinking about homes, real estate, for example, and big ticket items, your Ferrari,

your car, what have you. And what will probably happen is that as governments become more and more powerless to raise revenues through their traditional taxes, that they will move towards some sort of tax on-site system. Because even if you have a lot of bitcoins at a point in time, you will want to live in a nice house and drive a nice car and so on. So it can be expected that that will be the point where you pay the most taxes. So that's the tax shift 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 a number of other, particularly around the Asian regions, there were similar types of attacks proposed and brought in. In fact, one of them is Australia, and maybe we'll have time at the end just to talk about that because it has similar implications there. So before we move on, just very briefly, are we going to know anything during that decision-making process,

or are we just basically going to be totally in the unknown until a year from now or something like that? There will be a decision. No, so you will have an advance warning because first you have a specialist, which is called the Advocate General. And the Advocate General is first going to write his or hers opinion on the matter. Can we put specialists in air quotes? Yes. With regards to Bitcoin?

No, no, no, no. I wouldn't underestimate these people. I think often they make good points. But they will first write a report. and in most cases the court will follow the conclusions of the Advocate General. So timing-wise, I talk to multiple experts and we're talking about a year from now or so, and then everyone expects that we will know more or less where we're at. But the member states won't be able to do anything about it

until the court as a whole has ratified that decision or modified it, although you're absolutely right, Thomas. There's very few cases where the court even adds anything to it. It's really a rubber stamp of the Advocate General's recommendation, isn't it? So can we start a crowdfunding campaign to purchase some judges on the European Court of Justice? they're very well paid so everything's possible they are they sit in Luxembourg is there a way that because the this gentleman in

Sweden is taking this court to the EU level and is paying lawyers to do that and so is there a way that the community can support him in doing that well actually it's interesting because he he opened up the need for crowdfunding his defense. He didn't actually take it to Europe. He just asked his local tax office, 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 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 these things didn't exist when the VAT exemptions were defined. So let's ask the court in Luxembourg to interpret the law. And he's almost been sucked into this process of going to the European court because he was a small business asking a little local question that now he's having to fund a case where he needs to be represented in order to submit his observation. If he doesn't 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 observations. observations before the court. Court already has 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. Hedchrist to come up with, if you like, the counter argument, even though he's even not yet started his business. So a little over a week ago he posted on Reddit and one or two other places. saying, look, I've been sucked into this thing.

I don't have this kind of money that's needed to go to the European court. And let's start a crowdfunding exercise to pay for lawyers who could do this. And he managed to secure an as yet anonymous donation earlier this week to at least fund it through the first stages. He had a lot of offers of support from legal experts. I think Thomas, you and others in conjunction with you were involved in offering various services pro bono if he wasn't able to raise the funds

so that it wouldn't go unanswered that his position wouldn't be put before the court. And fortunately, he's been able to get some funding to at least take it to the first stage where you can put in written submissions. So should we perhaps move on to other topics with regards to legislation and taxes, like Australia, for instance?

Yes, Australia is sort of very, came out with its decision on its version of VAT. They call it their goods and services tax, GST, 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 exemptions in Europe, but very similar.

And it's been mulling over this question for around about, I think, three to six months now. And it promised to come up with a decision in the summer. It was a few weeks late. But essentially, 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 in force. 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 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 if you're buying a cup of coffee. There's the GST on the cup of coffee. But equally, if you're paying for it, with Bitcoin, there's also VAT on the Bitcoin as well because it's like a barter transaction. And indeed, that was

the conclusion the Australians came up with. Now, it's only a preliminary decision right now. Well, it is a decision, but it's up for comment. I believe there's 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 re-examined.

But barring 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, 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 a coin jar that has been selling Bitcoin's two individuals for several years and has been doing merchant processing as well? So it's a business and as with VAT in Europe it only applies to people who are selling Bitcoin as a business, as a trade, then that subject, yes, it would be.

Yeah, that would be the case here, right? So would they have to go back two years or for however long they've been operating and pay the sales tax on all their past 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? I don't think so. So in the past, we've had similar situations where the European Court of Justice, for example, decided that the VAT did apply to some transaction or other.

I don't think that this was a huge problem for businesses. They can always say, well, what I did was based on my national regulations. So I don't think that's a reasonable scenario. I think, no, I doubt it. I doubt it that it would work retroactively. I haven't seen anything yet from the Australian Tax Authority to suggest that they're looking to go back over time to make it retrospective. In fact, I always like looking at the nuances underpinning the statements that are put out by various official entities. And I get the feeling from the way that some statements have been made by the Commissioner for Tax in Australia.

He, I think his name is Chris Jordan, and he gave an interview to comment. Telegraph recently, in which he suggested that, in fact, he made it quite plain, that this is an interpretation under the existing law, but really opening up the possibility that the law could be changed if Bitcoin 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 that this is the right thing. It's just how it is under the law at the moment and almost pointing policymakers in the direction of changing the law. And this comes back to Brian your earlier question about, you know, do courts make

decisions in this case a form of regulator, the tax authorities making a decision based on its interpretation of the law. But the law can always be changed to address new situations. And as Thomas said earlier, we've got all these new phenomena. And the law is always working in arrears. The law is always working on how it is, or indeed how it was yesterday, before it gets around 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 stretches throughout all kinds of law and with things that are on the horizon, the blockchain two technologies with what Ethereum and others are doing, with smart contracts and distributed

organizations. The law, I can predict one thing, the law has a huge amount of catching up to do over the next five to ten years a huge amount to to catch up with because everything is changing yeah i agree and a lot of this regulation stuff that we see and that that we see happening and we kind of find just mind-boggling 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, et cetera.

