Abstract:
Background: Tax implications of virtual currencies are a widespread debate that
perplexes many governments, policymakers and revenue collection authorities. Virtual
currencies are not physical but rather digital, and only exist electronically. Their unique
decentralized online exchange platform means that they do not belong to a specific
country, jurisdiction or regulatory body and therefore no bank can govern the use or
exchange of these currencies. The combination of the above poses unfamiliar challenges
to tax jurisdictions regarding how to effectively accommodate and tax these currencies
within existing traditional tax systems that were not designed to absorb unconventional technologies.
Main purpose of the study: Using a systematic review, this study aimed to provide a
holistic view of the tax implications of virtual currencies globally and whether a consensus
on an approach has developed.
Method: Applying a systematic review, relevant secondary data was obtained from quality
sources and analysed against predetermined criteria for relevancy. This collective data
was scrutinized, and findings were presented and discussed. A conclusion regarding whether a consensus is evolving on how virtual currencies are taxed was reached and
summarized accordingly.
Results: The approach taken in academic literature regarding how to tax virtual currencies
varies. Commonly, virtual currencies are simply incorporated into existing tax law; either by
incorporating them into current tax law definitions by way of defining what virtual
currencies are or by amending existing tax definitions to include virtual currencies.
Unavoidably, tax jurisdiction existing laws differ; for example what constitute revenue in
nature, capital gains taxes and wealth taxes. Consequently, there will be different tax
implications for virtual currencies as well. Therefore, various factors exist that will impact
how jurisdictions tax virtual currencies.
Conclusions: The different stages in the lifecycle of virtual currencies are of utmost
importance. Once the lifecycle stages are understood, current tax law can be amended to
accommodate these stages and bring them into the tax net as either revenue, capital in
nature or non-taxable. In conclusion, no consensus has been reached regarding the tax
implication on Normal Tax, however promising results exist for Value Added Tax.