So I think it's only a matter of time until we have that shift. And it's going, it's happening faster and faster. Yes. And governments are actually facing a measure of redundancy. And I'm not talking about this from this sort of libertarian perspective, but rather just the pragmatic one, that a lot of the things that they do, like raising taxes and regulating entities and controlling and authorizing entities 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, Sean, you want to talk about Bit License. I know this is a topic that we've covered extensively before, but there seems to be always some new things happening with Bitlicense.

Only very briefly to say that it's raised so many controversial questions in New York that the New York Department of Financial Services and the financial superintendent Bandlorsky have decided to extend the feedback period. There was a period of 45 days from when it was published, officially published, that's due to expire at the end of this coming week, I think around 6th 7th of September, and that they have given in to 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 actually a little bit more complicated than that. One of the reasons it's more complicated is that the way particularly that the New York regulations, as they're currently drafted, will apply.

They have huge extraterritorial reach and they apply to more or less any kind of connection with New York. So let's say I live in China, but I spend a few weeks a year in an apartment that I own or rent in New York, where I run a, or where even I'm just an investor in a, of course, an upcoming Bitcoin company. And I just happened to visit there, but for slightly extended periods, but not necessarily enough to qualify as a full, time sort of legal resident of the US, but just enough to be associated with New York. And I come to Lille and I want to exchange some Bitcoin. But because of my association with New York, you would have to treat me as a New Yorker, even in our face-to-face or local transaction. And that has huge, huge implications because if you were to sell me some Bitcoin,

other than in exchange for some goods of services, in other words, just as a merchant, but as a say, an exchange transaction, you, Sebastian, would be breaking New York law. And when you go and visit your old aunt in Canada and you stop over in New York to change planes, 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 things. But a very good point, and that has happened in the past. Yes. I mean, this has happened with bank accounts already to an extent. You know, I was filling out this bank account transfer from 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 their bank accounts. And I think even if you're an expat in Switzerland, as far as I know, I could be slightly wrong.

It's very difficult to get a national bank account because it's so risky for the banks and it's such a nightmare. So, yeah, 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 old-fashioned system, like with banks where they do KIC anyway. it's a totally different thing to try to make this work of cryptocurrencies which I just don't think this anyway 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 new york in particular folks in europe and elsewhere probably think that it's not a big deal for them they'll just block new york IP addresses it really depends on

your business model and whether you ever plan to go to the states again as to whether you want 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 proposals from these, you know, that flow from these proposals and should at least weigh them up. And if nothing else, make their views known. On the New York DFS website, there's information about how you can lodge your feedback and it would certainly, you know, be good to add one's voice if you feel that this extraterritorial reach is excessive. Interestingly enough, it was also announced this last week that North Carolina, another

of the U.S. states, has determined, I think it was its sort of board of banks, sort of its banking supervisor, has decided that actually their existing money transmitter laws, already apply to certain kinds of Bitcoin business, nowhere near as far reaching an scope as New York, but that, you know, they don't need to come up with any new Bitcoin-specific, technology-specific regulations. They argue that they already exist. And again, they do have some extraterritorial reach in that if you do business, with somebody who is a North Carolina resident, you may be subject to them even if you or your business is not in North Carolina.

So, you know, where do we stop blocking IPs? How extensive a set of questions do we have to ask of folks who may have some sort of American connection? It's quite worrying in a sense. Yeah, absolutely. Well, I think we've kind of come to the end of our show, but thanks so much for joining us today to talk about this topic, which I think is going to be a very important topic for the future of Bitcoin, especially in this kind of transition period, I guess as we go from that traditional financial system to a decentralized cryptocurrency system. now if guys want to learn more about you again involved thomas is there what's the best way to reach you uh you can reach me through the the website of the belgian bitcoin association which is wwww dot bitcoin association dot be and there you can find more information and you can

also reach me there and we'll link to that in the show notes yeah we'll link to that and of course Sean, people can reach you at your website, which is... Yes, coin salt. EU, C-O-N-S-U-T-E-U. We're busy at the moment setting up 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 busy setting up a regulatory compliance office in the Isle of Man.

which is a very interesting new jurisdiction. So we're very busy this autumn. Excellent. Well, thanks so much for listening. We look forward to being back next week. If you want to support the show, what you can do is leave iTunes review. It helps people find it.

And it helps us a lot. You can also leave us a tip. Of course, we accept Bitcoin tips. And you can do that at Epiccentbikon.com. Finally, if you're interested, you can subscribe to our newsletter, which goes out every Friday. and discusses what's been going on in the Bitcoin world.

And you can do that at www.com slash newsletter. So thanks so much for tuning in and we look forward to being back next week. Bye, guys. Thanks for having me. Bye, bye-bye. Thank you very much.